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C | Iron Ore Powers Above 100 as Supply Crisis Roils Global Market | Bloomberg Iron ore rallied above 100 a ton surging to the highest since 2014 as investors bet that a global supply crunch will spur a scramble for cargoes just as China s mills push out record volumes of steel
Benchmark spot ore climbed 2 5 to 100 35 according to Mysteel Global Earlier most active futures in Singapore jumped as much as 3 8 while miners shares powered ahead with Fortescue Metals Group Ltd hitting the highest since 2008
Iron ore has staged a stunning rally in 2019 as supply disruptions in Brazil and Australia the top shippers spurred forecasts the seaborne market will swing to a deficit At the same time mainland mills have been producing record quantities of steel underpinning expectations for strong import demand That means while other materials such as copper have been harmed by concerns the U S China trade war will hurt demand iron ore has vaulted higher
The global iron ore market will tighten further Liberum Capital Ltd analysts including Richard Knights said in a report predicting that prices will average 110 in the second half on sustained Chinese demand
Miners have benefited as prices surged Australia s Fortescue has more than doubled its market value this year after raising dividends while top U S producer Cleveland Cliffs Inc and Anglo American LON AAL Plc s Kumba Iron Ore Ltd have jumped On Friday BHP Group and Rio Tinto LON RIO Group climbed in Australia
The genesis of the rally was a tragedy in Brazil in January when a Vale SA dam burst triggering a slew of mine curtailments as its operations came under intense scrutiny This week state prosecutors recommended Vale warn people that a structure at its Gongo Soco mine may be close to breaking point
Additional hits to supply came in Australia as a cyclone hurt operations
On Thursday a senior Brazilian official said that nationwide production may shrink by 10 this year with the 2020 outlook still unclear Sanford C Bernstein Co estimates that the world s top miners including Vale will ship about 283 million tons this quarter 10 lower year on year
Iron ore hitting 100 vindicates predictions from market watchers including Citigroup Inc NYSE C Barclays LON BARC Plc and Clarksons Platou Securities Inc all of which flagged the potential for a gain for the raw material into three figures
Key to the rally over the past three months has been declines in port holdings in China which have sagged to lowest since 2017 The tradeable portion of remaining holdings is set to be depleted according to a report from First NZ Capital Securities Ltd that includes estimates from Credit Suisse SIX CSGN Group AG |
C | Yuan Within Sight of Seven Poses Challenge for Both Trump and Xi | Bloomberg The yuan s rapid slide risks re igniting one of U S President Donald Trump s favorite criticisms of China that Beijing weakens its currency to aid exporters
While analysts say the exchange rate is being driven by souring market sentiment as China s economy slows and the U S ramps up tariffs the slide towards 7 against the dollar comes during crunch trade negotiations
The offshore yuan has fallen almost 3 this month making it the worst performing currency in Asia and the onshore yuan broke the 6 9 level on Friday for the first time this year
This will give ammunition to hawks in Washington said Hui Feng a senior research fellow at the Griffith Asia Institute and co author of The Rise of the People s Bank of China
That s probably one of the reasons the central bank is now trying to push back at least verbally China has ample policy tools to cope with fluctuations in the foreign exchange market State Administration of Foreign Exchange head Pan Gongsheng said in an interview with Financial News published on the PBOC website Sunday
While tight capital controls and the world s biggest holding of foreign exchange reserves offer a crucial buffer the yuan s weakness will also be a test for President Xi Jinping who as recently as last month pledged against currency depreciation that harms other nations
A weaker currency risks pressuring households and companies to get money out of the country and would force the government to draw on its more than 3 trillion reserves to defend it
A yuan sell off would also rattle investors as seen in the aftermath of a shock devaluation in 2015 That year the yuan s slide triggered panic in the stock market and stoked concerns of a hard landing
The worry is that a yuan slump could make consumers less willing to spend and corporates lose the motivation to make investments according to Citigroup Inc NYSE C strategists Lu Sun and Gaurav Garg
It could also trigger trading partners to allow their currencies to weaken in response
Foreign investors who have been boosting holdings of onshore stocks and bonds for years may accelerate their selling if the yuan sinks past 7 according to Citi s Sun and Garg Overseas funds may also prefer global index compilers to delay adding Chinese assets to their gauges they said That could postpone capital inflows just as China is expected to see a current account deficit and undermine a major support for the yuan
It really depends on the pace and the extent to which it goes Viraj Patel foreign exchange and global macro strategist at Arkera told Bloomberg Television If it is a sharp move that takes markets by surprise then that will have greater ramifications for global markets
For China s manufacturers and exporters a weaker yuan would boost their competitiveness A Bloomberg replica of the CFETS RMB Index which tracks the yuan against 24 trading partners currencies fell for a 13th straight day on Friday the longest run since the data were available in January 2015
That sell off won t go unnoticed in the White House said Louis Kuijs chief Asia economist at Oxford Economics in Hong Kong
I am sure that a weakening of the yuan will be disliked by Trump and taken by him as a political act he said |
C | Why Yuan at Seven Would Risk Further Inflaming Trade Dispute | Bloomberg The yuan s recent slide risks re igniting one of U S President Donald Trump s favorite criticisms of China that Beijing weakens its currency to aid exporters
While analysts say the exchange rate is being driven by souring market sentiment as China s economy slows and the U S ramps up tariffs the slide towards 7 against the dollar comes during crunch trade negotiations
The offshore yuan has fallen almost 3 this month making it the worst performing currency in Asia and the onshore yuan broke the 6 9 level on Friday for the first time this year
This will give ammunition to hawks in Washington said Hui Feng a senior research fellow at the Griffith Asia Institute and co author of The Rise of the People s Bank of China
That s probably one of the reasons why China is now pushing back The nation has ample policy tools to cope with fluctuations in the currency market State Administration of Foreign Exchange head Pan Gongsheng said in an interview with Financial News published on the central bank s website Sunday There is more harm than good if the yuan weakens past 7 as a breach of the level may hurt confidence and increase outflows pressures according to a China Business News article co authored by former central bank official Sheng Songcheng
On Monday the People s Bank of China set the daily reference rate at a level stronger than analysts and traders projected a sign that Beijing is seeking to slow depreciation The onshore yuan advanced for the first time in four days rallying 0 22 to 6 9034 as of 9 49 a m in Shanghai The fixing restricts the onshore yuan s moves by 2 on either side
While tight capital controls and the world s biggest holding of foreign exchange reserves offer a crucial buffer the yuan s weakness will also be a test for President Xi Jinping who as recently as last month pledged against currency depreciation that harms other nations
A weaker currency risks pressuring households and companies to get money out of the country and would force the government to draw on its more than 3 trillion reserves to defend it
A yuan sell off would also rattle investors as seen in the aftermath of a shock devaluation in 2015 That year the yuan s slide triggered panic in the stock market and stoked concerns of a hard landing
The worry is that a yuan slump could make consumers less willing to spend and corporates lose the motivation to make investments according to Citigroup Inc NYSE C strategists Lu Sun and Gaurav Garg
It could also trigger trading partners to allow their currencies to weaken in response
Foreign investors who have been boosting holdings of onshore stocks and bonds for years may accelerate their selling if the yuan sinks past 7 according to Citi s Sun and Garg Overseas funds may also prefer global index compilers to delay adding Chinese assets to their gauges they said That could postpone capital inflows just as China is expected to see a current account deficit and undermine a major support for the yuan
It really depends on the pace and the extent to which it goes Viraj Patel foreign exchange and global macro strategist at Arkera told Bloomberg Television If it is a sharp move that takes markets by surprise then that will have greater ramifications for global markets
For China s manufacturers and exporters a weaker yuan would boost their competitiveness A Bloomberg replica of the CFETS RMB Index which tracks the yuan against 24 trading partners currencies fell for a 14th straight day on Monday the longest run since the data were available in January 2015
That sell off won t go unnoticed in the White House said Louis Kuijs chief Asia economist at Oxford Economics in Hong Kong
I am sure that a weakening of the yuan will be disliked by Trump and taken by him as a political act he said
Updates 4th paragraph with Sheng s article adds 5th paragraph with yuan s latest moves on Monday updates prices throughout story |
C | China Dollar Loan Market Tanks 62 This Year Amid Trade War | Bloomberg Dollar loans to Chinese borrowers have cratered this year thanks to both a decline in demand and increased wariness among lenders amid escalating U S China tensions
Syndicated dollar loan issuance to Chinese borrowers has tumbled 62 from the start of the year through May 17 to 7 3 billion according to data compiled by Bloomberg That s the lowest level since 2012
Volume is unlikely to rebound anytime soon said Fang Lei a Hong Kong based managing director of Asia Pacific debt origination and advisory at Credit Agricole PA CAGR SA Some companies are sitting on the sidelines watching the U S China trade war
Many instead are turning to domestic funding taking advantage of policy makers moves to bolster credit growth as China s economy slows Yields on weaker companies bonds have fallen near the lowest in 30 months luring issuers including developers back home for funding Local corporate bond issuance has jumped 33 5 so far to a record high of 4 4 trillion yuan 637 3 billion
A weakening exchange rate has also enhanced the appeal of yuan borrowing and raised the risk of servicing overseas debt Dollar bond issuance has also slowed this year though not by as much as in the loan market Chinese entities dollar note sales are just 4 9 down on last year according to data compiled by Bloomberg
Meanwhile the prolonged trade dispute has reduced the incentive for manufacturing investment amid fear Chinese products will be subject to additional tariffs Banks have turned cautious according to Steve Wang Hong Kong based deputy head of research at BOC International Holdings Ltd
Economic uncertainty has been holding back Chinese companies from significant spending plans and in turn has dampened demand for offshore loans said Benjamin Ng head of Asia Pacific debt syndicate and acquisition finance group at Citigroup Inc NYSE C in Hong Kong
Read here about China s pledge to continue with targeted stimulus amid trade war risks
To cap it off there s China s record pace of credit defaults to give lenders pause
Marginal borrowers with weaker financials would find it more difficult to tap syndicated loans amid increasing worry on defaults said Fang at Credit Agricole
Updates dollar note sales in the fifth paragraph |
JPM | 4 Hot Mutual Funds To Buy As ECB Raises Growth Projections | On Dec 14 ECB President Mario Draghi announced his decision to keep borrowing rates unchanged and slashed the quantitative easing program to half The ECB chief also raised the growth and inflation forecast for the euro area Though the inflation rate remains well below the target rate of 2 the central bank is confident that the economy will reach the targeted level gradually Further the central bank has raised its growth projection for the economy through 2020 Manufacturing activity in Europe is also burgeoning and hit a seven year high last Thursday buoyed by a surge in business investments Such encouraging economic conditions make the eurozone a hotbed for investors and we suggest you bet on the following mutual funds from Europe ECB Raises Growth Forecast for 2018The ECB decided to leave its deposit rate unchanged at 0 4 The main referencing rate also remained 0 In a statement the ECB said that the interest rate would remain at their present levels for an extended period of time and well past the horizon of the net asset purchases Moreover the European Central Bank raised its growth and inflation forecasts for the eurozone on Dec 14 Officials from the central bank also predicted that inflation would linger below the target of 2 till 2020 Risks surrounding the euro area growth outlook remain broadly balanced said ECB President Mario Draghi Further he stated that the economy has been gaining from an increase in business investments improved profits and rising demand Draghi also commented that economic improvement in the area was consistent in the third quarter of 2017 Real GDP increased 0 6 quarter over quarter following 0 7 growth in the second quarter The GDP forecasts for 2017 2018 and 2019 were raised to 2 4 2 3 and 1 9 respectively Further it gave the first forecast for 2020 of 1 7 Eurozone s PMI at a Seven Year HighThe composite purchasing managers index PMI for the euro area notched up an 82 month high on Dec 14 The reading came in at 58 higher than 57 5 in November This indicates that businesses in the euro area have gathered steam as 2017 nears its end Such a reading also indicates economic expansion of 0 8 in the fourth quarter Further growth in new business also notched up a 10 year high as the new orders subindex rose to 57 9 from 57 3 earlier Moreover the service industry has risen 56 5 this month pushing the business expectations gauge up to a three month high of 65 6 Finally the index that measures output rose to a 17 year high to 62 and the purchase index touched 52 3 its highest level since 1998 4 Best Performing European Mutual FundsHere we have highlighted four European mutual funds carrying a Zacks Mutual Fund Rank 1 Strong Buy or 2 Buy Moreover these funds have encouraging three year and year to date returns Additionally the minimum initial investment is within 5000 The eurozone is growing by leaps and bounds under favourable economic conditions The central bank has projected that the GDP will expand by as much as 2 3 in 2018 alone This is why we suggest that you should invest in the following mutual funds from Europe 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 T Rowe Price European Stock seeks appreciation of capital in the long run by investing in common stocks This fund invests the lion s share of its assets in companies from Europe Normally the fund is invested in companies of any capitalization from a minimum of five countries PRESX has an annual expense ratio of 0 96 which is below the category average of 1 39 The fund s respective returns are 23 6 and 4 5 for the year to date and three year annualized periods Invesco European Growth A seeks appreciation of capital in the long run and invests the majority of its assets in securities of European countries The fund invests in companies of all capitalizations however a large portion of its assets are invested in small and mid cap companies AEDAX has an annual expense ratio of 1 34 which is below the category average of 1 39 The fund s respective returns are 24 2 and 9 3 for the year to date and three year annualized periods Fidelity Europe seeks appreciation of capital in the long run It invests primarily in common stocks of different European companies FIEUX has an annual expense ratio of 1 06 which is below the category average of 1 39 The fund s respective returns are 25 1 and 8 1 for the year to date and three year annualized periods JPMorgan NYSE JPM Intrepid European A seeks appreciation of capital in the long run It invests the lion s share of its assets in equity securities of companies that have the majority of its operations in Western Europe VEUAX has an annual expense ratio of 1 42 which is below the category average of 1 39 The fund s respective returns are 20 1 and 6 1 for the year to date and three year annualized periods 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 | Twitter Stock Rallies After Making JPM s List Of Best Ideas For 2018 | Twitter Inc NYSE TWTR stock surged by more than 10 in intraday trading on Monday climbing to its highest level in more than a year at 24 57 The social media firm has JPMorgan analysts to thank for that sudden surge in the Twitter stock price as they named it one of their top smid cap ideas for 2018
Twitter stock upgraded to Overweight
Analyst Doug Anmuth upgraded Twitter stock from Neutral to Overweight and boosted his price target from 20 to 27 per share He expects the company s results and even its story to become stronger over the next year building on the differentiated value proposition it offers to users as it returns to revenue growth
He cited four main reasons for his upgrade First he feels that the company s are improving on the back of video and live streamed content timeline changes notifications the Explore tab and improvements to the user interface He expects all of these changes to drive continuing double digit growth in daily active users next year He has also been watching Bloomberg s TicToc a global news network made specifically for Twitter and launching today with seven sponsors
Anmuth believes that video and live streamed content are the most important parts of Twitter s new platform and he sees it as differentiated because it s focused more on real time news and discussions The micro blogging platform streamed 830 live events during the third quarter and 74 of them reached a global audience
Return to growth next year
The JPMorgan NYSE JPM analyst looks for Twitter to return to revenue growth next year as he looks for a 10 7 increase including an 8 6 increase in ad revenue and 23 growth in data licensing He pointed out that the micro blogging platform s daily user base has grown consistently in the double digits over the last year and he feels that the platform s content is improving as well As a result he also believes that advertisers are getting back into using Twitter citing more upfront deals and his discussions with others in the industry
Anmuth also expects Twitter to be profitable on a GAAP basis as its margins expand driven by revenues rather than cost cutting measures He expects the company to invest selectively from here on out Even with a 5 increase in non GAAP expenses next year he still expects 2018 to be the first year the company posts a GAAP profit resulting in more than 20 growth in EBITDA and an EBITDA margin of 37
Twitter stock still on the rise
He also noted that Twitter stock isn t cheap right now as it has gained 30 since the company s third quarter earnings release in Based on his revised numbers Twitter stock was trading at 11 8 times his 2019 EBITDA estimate before today s rally However he also expects the platform s improving traction among marketers and users to drive upside to consensus estimates for 2018
Today s gains in Twitter stock add to last week s gains which some said were brought about by fresh that the company could be bought out possibly by Twenty First Century Fox which is planning on shedding its movie and TV studios and its other major entertainment related assets to focus more on news and sports |
JPM | JP Morgan Launches Managed Futures ETF | JP Morgan has launched a new fund focused on providing long term return through exposure to managed futures strategies
JPMorgan NYSE JPM Managed Futures Strategy ETF JPMF is an active fund and does not track any particular index
Fund Characteristics
The fund utilizes a rules based bottom up methodology to select assets across a wide range of asset classes to provide diversified exposure adopting managed futures strategies It seeks to provide high diversification benefits in order to reduce the exposure to risk by offering returns uncorrelated with the overall markets It has AUM of 50 4 million and charges 59 basis points as fee per year It has top holdings in USD currency contract ZAR currency contract and Coffee commodity futures with 0 1 exposure each as of Dec 18 2017
Market Impact
The Senate voted 51 49 in favor of the tax reform The legislation was finalized in a conference report last week and is poised to become law this week and hand President Donald Trump his first legislative victory This is expected to lead to a rally in U S equities
The Fed recently hiked interest rates in its December meeting Moreover Wall Street expects Fed to raise U S interest rates thrice in 2018 However the outlook for the greenback is still quite uncertain
Although the OPEC has extended its production cut plans the outlook for crude is still uncertain U S shale output has been rising and weighing on crude prices Therefore it is difficult to predict if oil inventories will be stabilized owing to the OPEC deal and whether prices will be given support
Competition
It faces high competition from other funds focused on providing exposure to the same space However WDTI offers the maximum competition as the other two funds discussed are relatively less popular in the space Below we discuss a few ETFs that seek to provide exposure to this corner see
WisdomTree Managed Futures Strategy Fund
This fund seeks to provide exposure to the global managed futures space
It has AUM of 166 1 million and charges a fee of 65 basis points a year From a sector look the fund has high exposures to Commodities and Financials with 51 6 and 31 6 allocation respectively as of Dec 15 2017 The fund has lost 3 7 in a year and 3 4 year to date as of Dec 15 2017
First Trust Morningstar Managed Futures Strategy Fund WA FMF
This fund seeks to provide returns that exceed the Morningstar Diversified Futures Index while adopting an actively managed strategy of selecting investments
It has AUM of 11 9 million and charges a fee of 102 basis points a year It has 22 9 allocated to Cash and 77 1 to U S Treasury bills as of Sep 29 2017 The fund s top three holdings are S P 500 equity futures Euro Dollar currency futures and Brent crude commodity futures with 13 0 12 7 and 4 9 allocation respectively as of Sep 29 2017 The fund has returned 3 3 in a year and 1 2 year to date as of Dec 15 2017
Pro Shares Managed Futures Strategy ETF
This fund seeks to provide returns that exceed the S P Strategic Futures Index while adopting an actively managed strategy of selecting investments
It has AUM of 5 million and charges a fee of 76 basis points a year Its top long holdings are U S Treasury bond Euro currency futures and Live cattle with 6 1 5 9 and 5 9 allocation respectively as of Dec 18 2017 The fund has lost 3 1 in a year and 4 0 year to date as of Dec 15 2017
Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
MS | Top 5 Things That Moved Markets This Past Week | Bitcoin steadied as Draghi downplayed ECB s ability to regulate cryptocurrencies
A few weeks after Bitcoin suffered one its worst crashes in its nine year history as China stepped up efforts to curb bitcoin trading activity forcing local cryptocurrency exchanges to cease trading the popular cryptocurrency has pared most of its losses
The post China ban recovery however has been far from straight forward as central bankers and Wall Street CEOs have not passed up the opportunity to share their views on the popular digital currency
Morgan Stanley Chief Executive Officer James Gorman on Wednesday adopted a somewhat measured view on Bitcoin compared to his JP Morgan counterpart Jamie Dimon who earlier this month called it a fraud
Gorman said Bitcoin is certainly something more than just a fad adding that the underlying software supporting Bitcoin Blockchain is interesting for the privacy protections it gives people
The Morgan Stanley NYSE MS chief did wonder however whether regulators would strengthen efforts to crackdown on bitcoin related activity to curb the digital currency use among fraudsters
Draghi allayed fears that other regulators could step up efforts to curb bitcoin related activity admitting that the European Central Bank did not have the authority to regulate cryptocurrencies
Janet Yellen s time as Fed chief coming to an end
Speculation surrounding the future of Janet Yellen s position as Federal Reserve chair intensified after both President Donald Trump and U S Treasury Secretary Steven Mnuchin reportedly met with Kevin Warsh to discuss the possibility of his nomination to replace Janet Yellen
Warsh was a Fed governor from 2006 until 2011 and was a member of former Fed chairman Ben Bernanke s inner circle of advisers
The news drew a slight uptick in the U S 10 Year as Warsh if appointed as Fed chair is widely expected to adopt a more hawkish stance on monetary policy
Trump promised a middle class miracle in tax reform speech
President Donald Trump on Wednesday hailed a tax reform plan released by his administration as a once in a generation opportunity promising that it would deliver American businesses some of the lowest tax rates in more than 80 years
President Trump s attempt to get his economic agenda on track following a major healthcare reform setback sparked investor hopes that tax reform will be implemented sooner rather than later
Some analysts however raised concerns over the lack of details on how the proposed tax reforms will be funded fuelling fears that key elements missing from the plan could invite pressure from support industry groups and lobbyists
The dollar was roughly unchanged against its rivals on Friday
Crude oil settled above 50 a barrel
Investors had to contend with a rocky week in oil markets weighing up the possibility of supply disruptions in Northern Iraq against expectations that U S producers are poised to ramp up shale output
Concerns over a possible supply disruption in the oil rich region emerged after Turkey s President Recep Tayyip Erdo an warned that his country could close the valves on the pipeline carrying 500 000 600 000 barrels of crude per day from northern Iraq to the Turkish port of Ceyhan
In the U S investors mulled over signs that rising crude prices are encouraging an uptick in U S drilling activity as oil rigs operating in the United States rose by 6 to 750 last week according to a report from oilfield services firm Baker Hughes
Gold dipped further below 1 300
For the second straight week investors continued to unwind their bullish bets on the gold as renewed hopes for tax reform and elevated expectations for a year end rate sparked a selloff in the precious metal
Net bullish bets on gold fell to 212 600 according to a report from the Commodity Futures Trading Commission CFTC on Friday
Gold prices traded at 1 283 47 down 0 41 on Friday |
MS | OMERS buys landmark Berlin property Sony Center for 1 1 billion euros | FRANKFURT Reuters Canadian pension fund OMERS and U S buyout group Madison N MCN are acquiring Berlin s landmark property Sony Center from Korea s national pension fund NPS for 1 1 billion euros 1 3 billion the companies said on Monday The eight buildings at Berlin s central square Potsdamer Platz include BahnTower the headquarters of national railway company Deutsche Bahn DBN UL as well as office and retail space used by tenants such as Sony Sanofi PA SASY Facebook NASDAQ FB and WeWork They also house cinemas and residential units NPS had bought the property for 767 million from Morgan Stanley NYSE MS in 2010 Ontario Municipal Employees Retirement System OMERS will acquire the property through its Oxford Properties unit which recently invested in Paris La Defense district and after the Berlin deal will have 2 3 billion in continental European investments Most of its other assets are located in London The acquisition is set to be completed in the fourth quarter
1 0 8516 euros |
MS | Sinclair 4 1 on report Fox sees sweeter affiliate deal from Ion | Sinclair Broadcast Group SBGI 4 1 is sinking again on a new sign that Fox FOX 0 9 FOXA 1 1 might drop it as an affiliate partner with word that Fox is getting a sweeter affiliate offer from Ion Media Networks A better offer from Ion would combine its local broadcast stations with Fox s TheStreet says in a deal that could get Fox as much of 90 of the venture s retransmission fees A successful deal would mean Fox transferring ownership of 28 mainly metro TV stations to the JV joining 60 stations owned by Ion Previously Sinclair Broadcast 7 6 amid reports Fox could dump affiliation Aug 03 2017 Now read |
MS | BOJ tankan corporate inflation expectations flagging | By Stanley White TOKYO Reuters Japanese companies inflation expectations eased slightly in September from three months ago in a worrying sign the economy continues to struggle with a deflationary mindset Companies surveyed by the Bank of Japan expect consumer prices to rise 0 7 percent a year from now lower than their projection for a 0 8 percent increase three months ago Firms also expect consumer prices to rise an annual 1 1 percent three years from now unchanged from the previous survey Japan s economy has grown at a healthy pace this year but consumer prices have eked out only small gains which could hasten calls for the BOJ to either expand monetary easing or overhaul its approach to reflating the economy Companies are more optimistic about overseas economies and don t expect domestic retail prices to rise that much said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities We won t see an immediate change in the BOJ s policy but this does show that monetary easing will have to remain in place for a long time The data come one day after the BOJ s tankan survey on corporate sentiment showed big manufactures are the most confident in a decade as global demand adds momentum to the economic recovery The tankan survey also showed companies expect the economy to lose a little momentum in the next three months Core consumer prices which include oil products but excludes fresh food prices rose 0 7 percent in August from a year earlier marking the eighth straight month of gains but still well below the BOJ s 2 percent inflation target One BOJ policymaker called for expanding monetary stimulus at a policy meeting in September raising concerns that the board could become divided The central bank next meets on Oct 30 31 where it will update its forecasts for consumer prices A lowering of the forecasts would put pressure on the central bank to take further steps
The BOJ started the survey on corporate price expectations from the tankan in March 2014 to gather more information on inflation expectations key to its current stimulus programme |
JPM | Citi JPMorgan to pay 182 5M to settle Euribor rate rigging suit | A preliminary agreement to settle an investor lawsuit against Citigroup C 1 and JPMorgan Chase JPM 0 5 for allegedly manipulating the European Interbank Offered Rate calls for the banks to pay 182 5M Reuters reports
Investors including the California State Teachers Retirement System pension fund allege that the banks rigged Euribor and fixed prices of Euribor based derivatives from June 2005 to March 2011 at investors expense
Citi and JPMorgan both denied wrongdoing as part of the settlement Several banks still remain as defendants in the case
Previously Deutsche Bank DE DBKGn reaches Euribor settlement June 13 2017
Now read |
JPM | ECB s Praet Says QE End Isn t Reduction of Stimulus | Bloomberg European Central Bank chief economist Peter Praet said the end of the institution s bond buying program this year doesn t mean policy is being tightened as he pointed to increasingly noticeable headwinds for the economy
The message comes as the Governing Council prepares for its Dec 13 meeting when it will publish new economic forecasts and decide whether to confirm the end of almost four years of purchases of government and corporate bonds Praet stressed that the reinvestment of maturing assets will play a key part in ensuring that monetary support remains in place as inflation slowly picks up
The end of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation he said in a speech in Frankfurt on Monday
Praet acknowledged the recent slowdown in the euro zone economy saying that factors related to protectionism financial market volatility and vulnerabilities in emerging markets are creating headwinds that are becoming increasingly noticeable
He also said excess liquidity the surplus cash sloshing around in the financial system will decline as lenders repay the ECB s long term loans in coming years However reinvestments will contribute to maintaining favorable liquidity conditions for an extended period of time ensuring that interbank interest rates remain close to the ECB s deposit rate currently minus 0 4 percent
Excess liquidity is currently around 1 9 trillion euros 2 2 trillion Praet displayed a slide in his presentation showing that if there were to be no reinvestments it would fall to about 500 billion euros in March 2021 when the last targeted longer term refinancing operation matures
Economists at JPMorgan NYSE JPM and Barclays LON BARC among others expect the ECB will offer new TLTROs in coming months Barclays said in a note on Monday that risks including trade disruption Italy s budget standoff and slower growth in China make launching a third batch of such loans an effective way to prevent tightening
Corrects million to billion in 6th paragraph |
JPM | Brazil economy bounces back from strike strength may be fleeting Reuters poll | By Bruno Federowski BRASILIA Reuters Record low interest rates and a one off windfall from the release of pent up worker savings funds likely helped Brazil s economy bounce back strongly in the third quarter after a nationwide truckers strike disrupted production earlier in the year a Reuters poll showed Yet newfound strength is likely to ease soon as firms anxiously await clear signs that newly elected President Jair Bolsonaro will address their concerns over a ballooning fiscal deficit that have held back capital spending Gross domestic product GDP probably rose 0 8 percent from the second quarter according to the median of 25 forecasts the fastest since the first quarter of 2017 Even the lowest estimate of 0 3 percent would represent an acceleration from the 0 2 percent rate seen in the second quarter when truckers protesting high diesel prices blocked highways across Brazil choking off flows to major industries and forcing farmers to cull their flocks and dump milk At the other end of the scale the most optimistic forecaster HSBC predicted an expasion of 1 7 percent which would be the highest rate since the second quarter of 2013 Economists at JPMorgan NYSE JPM highlighted that a statistical bounce from the strike as well as a non recurring government measure allowing workers to withdraw from inactive severance accounts accounted for much of the accelerated expansion That measure is estimated to have injected 15 billion reais in the economy this year As the effects of these events should phase out during the last quarter of the year this strength should be temporary they wrote in a report JPMorgan expects Latin America s largest economy to expand only 0 4 percent in the fourth quarter in line with wider market expectations A weekly central bank survey of over a hundred economists put 2018 growth at 1 39 percent which would imply a fourth quarter expansion of only 0 3 percent This suggests that Brazil s recovery from its deepest recession in decades is likely to remain slow and steady as opposed to fast and furious The GDP data scheduled for Friday at 9 00 a m local time 1100 GMT is expected to show a 1 6 percent expansion from the year before based on 26 estimates ranging from 1 1 to 2 0 percent All components of demand consumer spending investments government spending and net exports likely contributed positively to growth in the third quarter according to most of the 12 economists who replied to additional questions Interest rates at all time lows helped support a recovery in corporate investments despite uncertainty around October s presidential election Corporate investments had slumped 1 8 percent in the strike depressed second quarter versus the previous three months While continuously rising government spending did boost growth in the short term it is likely to crowd out corporate spending in the future as has been the case in recent quarters economists said Bolsonaro a far right lawmaker who won the presidency campaigning for a tough stance on crime and corruption privatizations and deregulation has pledged to plug the budget deficit in a matter of years Yet that would require negotiating an unpopular overhaul of the nation s costly pension reform with a fragmented Congress Contradictory statements from Bolsonaro s own team mean that is hardly a done deal It s been years since we ve been saying that a pension reform is an urgent necessity and that has not changed said Luciano Rostagno a strategist at Mizuho
We re past the point where we can give anyone the benefit of the doubt Unless we see clear signs that the pension reform will be a reality companies will not invest banks will not lend and the economy will remain as sluggish as ever |
MS | MS Cuts EUR USD Forecast | EUR s trading behavior has changed which has become evident since the EUR USD peak in May and implies that the ECB s easing measures announced at the September meeting will exacerbate EUR weakness over the coming year argues Morgan Stanley NYSE MS
A New EUR Regime
We believe that the EUR regime has changed From the second half of 2012 to the beginning of this year no news was good news for EUR as financial inflows and central bank reserve diversification underpinned the currency However going forward we believe that no news will be bad news for EUR and that EUR rallies will be limited unless accompanied by significant domestic upside surprise in Europe MS notes
This according to MS is consistent with a complete reversal of investor sentiment towards EUR and MS view that the provision of further ECB easing measures and extra liquidity is now set to weaken EUR
Bank Lending EUR a Funding Currency
While MS sees some positive impact from the ECB measures on bank deleveraging MS believes that even this is likely to be EUR negative
Now however with signs that balance sheets are being cleaned up banks can increase risk again and EUR is likely to be exposed to the underlying negative fundamentals Indeed there are already indications that European banks are lending overseas again We expect this process to accelerate once the ECB s AQR and bank stress testing is complete anticipated in November when the ECB takes over as the banking regulator in EMU MS adds
Revising EUR Forecasts Lower
In line with this view MS lowered its EUR USD forecast to 1 24 for end 2014 and 1 12 for end 2015
The trades
MS now runs a new limit order to sell EUR USD as a short term trade at 1 26 MS also holds another short EUR USD position from 1 2920 in its strategic portfolio |
MS | MS Says Stay Short EUR USD | Morgan Stanley NYSE MS expects EUR depreciation to pick up into the end of the year and maintains its forecast for EUR USD to head toward 1 12 by the end of 2015
MS outlines several factors that will drive EUR lower
First we believe that banks are now better positioned to lend overseas catalyzing EUR s use as a funding currency Second growth has been soft driving a sell off in equity markets Third we note that even if growth begins to turn around as our economists expect it could investors who return to the euro area equity market in the future are likely to hedge purchases given low rates in the region MS clarifies
As a result we believe there is limited scope for EUR upside in the current environment The latest bank lending data have shown a pick up in overseas assets suggesting that cross border lending in the eurozone is picking up With the ECB likely to keep rates low far beyond the Fed particularly given the somewhat more hawkish latest FOMC meeting investors are likely to increasingly use EUR as a funding currency MS argues
In line with this view MS maintains a short EUR USD position from 1 2750 targeting 1 20 and runs another limit order to sell at 1 2650 |
MS | Morgan Stanley Sees USD Correction Risk | Given that USD has switched from a funding to an asset currency there is now a large USD long position in place which suggests that if the historical pattern of position reduction is repeated this year there is the risk of a USD corrective setback according to Morgan Stanley
Indeed as well as USD long positioning reaching an extreme many technical indicators also point to current USD price action becoming over extended and vulnerable to a correction While we maintain our bullish USD view over the medium term we would highlight the risk of a near term corrective setback on seasonal position adjustment
The firm went on to suggest
Hence we now recommend caution with USD long positions for the next few weeks
In line with that view
MS tightened the profit stop on its EUR USD short to 1 2550 The trade entered at 1 2750 with a target at 1 20
MS also raised the entry level on its limit order to sell EUR USD from 1 2550 to 1 26 |
C | Citigroup names investor relations chief as consumer bank CFO | By Imani Moise Reuters Citigroup Inc NYSE C said on Friday that its investor relations head will become chief financial officer of its consumer banking unit Susan Kendall who has been with the bank for a decade joins Citi s Global Consumer Bank at a time when the business is trying to jump start domestic growth and streamline its sprawling global operations We are pleased to welcome her to the team as momentum continues to build in the Global Consumer Bank Stephen Bird chief executive officer of the Global Consumer Bank said in a statement Revenue from consumer banking Citi s largest business was flat in the most recent quarter as deposits grew faster abroad than in the United States The change will be effective June 15 and a search for a new investor relations leader will be underway shortly the company said In her new role Kendall will report directly to Mark Mason Citigroup s chief financial officer
Elizabeth Lynn will serve as interim head of investor relations |
C | Italy Rocks European Bond Markets Over Its Deficit Once Again | Bloomberg Concerns of a renewed showdown between Italy and the European Union are rippling through euro area assets
Italian bonds and stocks tumbled leaving investors scrambling for the safety of German bunds a day after Deputy Prime Minister Matteo Salvini ratcheted up tensions by saying he would be prepared to see the country s deficit rise above EU limits if it were to boost employment
Fears over Italy s deficit have resurfaced over the past week following a projection from the European Commission that the shortfall will exceed the bloc s 3 limit in 2020 A battle between the nation s leaders and Brussels roiled the nation s bond markets last year before an agreement was finally reached A strong performance by Europe s populists at the European Parliamentary elections next week could embolden Salvini further
Italy s yield spread was going to come under pressure over the summer on a protracted budget process but the market is now front running this scenario said Michael Leister head of rates strategy at Commerzbank AG DE CBKG We will test 300 320 basis points versus bunds
Italy two year yields surged 11 basis points to 0 79 with trading volumes in bond futures reaching more than twice the 10 day average The slide was precipitated by a block trade in short dated contracts The FTSE MIB Index of shares fell for a second day in three
The slide in Italian notes spurred demand for German securities with the 10 year bund yield falling three basis points to minus 0 10 the lowest level since October 2016 Italy s 10 year bonds now offer 287 basis points more having widened 37 basis points this year
Some investors will have been burned by the latest selloff Italian bonds offer some of the highest yields in the euro area offering what s known as carry effectively higher coupon payments received for just owning the bond But those returns are eroded during volatile periods Both NatWest Markets and Danske Bank A S recommended long trades in segments of Italy s bond markets in recent notes
Stay out of Italy said Jens Peter Sorensen chief analyst at Danske in emailed comments Wednesday
Other investors favor the bonds of Italy s neighbors such as Portugal and Spain Citigroup Inc NYSE C extended its recommendation to buy Portuguese 10 year bonds versus their Italian peers for a second time with the latest reports on the country s deficit stoking another wave of selling pressure
On BTPs we continue to target further widening to 300 basis points versus bunds in 10s on weak growth prospects and renewed politicization of the deficit wrote Citigroup strategists led by Jamie Searle
The slide in Italy over the past week will have also been compounded by heightened fears over U S China trade relations according to Robeco Institutional Asset Management BV President Donald Trump has given his Chinese counterparts a month to agree to a deal or face tariffs on all exports Investors have shed riskier asset such as stocks and Italian bonds as a result
It s not just idiosyncratic Italy risk that is driving bund yields lower but also the broader risk off sentiment as evident in equities credit risk markets said Martin van Vliet a strategist at Robeco |
C | Investors renew calls for Deutsche Bank to trim investment bank | By Andreas Framke Hans Seidenstuecker and Tom Sims FRANKFURT Reuters Deutsche Bank DE DBKGn investors are renewing calls for it to scale back its investment bank division ahead of what promises to be a challenging annual shareholder meeting next week The future of Deutsche Bank s investment banking operations has returned to the fore after the collapse of merger talks with smaller rival Commerzbank DE CBKG One major investor is trying to extract a pledge from the bank for cuts to the unit before committing to back management in a symbolic vote of confidence at the meeting a person with knowledge of the matter said on condition of anonymity Another prominent investor Union Investment said changes in strategy were long overdue Without cuts in investment banking we believe it will not be possible to achieve targets on returns said portfolio manager Alexandra Annecke who is due to address the meeting Deutsche Bank declined to comment The division generates about half of Deutsche Bank s revenue but is also considered its Achilles heel with European regulators fearful that it will fail the next round of stress tests in the United States Last week the risk of a rebuke from shareholders at the annual meeting grew after two influential investor advisory groups Institutional Shareholder Services and Glass Lewis urged them to issue a vote of no confidence in Deutsche Bank s management QUELLING CONCERNS Deutsche Bank s shares have dropped 34 since shareholders convened a year ago On Thursday the price was just cents above the record low of 6 68 euros set in December The bank s chairman Paul Achleitner and top executives are speaking to investors to quell concerns of large shareholders a common practice in the run up to the annual meeting on May 23 said another person familiar with the matter But the bank is unlikely to announce any changes to its investment banking operations in the coming days executives said Revenue at the division is forecast to fall to 12 5 billion euros 14 0 billion this year according to a consensus of analysts That would mark a fourth consecutive year of decline down 34 from 2015 based on Reuters calculations That contrasts with a projected 6 rise in JP Morgan s investment banking revenue to 36 billion for the same period It far outpaces a 5 drop in investment banking revenue across the industry from 2015 to 2018 according to Coalition which tracks banking industry performance Deutsche Bank and Commerzbank attributed the collapse of merger talks to the risks of doing a deal restructuring costs and capital demands but concerns about the investment bank loomed large people with knowledge of the matter said The ratings agencies Moody s and Fitch which have both tagged Deutsche for a possible credit rating downgrade have cited troubles at the investment bank as key concerns Citigroup NYSE C analysts said in a report this week that Deutsche had only one option a restructuring of its investment bank This could mean exiting the United States where it employs 9 000 people and dropping out of the equities business they said adding that an exit would be costly and weigh on earnings Chief Executive Officer Christian Sewing told analysts last month that it was non negotiable that the bank remain globally relevant including in the U S and Asia Sewing announced plans to cut more 7 000 jobs soon after assuming office in a management reshuffle last year including a 25 cut in equities sales and trading jobs
Story corrects date of AGM in 10th paragraph to May 23 not May 24 |
JPM | Darling Ingredients Eyes Uncertain Future | Darling Ingredients Inc NYSE DAR a natural ingredient supplier trying to be one of the 21st century s leading innovators is eying an increasingly Uncertain future on the marketplace Investors are beginning to worry about the company as it consistently underperforms when compared to others in it industry and recent trimmings undertaken by some shareholders could be a sign of more woes to come The company s stocks have still shown life however and Darling s future is anything but certain at this point
Investors question long term prospects
Some investors don t have much of a long term appetite for Darling Ingredients NASDAQ DAR and it s not hard to see why Stock prices have been inconsistent having a relatively healthy 2017 before in October with shares dipping nearly 11 after JPMorgan Chase NYSE JPM lost confidence in the company s long term prospects Furthermore a lackluster performance by Darling Ingredients stands to render its market future hopeless especially if the company doesn t see a serious change in management practices quickly
Sure Darling Ingredients isn t collapsing before us the company s 2017 hasn t been all too bad but investors are never happy when they re just barely getting by Darling has consistently in its industry with relatively poor returns on equity and a brand that may not be savvy enough to compete well into the 21st century Whether the company sees success is largely a question of whether its leadership can turn things around and make Darling competitive again in an industry that s largely written it off
Shareholders aren t exactly stoked for Darling Ingredients either Vivaldi Asset Management recently its holdings in Darling for example and other smaller fish are likely to jump ship too if they don t see progress soon The company needs healthier earnings reports and a stronger message it can bring to shareholders that it s standing out in the market if it wants to win back investor s confidence
As hedge funds continue to gamble over the company s relatively bleak future smaller investors would be well advised to wise up and realize how little potential companies like Darling have While the company can t fairly be described as a time bomb ticking away its last moments on the market it has no real opportunity to grow into the burgeoning success that investors are always on the lookout for If you re interested in a long term prospect that could bring home dividends for years to come Darling Ingredients is likely to let you down as it struggles with its own problems
Keeping up the fight
Darling Ingredients isn t going away without a fight however The company has tried to diversity itself already particularly to appeal to investors after relatively weak earnings reports and could stand to reshape itself in the future too If Darling is to remain attractive to startup investing shareholders for years to come a makeover to help inspire confidence in the company once again certainly wouldn t hurt
Darling Ingredients could stand to re establish itself as a serious player in the market if it continues to innovate too As the demand for biodiesel products heats up for instance the company s work could prove attractive to investors banking on a greener future With the biodiesel market alone to be worth some 40 billion by 2021 it wouldn t be entirely unfair to say that Darling Ingredients could yet be saved by changing market preferences for greener energy Still Darling will need to do more to avoid costly disasters like the plunging stock prices it saw after JPMorgan Chase s evaluation of the company Some may not be wrong when they save that the but to argue that the company isn t facing some hurdles right now would be to ignore reality itself Until Darling Ingredients gives investors new reason to have confidence in the company s long term business strategy shareholders should be cautious to throw their full weight behind the company as it plunges towards an increasingly uncertain future |
JPM | 5 Funds To Buy On Second Best Small Business Sentiment | In November the small cap business optimism index rose to its second highest level since its inception 44 years ago Small business sentiment also hit its best settlement since 1983 Expectations of better business conditions in the near future and expansion in the business environment supported these gains Out of the 10 key components of the index eight registered an increase Additionally optimism over Trump s tax overhaul policies makes small cap growth funds a favorable investment choice Though small cap funds are believed to have a higher level of volatility compared to their large and mid cap counterparts they show greater growth potential following strong business optimism and a weak tax environment Small Business Sentiment Index Hovers Near Record HighAccording to National Federation of Independent Business the small business optimism index increased 3 7 points to settle at 107 5 in November its second best level in 44 years Out of the 10 major components in the index only plans to make capital outlays and current job openings in small cap companies decreased last month Meanwhile the two key contributors of the index expectation of improving economy and higher real sales prospect rose 16 and 13 respectively Additionally better employment plans and an expanding business environment for small business firms soared 14 and 10 respectively Per the index readings majority of the NFIB members now expect the U S economy to register strong growth in the fourth quarter which may rise as high as 4 NFIB President Juanita Duggan said small business owners are now focused on Trump s long awaited tax reforms Duggan added that 2018 might shape up as a great year for small business firms provided the President and the Congress follow through on tax reform Trump s Tax Reform in FocusOn Dec 2 U S Senate Republicans passed the tax Bill after they won the vote by 51 to 49 According to the Tax Cuts and Jobs Act the corporate tax rate will be reduced to 20 from 35 while companies will be allowed to pay a 5 tax on reinvested earnings and 10 tax on deferred cash earnings With Trump s much awaited Republican tax Bill being approved by the Senate a tax cut seems evident in the coming months Lower tax rate prospects are expected to have a positive impact on funds which have significant exposure to small cap stocks Buy These 5 Small Cap Mutual FundsIn the current scenario investing in small cap mutual funds with stable growth potential could be wise The small cap growth value and blend mutual funds posted year to date YTD returns of 19 8 7 4 and 11 1 respectively In this context we have highlighted five small cap mutual funds that have a Zacks Mutual Fund Rank 1 Strong Buy and have impressive YTD and one year annualized returns Moreover these funds have a low expense ratio and their 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 TCM Small Cap Growth invests a large share of its assets in companies which are expected to have market capitalization similar to those listed on the Russell 2000 Index TCMSX seeks growth of capital over the long term TCMSX has YTD and one year annualized returns of 22 6 and 21 9 respectively and an expense ratio of 0 95 compared with the category average of 1 32 Bridgeway Small Cap Value maintains a diversified portfolio by investing in securities of small cap companies listed on the NYSE NYSE MKT and NASDAQ BRSVX seeks total returns through growth of capital The fund invests the lion s share of its assets in undervalued small cap stocks BRSVX has YTD and one year annualized returns of 6 4 and 5 5 respectively and an expense ratio of 0 94 compared with the category average of 1 31 JPMorgan NYSE JPM Small Cap Growth A invests a huge part of its assets in securities of small cap companies These companies have market cap similar to those on the Russell 2000 Growth Index PGSGX seeks long term capital growth primarily from a portfolio of equity securities of small capitalization and emerging growth companies PGSGX has YTD and one year annualized returns of 37 7 and 35 1 respectively and an expense ratio of 1 24 compared with the category average of 1 32 T Rowe Price Small Cap Value Advisor seeks capital appreciation over the long run PASVX invests the lion s share of its assets in securities of companies with market capitalization similar to those listed on the Russell 2000 Index Also it may consider securities of non U S companies for potential investment PASVX has YTD and one year annualized returns of 12 3 and 11 6 respectively and an expense ratio of 1 15 compared with the category average of 1 22 Principal SmallCap S P 600 Index R3 invests a huge part of its assets in equity securities of those small cap companies that are included on the S P SmallCap 600 Index PSSMX seeks appreciation of capital for the long run PSSMX has YTD and one year annualized returns of 11 3 and 9 9 respectively and an expense ratio of 0 73 compared with the category average of 1 22 Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
MS | Morgan Stanley downgrades Trivago on increasing headwinds | Morgan Stanley NYSE MS downgrades Trivago NASDAQ TRVG from Overweight to Equal Weight and drops the price target to 12 Analyst Brian Nowak cites multiple headwinds coming on and thinks online travel agents have started spending less on Trivago which gives the company less money to grow Nowak sees 2H18 as a tough comp period with limited upsides Trivago shares are down 2 19 Competitor TripAdvisor NASDAQ TRIP goes along for the ride with shares down 1 22 Now read |
MS | Bitcoin Pares Gains as CME Dashes Hopes of Bitcoin Futures Contract | Investing com Bitcoin prices were roughly unchanged on Thursday as CME group the world s largest futures exchanged dashed investor hopes that the group would introduce a futures contract for the popular digital currency
On the U S based Bitfinex exchange bitcoin fell to 4 179 0 down 11 3 or 0 27 as the popular digital currency bolstered its market cap to nearly 70bn
I really don t see us going forward with a futures contract in the very near future he said However the straight through processing and capabilities associated with digitization technologies is an area of interest for us Said Bryan Durkin president of the CME group
Bitcoin prices consolidated a day after hitting a two week high following comments from both Morgan Stanley NYSE MS Chief Executive Officer James Gorman and European Central Bank president Mario Draghi
Gorman admitted that while he hasn t invested in Bitcoin it is certainly something more than just a fad adding that the underlying software supporting Bitcoin Blockchain is interesting for the privacy protections it gives people
The Morgan Stanley chief did wonder however whether regulators would strengthen efforts to crackdown on bitcoin related activity to curb the digital currency use among fraudsters
China so far has been one of the more aggressive nations clamping down Bitcoin related activity after it ordered domestic Bitcoin exchanges to cease trading by the October s end sending shockwaves through the cryptocurrency industry
Draghi allayed fears however that other regulators could step up efforts to curb bitcoin related activity admitting that the European Central Bank did not have the authority to regulate cryptocurrencies
Other cryptocurrencies followed Bitcoin s move lower as Ethereum fell 2 68 to 301 68 Ripple lost 3 33 to 0 20300 while Bitcoin Cash fell 0 57 to 462 13 |
MS | Japan s inflation labor demand and factory output signal solid economic recovery | By Leika Kihara and Stanley White TOKYO Reuters Japan s core inflation accelerated in August industrial output rose more than expected and demand for labor remained at its strongest in over 40 years in a further sign of solid momentum in the world s third largest economy The flurry of data should bolster optimism about the outlook for growth though Prime Minister Shinzo Abe s decision to call a snap election has raised some uncertainty over economic policy There was also some uneasiness about monetary policy after a summary of the Bank of Japan s most recent meeting showed one board member wanted an expansion of stimulus as consumer prices remain distant from the central bank s 2 percent inflation target Nationwide core consumer price index CPI which includes oil products but excludes volatile fresh food prices rose 0 7 percent matching a median market forecast It was the eighth straight month of gains in the index and followed a 0 5 percent rise in July Prices are rising gradually Exports are supporting output and domestic demand doesn t look too bad said Hidenobu Tokuda senior economist at Mizuho Research Institute As long as Abe remains in power we will see a continuation of his policies but it all depends on the election Indeed demand for labor remains at the strongest level since 1974 with data showing the jobs applicants ratio held steady at 1 52 in August Industrial output also rose a larger than expected 2 1 percent in August from the previous month as manufacturers of construction equipment autos and electronic parts produced more goods Manufacturers surveyed by the government expect output to fall 1 9 percent in September and then expand by 3 5 percent in October Politics however added a layer of uncertainty over the outlook for growth with inflation still well behind the BOJ s target Abe on Thursday dissolved the lower house and called a snap election for Oct 22 Initially his ruling coalition looked certain to retain its majority However the outcome has been thrown into doubt because the largest opposition party has abandoned the election and will allow its members to run for a newly formed party that may be more popular with voters The summary of the BOJ s rate review this month did not identify who spoke or what specific measures were proposed However the central bank s announcement after its Sept 20 21 meeting showed board newcomer Goushi Kataoka a vocal advocate of aggressive easing dissented to the BOJ s decision to leave policy unchanged saying it is insufficient to meet the 2 percent inflation target Japan s economy expanded at an annualized 2 5 percent in the second quarter as consumer and company spending picked up But price and wage growth remain weak with firms still wary of passing more of their profits to employees forcing the BOJ to push back the timing for reaching its price target six times since deploying a massive stimulus program in 2013 The BOJ now expects inflation to hit 2 percent in the fiscal year ending in March 2020 arguing that a tightening job market and solid economic growth will gradually push up prices Friday s data also showed core consumer prices in Tokyo available a month before the nationwide data were up 0 5 percent in September from a year earlier matching a median market forecast Household spending rose 0 6 percent in August from a year earlier in price adjusted real terms but this was below the median estimate of a 1 0 percent increase and suggests that consumer spending is slowing slightly after a strong performance in April June quarter I m not pessimistic on consumption said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities
The labor market is tight and disposable income is rising Consumer spending can remain on firm footing |
MS | European stocks set for best month this year Volkswagen falls | LONDON Reuters European stocks headed for their best monthly gains this year on Friday as the third quarter drew to a close while Volkswagen shares sank after the German carmaker said it had to increase provisions for settlements in North America A weakening euro has taken pressure off Europe s equities and the exporter heavy DAX especially and helped investors find renewed enthusiasm for the asset class after the slow summer months The pan European STOXX 600 STOXX steadied at a two month high while euro zone stocks STOXXE hit their highest in three months on track for a quarterly gain after falling back in the second quarter Volkswagen DE VOWG p shares dropped 3 5 percent after the car manufacturer said it was increasing its provisions for settlements in North America over its diesel cheating scandal Porsche DE PSHG p shares also fell 3 2 percent Dutch bank ABN AMRO AS ABNd rose 2 1 percent after Morgan Stanley NYSE MS raised its rating on the stock saying it expected dividend payouts to increase Covestro DE 1COV gained 2 percent after Bayer DE BAYGn further reduced its holding in the plastics producer to under 25 percent An upgrade to outperform from Exane BNP analysts boosted satellite communications firm Eutelsat PA ETL up 2 5 percent |
MS | Below target Russian inflation to give room for deeper rate cut Reuters poll | By Zlata Garasyuta MOSCOW Reuters Russian inflation will fall below the central bank s target in 2017 which should allow the bank to cut rates deeper than previously expected the Reuters monthly economic poll found on Friday The consensus forecast showed for the first time that analysts and economists believe the central bank will to keep 2017 inflation below the bank s 4 percent target Once stubbornly high at double digit levels inflation is now seen at a post Soviet low of 3 7 percent for the whole of 2017 A month ago the same poll showed full year inflation was seen at 4 1 percent while in late 2016 this year s inflation was expected at 4 9 percent Lower inflation gives room for monetary easing The central bank is now expected to cut the key rate to 8 percent by the end of this year from 8 5 percent at present A month ago analysts and economists on average predicted the key rate at 8 25 percent by the end of 2017 Economic growth forecast improved marginally Gross domestic product is seen expanding 1 8 percent this year up from 1 7 percent predicted a month ago This brings GDP growth forecasts closer to levels of up to 2 2 percent predicted by the central bank earlier this month Renaissance Capital analysts said economic growth this year could be shaped by a more pronounced recovery in consumer demand and higher gross capital formation Looking forward economists expect consumer inflation to pick up next year In early 2018 we expect inflation to accelerate peaking at 4 4 percent in March as consumer demand recovers and the deflationary FX pass through reverses though a moderately tight monetary policy should return it to the CBR target of 4 0 percent by end 2018 Morgan Stanley NYSE MS analysts said Economic growth is seen running at 1 8 percent next year the poll showed Persistently low unemployment and the impact of promised minimum and civil servant wage hikes and retired pensioners increased stipends are like to support a private consumption recovery Moody s analysts said referring to 2018 The rouble exchange rate is seen at 58 68 against the dollar in a year from now stronger than 61 60 predicted by the previous poll
On Friday the rouble hovered at 57 77 versus the dollar firming 6 percent so far this year |
MS | Special Report Chaos and hackers stalk investors on cryptocurrency exchanges | By Steve Stecklow Alexandra Harney Anna Irrera and Jemima Kelly LONDON SHANGHAI NEW YORK Reuters Dan Wasyluk discovered the hard way that trading cryptocurrencies such as bitcoin happens in an online Wild West where sheriffs are largely absent Wasyluk and his colleagues raised bitcoins for a new tech venture and lodged them in escrow at a company running a cryptocurrency exchange called Moolah Just months later the exchange collapsed the man behind it is now awaiting trial in Britain on fraud and money laundering charges He has pleaded not guilty Wasyluk s project lost 750 bitcoins currently worth about 3 million and he believes he stands little chance of recovering any money It really was kind of a kneecapping of the project said Wasyluk of the collapse three years ago If you are starting an exchange and you lose clients money you or your company should be 100 percent accountable for that loss And right now there is nothing like that in place Cryptocurrencies were supposed to offer a secure digital way to conduct financial transactions but they have been dogged by doubts Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes Equally perilous though are the exchanges where virtual currencies are bought sold and stored These exchanges which match buyers and sellers and sometimes hold traders funds have become magnets for fraud and mires of technological dysfunction a Reuters examination shows posing an underappreciated risk to anyone who trades digital coins Huge sums are at stake As the prices of bitcoin and other virtual currencies have soared this year bitcoin has quadrupled legions of investors and speculators have turned to online exchanges Billions of dollars worth of bitcoins and other cryptocurrencies which aren t backed by any governments or central banks are now traded on exchanges every day These are new assets No one really knows what to make of them said David L Yermack chairman of the finance department at New York University s Stern School of Business If you re a consumer there s nothing to protect you Regulators and governments are still debating how to handle cryptocurrencies and Yermack says the U S Congress will ultimately have to take action Some of the freewheeling exchanges are plagued with poor security and lack investor protections common in more regulated financial markets Reuters found Some Chinese exchanges have falsely inflated their trading volume to lure new customers according to former employees There have been at least three dozen heists of cryptocurrency exchanges since 2011 many of the hacked exchanges later shut down More than 980 000 bitcoins have been stolen which today would be worth about 4 billion Few have been recovered Burned investors have been left at the mercy of exchanges as to whether they will receive any compensation Nearly 25 000 customers of Mt Gox once the world s largest bitcoin exchange are still waiting for compensation more than three years after its collapse into bankruptcy in Japan The exchange said it lost about 650 000 bitcoins Claims approved by the bankruptcy trustee total more than 400 million In July a federal judge in Florida ordered Paul Vernon the operator of a collapsed U S exchange called Cryptsy to pay 8 2 million to customers after he failed to respond to a class action lawsuit The judge ruled that 11 325 bitcoins had been stolen but did not identify the thief This is no different than bank robbers in the Old West said David C Silver one of the plaintiffs attorneys Cryptocurrency is just a new front Vernon could not be reached for comment Another challenge for traders government intervention This month Chinese authorities ordered some mainland Chinese cryptocurrency exchanges to stop trading The order however did not apply to exchanges based in Hong Kong or outside China including those affiliated with mainland Chinese exchanges So called flash crashes when cryptocurrencies suddenly plummet in value are also a threat Unlike regulated U S stock exchanges cryptocurrency exchanges aren t required to have circuit breakers in place to halt trading during wild price swings Digital coin exchanges are also frequently under assault by hackers resulting in down times that can sideline traders at critical moments On May 7 traders on a U S exchange called Kraken lost more than 5 million when it came under attack and couldn t be accessed according to a class action lawsuit filed in Florida During the incident the suit alleges the exchange s price of a cryptocurrency called ether fell more than 70 percent and the traders leveraged positions were liquidated They received no compensation The exchange declined to comment on the lawsuit In a court filing it asked for the case to be dismissed and said the claims should be decided by arbitration Another two flash crashes occurred this year on the U S exchange GDAX The exchange said it compensated traders who lost money Not surprisingly many banks are leery of cryptocurrency exchanges and some have refused to deal with them At a bank investor conference this month in New York Jamie Dimon chief executive of JPMorgan Chase Co NYSE JPM called bitcoin a fraud and predicted it will blow up Boycotts by banks can make it impossible at times for exchanges to process wire transfers that allow customers to buy or sell cryptocurrencies with traditional currencies such as dollars or euros In March Wells Fargo NYSE WFC stopped processing wire transfers for an exchange called Bitfinex leaving customers unable to transfer U S dollars out of their accounts except through special arrangement with the exchange s lawyer Wells Fargo declined to comment Dealing with the banks is a constant and ongoing challenge said Bitfinex Chief Executive Jean Louis van der Velde Citizens and businesses are being treated like criminals when they are not including myself He declined to say which banks Bitfinex is now using In part banks say they are concerned about the due diligence cryptocurrency exchanges do on their customers to guard against money laundering criminal activity and sanctions violations While regulators require banks to verify who their customers are some cryptocurrency trading platforms have performed minimal checks Reuters found Internal customer records reviewed by Reuters from the BTCChina exchange which has an office in Shanghai but is stopping trading at the end of this month show that in the fall of 2015 63 customers said they were from Iran and another nine said they were from North Korea countries under U S sanctions Americans are generally prohibited from conducting financial transactions with individuals in Iran and North Korea Statements on BTCChina s website from 2013 and 2014 identify Bobby Lee who holds American citizenship as its chief executive and co founder Lee is currently CEO of BTCC a separate Cayman Islands registered cryptocurrency exchange company according to a spokesman for the exchanges The spokesman did not respond to repeated questions from Reuters as to Lee s current role at BTCChina and Lee did not comment on the issue The spokesman said that BTCChina complies with Chinese law and is run by a Chinese citizen and its legal representative is also a Chinese citizen The spokesman originally said the exchange had significantly strengthened its compliance processes over the last two years including banning registrations from sanctioned countries such as Iran and North Korea Our system still has some inactivated accounts from some sanctioned countries for audit and logging purposes He said most of those accounts had never been used to trade He later said that BTCChina has never had any North Korean customers and has had only one Iranian customer The Iranian used a bank account in China not Iran therefore all of that customer s transactions on our trading platform did not violate U S sanctions the spokesman said He said BTCC has never had and does not have any North Korean or Iranian customers The U S Treasury Department s Office of Foreign Assets Control in Washington which enforces economic and trade sanctions declined to comment In mid 2016 the Chinese exchange hired a compliance analyst to help monitor any suspicious activity on the trading platform It selected Constance Yuan then 23 years old who told Reuters she had no prior formal training in compliance On her LinkedIn NYSE LNKD page she listed her title as Senior compliance manager I was a bit surprised Yuan said of her hiring I felt I had no experience and it was a pretty big responsibility She said lawyers taught her on the job which she recently left The spokesman for BTCChina told Reuters it has had a vice president in charge of compliance on its staff since 2013 and that person helped to develop a robust system to verify customers identities MICKEY MOUSE IDENTITIES Bitcoin the first digital currency to gain widespread acceptance sprang up during the financial crisis about nine years ago Its attraction early proponents maintained was that it offered a way to bypass banks and governments and to conduct financial transactions more cheaply Every transaction is validated and recorded on a public ledger called a blockchain that is maintained by a network of computers While anonymous the individual transactions are available for all to see on the internet They are secured by cryptography the computerized encoding and decoding of data Mike Hearn an early bitcoin developer said bitcoin was initially viewed more as a hobby than a serious alternative to traditional money People didn t really think it could take off and get big he said It was a thought experiment that happened to have some code Though bitcoin turned out to generate huge attention and media coverage it is still not widely used by ordinary consumers Few retailers accept it and processing transactions on the blockchain remains much slower than payment card networks despite some recent technical changes The computer maker Dell which announced in 2014 that it would accept bitcoin payments has stopped due to low usage a spokeswoman said At the U S online retailer Overstock com NASDAQ OSTK only a fraction of one percent of sales are transacted in bitcoins according to the company Most of the cryptocurrencies right now are more commodities than currency said Dan Schulman chief executive of payments company PayPal You trade them based on what you think will happen to their value They re not really accepted by many merchants as a currency Instead cryptocurrencies have proved attractive to those seeking anonymity Poloniex a U S exchange has allowed some customers to trade cryptocurrencies and withdraw up to 2 000 worth of digital coins a day by providing only a name an email address and a country Reuters found In a statement Poloniex said it has spent considerable resources developing a culture of compliance and has systems in place to prevent users from abusing the platform The exchange isn t allowed to accept New York residents as customers because it lacks a state license to operate a cryptocurrency exchange But Reuters interviewed two New York residents who had claimed that they lived elsewhere and were able to trade on Poloniex A Poloniex spokesman said Any NY resident who submits false profile information in order to trade on our platform is in breach of our terms of service Informed by Reuters of the trading on Poloniex by New York residents the state s Department of Financial Services said it would take appropriate action In a statement the department said As New York s regulator of cryptocurrency DFS will not tolerate any activity by unlicensed operators who attempt to conduct business in the state In June a former U S federal prosecutor testified before Congress that criminals including distributors of malicious code called ransomware large drug kingpins and serial fraudsters were increasingly using unregulated foreign exchanges that don t verify their customers Criminals can open anonymous accounts or accounts with phony names to fly under the radar of law enforcement Kathryn Haun a former assistant U S attorney said at a congressional hearing Thus we have received Mickey Mouse who resides at 123 Main Street in subpoena returns Haun left the Justice Department in May and joined the board of Coinbase which runs the GDAX exchange She told Reuters she was impressed with Coinbase s team and vision A class action lawsuit was filed last year against Coinbase on behalf of customers of the collapsed Cryptsy exchange It claims that Coinbase converted bitcoins allegedly stolen from Cryptsy into about 8 2 million that was then withdrawn Haun and Coinbase declined to comment on the case in a court filing Coinbase denied any wrongdoing In July U S authorities shut down the website of the BTC e exchange one of the world s largest and ordered it to pay a 110 million fine The Treasury Department said it had facilitated transactions involving ransomware computer hacking identity theft tax refund fraud schemes public corruption and drug trafficking BTC e required only a username password and email address to open an account authorities said Reuters was unable to contact BTC e whose base of operations was unclear though it continues to have a website using a New Zealand domain name It now forwards to a new exchange called WEX which didn t respond to a request for comment FAKE VOLUME One of the criteria traders say they use to select an exchange is trading volume The more trades an exchange handles the faster buyers and sellers can be matched From about early 2014 until late January this year Chinese exchanges accounted for about 90 percent of global bitcoin trading volume according to the website bitcoinity org which collates trading data reported by exchanges Some of that high volume occurred because traders were attracted by the fact that these exchanges at that time charged no transaction fees But some of the volume was fake six former employees at two Chinese exchanges told Reuters Artificially pumped up volumes in China could have affected the often volatile price of bitcoin because investors elsewhere monitor and respond to the activity One exchange OKCoin inflated volumes through so called wash trades repeatedly trading nominal amounts of bitcoin back and forth between accounts two former executives said The transactions were logged on the exchanges but not recorded on the blockchain according to a former employee Zane Tackett who held several positions at OKCoin from 2014 to 2015 including international operations manager said he resigned partly out of concern about its fake volumes The motivation is to seem larger than their competition he said Changpeng Zhao a former chief technical officer at OKCoin stated on the website reddit com in May 2015 that OKCoin used bots that are designed to pump up volumes In a response to the post OKCoin said OKCoin does not need to have any fake volume In a statement to Reuters OKCoin said it never artificially inflated trading volume Four former employees at BTCChina including one of its co founders said the exchange had also engaged in faking its trading volumes A spokesman for the exchange said it has never faked its trading volumes The Chinese exchanges sky high volumes appear to have caught the attention of the People s Bank of China After a series of inspections by the central bank Chinese exchanges in January began charging trading fees as exchanges elsewhere typically do and volumes in China plummeted A deceptive market is not a healthy market said Xiaoyu Huang a co founder of BTCChina who said that the exchange had faked some of its volume And in fact it was the fake volumes that made the government mistakenly believe that the Chinese market accounted for so much of the global trading volume and caused the government to supervise bitcoin in China so forcefully Huang said he had left the company in part over a disagreement over its direction The spokesman for BTCChina said the Chinese government s scrutiny into bitcoin exchanges earlier this year was because of a dramatic increase in bitcoin s price China s central bank declined to answer questions UNDER ATTACK Exchanges are frequently targeted by hackers causing additional problems for investors Walle Wei a Chinese trader based in Guangxi in southern China said he was trading futures in bitcoin and a cryptocurrency called litecoin on OKCoin com on July 10 2015 Betting that the litecoin price then about 4 would rise he bought contracts for long positions using borrowed money This meant that he only had to put down 10 percent to trade Trading with that much leverage meant that a small move in the price could either wipe out his positions or greatly magnify his gains Instead of rising as Wei had hoped litecoin s price began falling and OKCoin s website slowed down Wei said He was unable to buy or sell When he regained access to his account his contracts had been liquidated He said he lost 3 136 litecoins then worth about 12 500 OKCoin announced on its blog that it had been a victim of large scale attacks by hackers who flooded its websites with traffic preventing some users from accessing their accounts On July 13 Wei suffered a second similar event with bitcoin He said the exchange s website became inaccessible his contracts were liquidated and he lost 57 9 bitcoins then worth about 16 900 Wei said he complained and OKCoin covered 15 percent of his bitcoin losses waived one month s worth of trading fees and gave him a mobile phone charger He said he also filed complaints with police and five government agencies including the central bank and the China Securities Regulatory Commission CSRC Most ignored his complaints he said and those that replied told him his problem didn t fall under their jurisdiction They said to find the relevant department But I don t know what other relevant government departments there are he said A person close to the CSRC said cryptocurrency exchanges fall under the purview of the central bank which declined to answer questions In a written response OKCoin said it had invested heavily in guarding against attacks and there was no precedent for multinational corporations to compensate users for service interruptions All trading s profit or loss should be solely borne by the users OKCoin said To open an account customers must agree to terms of service that absolve the company of liability for losses from hacker attacks and computer virus intrusion or attack Inaccessible websites aren t the only way investors can lose money on exchanges In February a hedge fund called GABI based in Jersey bought a futures contract on OKCoin s Hong Kong exchange betting the price of bitcoin would rise But the contract was liquidated soon afterwards when another investor placed a giant bet the other way that dwarfed it In regulated exchanges such as the Chicago Mercantile Exchange there are limits to the size of futures contracts to prevent one trader from dominating the market That s not the case on some cryptocurrency exchanges In its online February newsletter the hedge fund s manager called the incident clear market manipulation He said he questioned OKCoin about it They confirmed to us that there were no position limits whatsoever and that people were free to do whatever they wanted in their happy trading environment yes they used those actual words The February bitcoin contract cost the hedge fund between 400 000 and 500 000 according to a person familiar with the matter OKCoin said the two customers traded fairly and there is no regulation restricting the trading strategy Hong Kong s Securities and Futures Commission declined to comment AN ABSOLUTE DISGRACE In the past 15 months Bitfinex one of the world s largest cryptocurrency exchanges was fined by a U S regulator lost 72 million worth of bitcoins to hackers and was cut off by Wells Fargo one of America s biggest banks Bitfinex was set up four years ago Its hundreds of thousands of clients include banks investment funds and other cryptocurrency exchanges according to van der Velde its CEO and co founder and its lawyer It has no head office is owned by a British Virgin Islands company and is managed by three executives who live in Hong Kong the United States and Europe Besides its Dutch chief executive they include Chief Financial Officer Giancarlo Devasini who is Italian and Chief Strategy Officer Philip Potter an American who once worked at Morgan Stanley NYSE MS In June 2016 the U S Commodities Futures Trading Commission fined Bitfinex 75 000 for offering illegal cryptocurrency transactions and failing to register as a futures commission merchant We were happy with the terms of the settlement said Stuart Hoegner Bitfinex s general counsel In August 2016 hackers stole 119 756 bitcoins from Bitfinex As customers and others went online to vent their anger bitfinex is an absolute DISGRACE to the bitcoin community and needs to go one Twitter user wrote Bitfinex executives weighed their options Convinced they couldn t get a bank loan and lacking insurance they decided to reduce their customers balances by 36 percent regardless of whether the investor accounts had been hacked a technique known as the socialization of losses The exchange distributed IOUs in the form of digital tokens which could be traded on Bitfinex Some customers converted the tokens into equity in the company that operates the exchange Although the exchange later redeemed the tokens in full some customers had already sold them at a loss In an interview van der Velde expressed regret for the hack But he defended his firm s response I felt and I still feel terrible for those people who lost their money he said He declined to discuss how the hack happened citing an ongoing police investigation We took responsibility How many financial institutions in the past can you find that say within a very short time We are good for that loss and we issue an IOU for that Please find me one He also said Bitfinex has acted transparently has rigorous know your customer procedures and cooperates with law enforcement agencies Despite its numerous challenges van der Velde said Bitfinex is now handling about 12 billion in trades a month and is very profitable Last year the exchange said it expected to make a 20 million profit in 2017 Despite all the Wild West problems besetting cryptocurrencies van der Velde predicted the final amount will turn out to be even higher
Steve Stecklow reported from London and Helsinki Alexandra Harney from Shanghai Beijing and Hong Kong Anna Irrera from New York and Jemima Kelly from London By Steve Stecklow Alexandra Harney Anna Irrera and Jemima Kelly Additional reporting by Jack Stubbs in Moscow and the Shanghai newsroom Edited by Richard Woods and Janet McBride |
JPM | KKR expands Asia infrastructure business with new hires | By Kane Wu and Anshuman Daga HONG KONG Reuters Global private equity group KKR Co N KKR is expanding its presence in Asia s infrastructure sector with new hires and is looking at launching a new fund as project spending in the region picks up The firm has poached David Luboff CEO of Macquarie Group s Asia Infrastructure Fund as its new head of Asia Pacific Infrastructure people familiar with the matter told Reuters Luboff based in Singapore will lead the Asian operations of the firm s infrastructure business from early next year the people said Reuters could not reach Luboff for comment A KKR spokeswoman confirmed the hire to Reuters but did not provide additional details KKR has also hired Hardik Shah formerly with Brookfield Asset management as a Mumbai based director the spokeswoman said He will focus on exploring infrastructure investment opportunities People familiar with the matter said KKR is also considering launching an Asian focused regional fund following strong demand from investors keen to increase exposure to Asian and emerging markets One of the sources said the fund could be as large as 1 5 billion and would look at areas such as power related investments toll roads and telecom infrastructure KKR declined to comment on the fundraising The people could not be named as the information is confidential Asia is an attractive part of KKR s global infrastructure investment strategy Across the region macroeconomic and societal trends are fostering a unique need for expertise and private capital solutions for projects in a wide range of infrastructure sub sectors Raj Agrawal global head of KKR s infrastructure business told Reuters last week He declined to comment about a new Asia focused fund The new hires follow the close of KKR s 7 4 billion global infrastructure fund in September which focuses primarily on North America and Europe Asia is still a relatively small market for infrastructure funds accounting for only about 15 percent of the total global fundraising pool over the past ten years according to Preqin data Only four Asia focused infrastructure funds worth a combined 4 1 billion have been raised this year just 5 percent of global activity Infrastructure deals in the region however picked up from 2015 to 2017 and accounted for more than a quarter of the global amount last year Preqin data showed as local economies spent trillions of dollars to improve creaking infrastructure KKR is a relative latecomer to infrastructure in the region compared with peers Global Infrastructure Partners I Squared Capital and the infrastructure investment arms of Macquarie Group Brookfield Asset Management and JPMorgan NYSE JPM
Established in 2008 KKR s infrastructure business manages approximately 13 billion in assets under management |
JPM | Wider U S German Yield Gap Is Money Maker for One Quant Fund | Bloomberg As 10 year U S and German yields go their separate ways QS Investors LLC s global macro strategy is wagering the spread has more room to run
John Iborg a portfolio manager at the 20 billion quantitative firm expects the gap between the two rates will widen to a record 300 basis points by year end from about 270 now The firm s macro fund has expressed this view through interest rate futures since the start of 2018 when the spread was about 200 basis points
Underlying Iborg s confidence is his bearish outlook for Treasuries which he expects to be pressured lower by a combination of strong U S economic data ballooning debt supply and a Federal Reserve intent on raising rates three or four times next year On the other side of the trade he sees bunds staying in a range as European growth cools and the European Central Bank keeps benchmark rates unchanged until late 2019
It s been one of our highest conviction and most profitable trades this year said New York based Iborg who was previously an interest rate strategist at JPMorgan Chase Co NYSE JPM It s been our best position on a total return and risk adjusted basis
The 10 year U S German rate differential reached an unprecedented 279 basis points this month as benchmark Treasury yields flirted with their year to date high of 3 26 percent Iborg expects 10 year U S yields to return to the 3 25 percent area by year end from about 3 05 percent currently German 10 year debt yields about 0 35 percent
Human Intervention
The global macro strategy he helps oversee relies on tactical models that take into account inputs such as momentum yield curves and capital flows to identify potential trades While the macro portfolio is heavily driven by those models managers can intervene
When it comes to the Treasury bund spread however the computers and Iborg s fundamental views align
The last employment report was strong inflation continues to meet market expectations that all points to the Fed staying on track he said But in Europe I don t think there s any reason for growth to exceed expectations in the near future so that equals bunds treading water into year end
While Treasury yields have climbed to multi year highs across the curve this year bunds have had a decidedly less dramatic 2018 After touching their highest level since 2015 in February 10 year German yields have traded between 0 3 percent and 0 6 percent for the past few months and are below where they ended 2017
The same forces that should drive U S and German yields apart will likely send the euro and the dollar in opposite directions as well according to Iborg For that reason QS s macro fund is positioned to benefit from further dollar strength against the euro The greenback has gained 5 5 percent against the common currency in 2018
We re long the dollar and short euro and that s one of our higher conviction views as well Iborg said It s along the same lines of reasoning for our Treasury bund spread this divergence in economic growth coupled with rates rising in the U S and not so much in Europe |
JPM | Not Everyone s Abandoning Those Calls for Yield Curve Inversion | Bloomberg The contortions of the Treasury market have shaken off some of Wall Street s most prominent calls for the yield curve to invert BMO Capital Markets and JPMorgan Chase Co NYSE JPM are among the few hanging on
Yields at the short end of the curve will push above those at the long end if the Federal Reserve proceeds with its planned policy tightening according to BMO interest rate strategist Ian Lyngen The U S central bank s latest quarterly projections show three 2019 rate increases and in Lyngen s view the Federal Open Market Committee is unlikely to back off from that stance while the unemployment rate is pushing through half century lows
It s too early to call the FOMC blinking on the hiking cycle and as a result our expectation for the curve to flatten to inversion remains in place Lyngen wrote in a note Wednesday
This position is longstanding as BMO was among the first to call the curve flattening trend that has gripped the 15 4 trillion Treasuries market for the past two years The Canadian bank s tenacity stands out as many others have backed off flattening trades in recent months as long end yields rose Upward pressure came from stronger growth data a pickup in wage inflation and an expansion in Treasury supply The gap between the 2 and 10 year yields has pulled back to around 25 basis points from a decade low of about 18 in August
JPMorgan takes an even stronger stance than the Fed on tightening predicting four hikes in 2019 and an inversion of the curve in the second half of the year according to a report released Tuesday
All Eyes on the Fed
Morgan Stanley s Matthew Hornbach another early subscriber to the flattener trade last month dropped his prediction for the 2 to 30 year U S curve to flatten completely Still the global head of interest rate strategy wasn t ready to back bets on a steeper curve John Herrmann a strategist at MUFG Securities Americas Inc has abandoned his call for inversion
The path of the curve from here hinges on whether the Fed signals a slower path of hikes ahead in response to weakening global growth recent equity market volatility and subdued inflation data Markets last week seemed to embrace this prospect a references to global economic headwinds from top Fed officials sent the benchmark 10 year yield tumbling back toward 3 percent
Traders in short end rates markets have scaled back their positioning for central bank increases And while a hike in December is still seen as likely the market is now pricing in less than half of the tightening that the Fed itself projects for 2019
Hot Labor Market
While Lyngen isn t dismissing the possibility of a March pause he argued that the simple reality is that one of the hottest labor markets we re going to experience in our lifetimes doesn t justify an accommodative stance of monetary policy even if inflation is a bit weaker than desired
This view is shared by Societe Generale PA SOGN SA economist Omair Sharif who has warned that markets are overreacting to the Fed s dovish undertones In a research note Wednesday he flagged a busy schedule of Fed related events over the next two weeks including another Powell speech and we suspect that the occasions could be used to pull markets back towards the Fed s stated 2019 path
Meanwhile in the absence of any more compelling catalysts for Treasuries to rally Lyngen is looking for short dated yields to correct higher
While eventually there will be an inflection point we re not there yet and once this reality is appreciated by the market expect another bearish move in the front end |
C | Singapore Studying Whether to Allow Digital Only Banks | Bloomberg Singapore is discussing the possibility of allowing virtual banks to operate in the city state the Monetary Authority of Singapore said Tuesday
MAS is studying whether to admit such digital only banks with non bank parentage the financial regulator said in an emailed reply to questions from Bloomberg News We have been engaging relevant stakeholders to ascertain the unique value that such entrants could bring to our banking landscape and understand how potential risks will be managed and contained
The MAS review follows the decision by regulators in Hong Kong to issue virtual banking licenses as a way to shake up retail lenders and compete better with regional economies such as China and India
Among the firms to receive Hong Kong permits three have partnered with financial institutions such as Standard Chartered LON STAN Plc BOC Hong Kong Holdings Ltd and ZhongAn Online P C Insurance Co Fintech firm WeLab Holdings Ltd has also received a Hong Kong banking license The new entrants are targeting a market dominated by HSBC Holdings Plc LON HSBA which has a leading share of local retail and corporate lending mortgages and credit cards
In its statement the MAS said digitalization isn t new to Singapore s banking industry noting that local lenders have been allowed to pursue digital only business models since 2000 DBS Group Holdings Ltd Oversea Chinese Banking Corp and United Overseas Bank Ltd all have digital strategies and compete with home grown financial technology firms as well as the local branch networks of HSBC Citigroup Inc NYSE C and other foreign banks
DBS Chief Executive Officer Piyush Gupta downplayed the competitive threat for the local banks of the possible entry of digital only banks in a recent interview with Bloomberg News To my mind that s just basically giving a few more banking licenses he said
In the interview Gupta said he d only see a problem in Singapore if virtual banks are allowed to operate on more lenient terms than the incumbents for example in terms of the capital they are required to hold The real challenge is if the regulators create an unlevel playing field and let the new bank licensees come in and do banking on different terms he said But he said most regulators don t seem to be inclined to do that
Virtual banks typically have lower operational costs than traditional lenders that rely on brick and mortar branch networks Last month Gupta told DBS s annual shareholder meeting that a new digital bank could generate 100 of income from a cost base a little above 30 In contrast DBS s cost to income ratio stood at 44 percent last year |
C | OPEC in the dark on oil supply as Russia Iran cut exports | By Rania El Gamal and Alex Lawler DUBAI LONDON Reuters OPEC is in the dark on the oil supply outlook for the second half of this year with Iranian and Russian outages looking increasingly significant but Saudi Arabia reluctant to pump more due to fears of a price crash sources in the organization said An oil contamination forced Russia to halt flows along the Druzhba pipeline a key conduit for crude into Eastern Europe and Germany in April The suspension left refiners scrambling to find supplies and its duration is unclear Iran s oil exports are likely to drop further in May as the United States tightens the screw on Tehran s main source of income Shipments from Venezuela also under U S sanctions could fall more in coming weeks The dearth of information is a headache for OPEC and allies led by Russia which gather in June to decide whether to renew a supply cutting deal A panel of ministers meets on May 19 in Saudi Arabia to discuss the market and make recommendations Two delegates from the Organization of the Petroleum Exporting Countries said the Russian outage on top of Iranian and Venezuelan export losses would be discussed at the Jeddah meeting and it seemed more than a short term technical glitch It s potentially significant one of the delegates said of the pipeline halt Still the delegate added the price of Brent crude close to 70 a barrel down from a 2019 high of 75 60 last month suggested traders saw no major risk of any shortage Other OPEC sources said there were conflicting views on the significance of the Russian outage and that the complexity of Russia s pipeline system meant the issue was not straightforward I m not quite seeing the impact in terms of supply shortage another OPEC delegate said SUPPLY DROP Analysts at Citigroup NYSE C saw the Russian export loss as enough to affect the balance between supply and demand While it is still difficult to assess the final impacts on balances the severity of the problem could mean up to 400 000 bpd barrels per day of Russian exports could be pulled out of the market for longer than earlier anticipated they wrote That would further tighten the market with OPEC signaling even before the Druzhba outage that demand would exceed supply by more than 800 000 bpd in the third quarter For a graphic on World oil market balance 2019 click A further cut by Russia would mean producers in the alliance known as OPEC exceed their pledged output reductions by an even greater margin The full extent of the drop in Iranian exports this month remains to be seen Tehran s biggest oil customer China has yet to say whether it will keep buying despite the U S decision to end waivers that had allowed limited Iranian exports OPEC Russia and other non member producers are reducing output by 1 2 million bpd from Jan 1 for six months a deal designed to stop inventories building up and weakening prices OPEC s agreed share of the cut is 800 000 bpd but its actual reduction is far larger due to the losses in Iran and Venezuela which are exempt from voluntary reductions under the OPEC deal U S President Donald Trump has said he called OPEC and the group s de facto leader Saudi Arabia and told them to lower oil prices Riyadh however is reluctant to boost supply quickly and risk a price crash On Wednesday a Gulf source familiar with Saudi plans said the kingdom had received moderate crude buying requests from countries that previously took Iranian oil although production would stay under its OPEC quota in June
Iraq another OPEC member able to raise output at short notice said on Sunday it would not decide unilaterally on any production boost |
JPM | JPMorgan s JPM Ratings Affirmed By Moody s Outlook Stable | JPMorgan Chase Co NYSE JPM recently received rating action from Moody s Investors Service an arm of Moody s Corporation The rating agency affirmed the ratings of the bank and kept the outlook stable The company s A3 long term senior debt rating and Aa2 deposit rating has been affirmed Reasons for the AffirmationThe ratings are based on JPMorgan s earnings strength and performance of different business lines Also the company s great liquidity and capital position boosted its credit profile JPMorgan boosts the most diversified earnings which has assisted it to absorb certain rare expenses relating to litigations and legal matters without hampering its regular business activities The dangers inherent in JPMorgan s Corporate and Investment Bank CIB are included in the ratings However the company s earnings from consumer commercial and wealth management operations have helped to partially offset CIB results JPMorgan s business mix has helped it to maintain one of the maximum baseline credit assessments a3 What Could Make Moody s Change the Ratings JPMorgan s ratings could be revised higher by the rating agency if the company maintains its leading position even in a more competitive setting On the flip side JPMorgan s baseline credit assessment could be downgraded if there is a major failure in risk control Shares of JPMorgan have gained 23 5 in the last six months outperforming the 17 4 rally for the it belongs to Currently the stock carries a Zacks Rank 3 Hold Stocks That Warrant a LookWoori Bank NYSE WF Zacks Consensus Estimate have been revised 5 6 upward for the current year in the past 30 days Also its shares have rallied 37 1 year to date It carries a Zacks Rank 1 Strong Buy You can see Republic Bancorp NASDAQ RBCAA witnessed an upward earnings estimate revision of 4 7 for the current year in the last 30 days Also its shares have gained 4 2 so far this year It sports a Zacks Rank of 1 First Bancorp s NASDAQ FBNC Zacks Consensus Estimate for the current year has been revised nearly 3 upward over the last 30 days Its shares have gained 39 year to date It also carries a Zacks Rank of 1 Zacks Hidden TradesWhile we share many recommendations and ideas with the public certain moves are hidden from everyone but selected members of our portfolio services Would you like to peek behind the curtain today and view them Starting now for the next month I invite you to follow all Zacks private buys and sells in real time from value to momentum from stocks under 10 to ETF to option movers from insider trades to companies that are about to report positive earnings surprises we ve called them with 80 accuracy You can even look inside portfolios so exclusive that they are normally closed to new investors |
MS | FINRA orders Morgan Stanley to pay 13 million in fines restitution | NEW YORK Reuters The Financial Industry Regulatory Authority said on Monday it ordered Wall Street investment bank and securities brokerage Morgan Stanley N MS to pay 13 million in fines and restitution to clients for inadequately supervising certain short term trades FINRA the securities industry s self regulator said that between January 2012 and June 2015 hundreds of Morgan Stanley brokers advised thousands of clients to sell unit investment trusts before the product had matured and to roll the product over into a new one Unit investment trusts like mutual funds and closed end funds pay investors a return based on how the trust s investments perform and they are designed to be held for a certain amount of time after which they close By selling an investor s position in the trust early and rolling it over into a new trust the client may pay higher sales charges over time which FINRA said raises questions about how suitable the move is for the investor The regulator pointed to some instances where Morgan Stanley brokers sold clients unit investment trusts less than 100 days before the fund s end and rolled the money over into new trusts FINRA also found the brokerage did not adequately train supervisors to recognize unsuitable short term training and did not have a proper system in place to detect and stop the orders before execution The regulator fined Morgan Stanley 3 25 million and ordered that it pay clients 9 78 million in restitution Morgan Stanley consented to FINRA s findings but did not admit or deny the charges In a statement from Morgan Stanley spokeswoman Margaret Draper the firm said it was pleased to cooperate with FINRA and that the matter was resolved
Morgan Stanley interviewed more than 65 employees as part of a firm wide investigation into the accusations FINRA said |
MS | Morgan Stanley fined 13M by FINRA | FINRA has ordered Morgan Stanley MS 0 7 to pay 13M in fines and restitution to clients for inadequately supervising certain short term trades The activity took place between January 2012 and June 2015 Hundreds of Morgan Stanley brokers advised thousands of clients to sell unit investment trusts before the products had matured and to roll them over into new ones Now read |
MS | Philippines booming casino sector at risk of oversupply | By Farah Master HONG KONG Reuters Overinvestment in the Philippines thriving casino sector could become a reality as investors chase lucrative returns in Asia s fastest growing gaming hub casino to ports magnate Enrique Razon Jr told Reuters on Tuesday Business is also at risk of being cannibalized when casinos operated by the state are privatized next year said Razon who is the chairman of Bloomberry Resorts PS BLOOM and International Container Terminal Services PS ICT Cannibalization it is always possible over investment With liquidity nowadays and low interest rates people are making investments that 10 years ago they wouldn t even think about those kinds of returns The Philippines is one of the fastest growing casino hubs in Asia after Macau and Singapore The government has said it hopes to draw millions of foreigners to casino resorts in Entertainment City a 100 hectare area that aims to mimic Las Vegas and Macau Ranked as the Philippines third richest person with a net worth of 4 4 billion according to Forbes Razon opened the 1 2 billion Solaire by the azure waters of Manila Bay in 2013 Other projects now open include casinos owned by Macau magnate Lawrence Ho and Philippine billionaire Henry Sy and a company founded by Japanese billionaire Kazuo Okada Gross gaming revenue has boomed over the past year up 27 percent in the year to August Morgan Stanley NYSE MS said due to robust demand for proxy betting via video streaming strong visitor arrivals and a solid domestic market The government said this month it wants to start privatizing the casino assets of the Philippine Amusement and Gaming Corp PAGCOR from next year The state run organization is presently both a regulator and operator of more than 40 casinos across the country Razon said Bloomberry would be interested in PAGCOR s casinos in the provinces but said further details were needed to understand how any sale would work On foreign competition for the licenses Razon said Bloomberry had the advantage of being already well established We are not the ones coming in creating the oversupply It is tougher for the entrant if Macau companies came to try to buy the licenses we would try to compete with them to buy the licenses Industry analysts are waiting to assess the impact of the privatization but some expect more gambling venues Ben Lee managing partner at gaming consultancy IGamiX said the move would create a whole lot of mini casinos all over the place and I expect that to increase Razon said competition inside Entertainment City was already strong and expected Okada s new property to ramp up further
The company is finalizing plans to build a smaller casino in Quezon city located in Metro Manila he said which would mainly cater to the dense population in the area Construction is expected to begin in the second half of next year |
MS | Healthcare Top 5 Gainers Losers as of 11 00 am | Gainers IMNP 35 CEMP 15 BGNE 13 OCRX 12 BLPH 12 Losers SYRS 14 AEMD 10 ITCI 9 ARDM 8 CLRB 7 Now read |
MS | Bitcoin Higher After Morgan Stanley s Gorman says Bitcoin more than just a fad | Investing com Bitcoin prices were markedly higher on Wednesday as the popular digital sought to break out of a recent lull that has seen it trade in a narrow range
On the U S based Bitfinex exchange bitcoin rose to 4 103 1 up 221 6 or 5 71 as the popular digital currency bolstered its market cap to 67 6bn
The sharp rise in Bitcoin comes amid comments from Morgan Stanley NYSE MS Chief Executive Officer James Gorman who adopted a somewhat measured view on Bitcoin compared to his JP Morgan counterpart Jamie Dimon who earlier this month called it a fraud
Gorman admitted that while he hasn t invested in Bitcoin it is certainly something more than just a fad adding that the underlying software supporting Bitcoin Blockchain is interesting for the privacy protections it gives people
The Morgan Stanley chief did wonder however whether regulators would strengthen efforts to crackdown on bitcoin related activity to curb the digital currency s popularity among fraudsters
China so far has been one of the more aggressive nations clamping down on Bitcoin related activity after it ordered domestic Bitcoin exchanges to cease trading by October s end sending shockwaves through the cryptocurrency industry
That however has not deterred proponents of Bitcoin as the Chinese bitcoin exchange market only accounted for approximately 10 13 of global bitcoin trading activity so far this year
Other cryptocurrencies followed Bitcoin s move higher as Ethereum rose 3 01 to 299 70 Ripple added 10 91 to 0 21014 while Bitcoin Cash fell 8 14 to 458 32 |
MS | Bitcoin more than just a fad Morgan Stanley s Gorman | Taking the other side of the trade from JPMorgan NYSE JPM s Jamie Dimon Morgan Stanley NYSE MS CEO James Gorman Bitcoin s obviously highly speculative but it s not something that s inherently bad It s a natural consequence of the whole blockchain technology
Gorman takes note of the privacy protections offered by cryptocurrencies and their challenge to central banks control over the money supply
Bitcoin is higher by 7 15 today
Related tickers OTCQB BTCS OTCPK BTSC OTCQX GBTC OTCPK GAHC OTC ARSC
Now read |
MS | The Bull Run For Biotech Stocks Is It Over | For months the experts have been duking it out about whether or not the biotech sector is in a full blown bubble
In one corner we have the Richard Bernsteins of the world Even though the iShares Nasdaq Biotechnology Fund NASDAQ IBB essentially doubled in price over the last two years they re dismissive
Bubbles pervade society says Bernstein They are bigger than the financial markets I don t think the biotech speculation is that broad So no bubble in my opinion
In the other corner we have those like Reformed Broker s Josh Brown who believes that the bubble is plain as day
Anyone with a protein compound under a microscope and a clean suit can go public right now says Brown
Now I admit that the data backs Brown up
An uncharacteristically high number of biotech companies 37 went public last year Yet the pace isn t letting up one bit By March 20 another 24 biotech companies have gone public in 2014
So is there more pain in store for biotech stocks And more importantly does it really matter to investors who aren t invested in the sector Let s discuss
A Risky Proposition
Let s be honest about one thing If any sector in the market is pre disposed to overheating it s biotech
After all an investment in any biotech stock is a speculation on the future sales of an unproven drug So by nature every bet you place in the sector is extremely hit or miss
Yet true to form we re prone to focus on the potential upside more than the downside risk Especially since analysts tend to be exceedingly optimistic too
Case in point After analyzing over 1 700 analyst forecasts Morgan Stanley s NYSE MS Matthew Harrison and Dr David Friedman found that consensus drug sales estimates were completely inaccurate
Most consensus forecasts were wrong often substantially And although consensus forecasts improved over time as more information became available accuracy remained an issue several years post launch
And when the researchers say substantial they mean substantial A significant number 53 of consensus forecasts were overly optimistic by more than 160 of the actual peak revenue of the product
If nothing else let this be a reminder to all of us to 1 take any expectations we have about a biotech s potential and 2 slash it in half immediately
Getting back to the matter of a biotech bubble average valuations certainly appear frothy
The IBB fund trades at a price to earnings ratio of 44 1 and a price to book ratio of 11 23 which compares to 18 0 and 2 6 for the S P 500 Index respectively
So there certainly could be more bloodletting ahead But only time will tell whether or not the 15 pullback for the sector since February 25 represents the beginning of the end or just another breather before the next upward charge
My take If you re sitting on profits in the sector protect them with trailing stops It s better to be safe than sorry
Don t Sweat the Little Stuff
If you re not invested in any biotech stocks it s only natural to still be concerned that a nasty downturn in the sector could end up sinking the entire stock market
Fight your instincts It s not a legitimate concern
Although investments in biotech stocks might represent a good measuring stick for investors appetite for speculation the sector s significance in the big picture is minimal at best
Or as Howard Silverblatt of S P Dow Jones Indices notes the market cap of the S P biotech industry is only equal to about 2 4 of the entire market cap of the S P 500
Granted that s swelled noticeably from the 0 4 level during the height of the 1999 2000 bubble But it s still too small to matter much
Put simply even if the biotech sector disappeared completely 97 6 of the S P 500 would remain intact And the overall impact on performance would be minimal
Bottom line We can t be certain whether or not the impressive bull run for biotech stocks is officially over One thing we can be certain about though is that no matter what happens next with biotech stocks it won t unduly impact the broad market |
MS | Daily Nugget Weak Data From China Pressures Gold | Yesterday the gold price hit a two week high 1 324 40 thanks to a healthy mixture of safe haven demand a weaker US dollar index and of course perceptions over the FOMC Thursday gave market participants more time to digest the FOMC minutes and they decided that the committee was more dovish than had originally been perceived back in March This sentiment has given gold three days of gains The price of gold also received a boost after the NASDAQ took its biggest jump since august 2011
This morning Gold is trading below the two week high following the release overnight of weak economic data from China Silver is also down by 0 5
Concerns over the health of the Chinese economy continue to circulate following the release of the country s latest trade data In March exports fell 6 6 year on year while imports were down by 11 over the same period The country is world s largest importer of raw commodities so expect fresh pressure on prices Volumes on the Shanghai Gold Exchange are according to Bloomberg about 40 lower than they were three weeks ago
This week we ve mentioned a fair few banks and their predictions for gold My most favourite was Morgan Stanley NYSE MS who said that gold would drop as Ukraine was no longer an issue bad luck guys Today we turn our attention to UBS commodity analyst Tom Price told Bloomberg that they expect to see 1 300 1 350 This is thanks to an ongoing US recovery which will see interest rates climb This a common answer however one wonders if anyone s notice that any signs of economic recovery have been driven by QE i e it s a not real recovery and therefore not sustainable
Good news from China however is from the China Gold Association who have released a statement saying Chinese gold consumption in the year 2013 showed 41 upsurge from previous year reaching 1 176 tones sic We asked China gold expert Koos Jansen about this and he believes the numbers are suspect We re looking forward to the release of his analysis shortly
On the flip side of China s insatiable gold demand which is fully encouraged by the government an Indian government official has told Reuters that gold imports to India fell by 40 last year This huge drop is thanks to a series of gold restrictions that were put in place in order to reduce the current account deficit It does seem however that the government and Reserve Bank of India are working on ways to relax the restrictions in a manner which does not open the flood gates For instance so far this year the RBI has allowed five more private banks to import gold |
MS | Why Morgan Stanley Will Grow While Other Financials Remain Flat | Morgan Stanley NYSE MS is set to report FQ1 2014 earnings before the market opens on Thursday April 17th Morgan Stanley is a financial services company which focuses primarily on its Global Wealth Management Institutional Securities and Investment Management businesses So far this earnings season the financials have been a mixed bag with JPMorgan Chase NYSE JPM missing analyst estimates badly while Wells Fargo NYSE WFC and Citigroup NYSE C have stood out as winners Across the board this quarter most financials have had their earnings bars set very low by Wall Street but that s not the case with Morgan Stanley While year over year declines are commonplace for the financials this spring Wall Street expects Morgan Stanley to report yoy revenue growth of 5 while EPS is expected to narrowly fall by only 1c per share Here s what investors expect from Morgan Stanley on Thursday
The information below is derived from data submitted to the Estimize com platform by a set of Buy Side and Independent analyst contributors
The current Wall Street consensus expectation is for Morgan Stanley to report 60c EPS and 8 586B revenue while the current Estimize com consensus from 21 Buy Side and Independent contributing analysts is 64c EPS and 8 541B in revenue This quarter the buy side as represented by the Estimize com community is expecting Morgan Stanley to beat the Wall Street consensus on earnings per share but come up slightly short on revenue
Over the past 5 quarters the consensus from Estimize com has been more accurate than Wall Street in forecasting Morgan Stanley s EPS and revenue 5 times each By tapping into a wider range of contributors including hedge fund analysts asset managers independent research shops students and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69 5 of the time but more importantly it does a better job of representing the market s actual expectations It has been confirmed by Deutsche Bank Quant Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market In this case we are seeing a small to moderate difference between the two groups expectations
The distribution of estimates published by analysts on the Estimize com platform range from 58c to 70c EPS and from 8 233B to 8 748B in revenues This quarter we re seeing a moderate distribution of EPS estimates and a wide range of revenue estimates on Morgan Stanley
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already A wider distribution of estimates signaling less agreement in the market which could mean more volatility post earnings
Over the past 4 months the Wall Street EPS consensus fell from 66c to 60c while the Estimize consensus pulled back from a high of 68c to 64c Meanwhile the Wall Street revenue consensus climbed to 8 738 before falling to 8 586B while the Estimize forecast plummeted late in the quarter before clawing some gains back to 8 541B Timeliness is correlated with accuracy and downward analyst revisions at the end of the quarter are often a bearish indicator
The analyst with the highest estimate confidence rating this quarter is turbinecity who projects 62c EPS and 8 654B in revenue turbinecity was our Winter 2014 season winner and is ranked among over 4 000 contributing analysts Over the past 2 years turbinecity has been more accurate than Wall Street in forecasting EPS and revenue 59 and 55 of the time respectively 1643 estimates Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy In this case turbinecity is expecting Morgan Stanley to beat the Estimize community s expectations on revenue but come up short on profit
Many of the banks and financial services companies are expected to see their earnings fall this spring compared to FQ1 of last year Despite sluggish economic growth and an underperforming financial sector contributing analysts on the Estimize com platform expect Morgan Stanley to grow both its EPS and revenue on a year over year basis by 5 each
Get access to estimates for Morgan Stanley published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize com Register for free to create your own estimates and see how you stack up to Wall Street |
C | Top cannabis CEOs say Canopy Growth s 3 4 billion purchase of pot cultivator Acreage shakes the foundation of what s been true and will spur a cannabis M A boom | Canadian pot company Canopy Growth last week announced it a US pot company for 3 4 billion conditional on the federal legalization of marijuana in the US The deal s unique structure could present an opportunity for more cross border cannabis mergers and as well provide a framework for big consumer packaged goods pharmaceutical and tobacco companies to get in on the lucrative US cannabis market without violating US federal law The Canadian marijuana behemoth Canopy Growth last week announced it had entered into a conditional agreement to purchase Acreage Holdings a US pot company for 3 4 billion pending federal legalization in the US Canopy Growth in other words is leveraging its Constellation Brands backed balance sheet to make a huge bet on the US federally legalizing marijuana The structure of Canopy s deal could provide a framework for more of these cross border mergers and perhaps pave the way for the biggest consumer tobacco and pharmaceutical companies to enter the lucrative US cannabis market and spur a cannabis M A boom according to numerous cannabis CEOs investors and lawyers Read more The deal shakes the foundation of what has been true Keith Merker the CEO of Canadian marijuana cultivator WeedMD told Business Insider in an interview on the sidelines of the Benzinga Cannabis Capital Conference in downtown Toronto s Fairmont Royal York hotel This deal will absolutely be scrutinized by all industry participants from the exchanges to the regulators to investors said Merker We ll be all over this like a wet blanket It s sort of like waiting for the Mueller report Here s how the deal works Acreage shareholders will receive an immediate 300 million payment in cash according to sources close to the deal pending approval by the Supreme Court of British Columbia as well as both Canopy and Acreage shareholders The value of the deal represents a 41 premium over Acreages weighted share price The rest of the money would come as soon as there is a federally permissible pathway to legalization in the US That pathway could take the form of the recently reintroduced STATES Act which would allow states to choose their own route on marijuana legalization already done according to Vivien Azer a cannabis analyst at the investment bank Cowen The STATES Act if passed would also protect banks that want to invest in the industry in states where marijuana is legal There s never been another industry where you ve had a federally illegal activity that s legal at the state level and that is also fully legal in a neighboring country said David Feldman a partner at the law firm Duane Morris who leads the firm s cannabis practice group and was not involved on the deal This is a very unique set of circumstances even liquor prohibition was nationwide there were no exceptions The deal will be terminated in seven years if a federally legal pathway doesn t emerge And it s not clear what would happen to the 300 million that Canopy Growth paid out up front if the deal doesn t go through We don t yet know what s in the agreement said Feldman It s sort of like waiting for the Mueller report Both the Toronto Stock Exchange and the New York Stock Exchange where Canopy is dual listed do not allow listed companies to invest in or own US cannabis because the drug is federally illegal in the US While it s not clear whether the TSX or NYSE will change their policy spokespeople from both exchanges declined to comment to Business Insider Johnathan Sherman a lawyer from the firm Cassels Brock that represented Canopy on the transaction told Business Insider that the deal was in the works for over eight months and both exchange s regulators had been looped in to the discussions Read more I don t think this announcement would shock anyone said Sherman regarding the exchange regulators And to Sherman the structure of this deal has the potential to untap the market for companies that want to pursue US cannabis acquisitions while remaining onside of both federal and stock exchange regulations You re going to see some interest from alcohol tobacco and pharmaceutical companies that aren t in the space right now because of sensitivity to cannabis generally said Sherman Business Insider previously reported that to allow them to purchase US assets The deal is not without some precedent however Canopy Growth has already purchased warrants in Slang Worldwide a cannabis brand headquartered in Toronto but with operations in a number of US states Canopy s deal with Acreage takes a similar deal structure to the next level said Slang CEO Peter Miller in an interview The warrant will allow them to buy the entire company said Miller Both Slang s and Acreage s deals with Canopy are caveated that they re only exercisable upon a change in federal law and that immediately says right in black and white we re not going to do anything that goes offsides what the exchanges will allow said Miller Canopy has just gone bigger than everybody as they do they don t take small swings said Miller Nicholas Vita the CEO of Columbia Care a New York based medical marijuana company told Business Insider that this deal is very typical of Canopy Growth s behavior to be a first mover You have large Canadian companies that were essentially boxed out of the US market said Vita The deal opens up a large range of opportunities for consolidation and partnerships Canopy s moving far ahead of the traditional risk curve Part of what the deal gives Acreage said Vita is access to deeper capital markets Because of the ever changing regulations in the cannabis industry there s a quirky setup where US operators like Acreage are forced to list on the Canadian Securities Exchange a secondary exchange whereas Canadian operators can tap into premier exchanges like the TSX and NYSE And that access to capital via Canopy s position on both exchanges can help a company like Acreage grow more rapidly by reducing the cost of capital as US marijuana companies fight for market share Ordinarily you don t see a corporation move so far out ahead of the risk curve in advance of a decision said Vita regarding Canopy s 3 4 billion bet that the US would federally legalize marijuana Read more I d imagine you re going to see several groups initiate transactions said Vita Maybe not exactly like this but I d be surprised if all the large US operators and all the large global operators aren t having some conversations It s going to be very rapid But for Acreage s shareholders like former Republican Speaker of the House John Boehner this could just be a good opportunity to cash out said Matt Hawkins a managing partner of the Dallas Texas based Cresco Capital Partners a private equity firm that invests in the cannabis industry There s no doubt that this is a shot across the bow to US cannabis companies that Canopy has the war chest to be your exit once marijuana becomes legal said Hawkins on the sidelines of the Benzinga conference Hawkins firm invested in Acreage Holdings before the company went public and still holds shares in the company Canopy is the only company that could do this deal said Hawkins That s why it s so tricky on the public side because when you ve got effectively one company that can come in and gobble up the number one US marijuana company and dictate those terms the way they have it doesn t make for much of a competitive landscape Read more |
C | Citi Says U S and China Will Nail Deal Aiding Commodities | Bloomberg The outlook for commodities is bullish according to Citigroup Inc NYSE C which expects raw materials to be supported by a confluence of positive factors including the agreement of a trade deal between Washington and Beijing improved demand from China and a weaker dollar
The bank s base case is that the U S and China will agree to end their protracted trade fight by end June paving the way for tariffs to be lifted analysts including Ed Morse said in a report A deal between the two economies is now on course for the end of the second quarter the bank said
Raw materials have advanced in 2019 aided by gains in energy and metals with the latest leg up this week driven by the U S decision not to extend sanctions waivers for buyers of Iranian crude At the same time the U S and China have stepped up the pace of diplomacy to try to resolve their trade squabble with speculation that an agreement may come next month A resolution would benefit demand for commodities from soybeans to pork
Partly as agreed during the trade talks China is expected to boost purchases of energy and agricultural products from the U S in the months and years ahead the bank said The current period will be be another strong quarter for commodities and raw materials are also looking up into the third quarter and potentially to year end it said
Global growth is seen at 2 8 percent this year and 2 9 percent in 2020 according to the bank which described that outlook as still reasonable It added While a constructive global economic outlook is good for commodities China being a key engine for global growth would be a further positive
Iron Ore
In addition to the supportive macro and trade backdrop Citigroup was positive on commodities that have been hit by supply crunches especially iron ore The steelmaking raw material has surged this year following mine suspensions in Brazil and disruptions to Australian output from a cyclone
The bank also warned that the spread of African swine fever in China may end up contaminating as much as a quarter of the country s vast herd or up to 200 million pigs That would tighten global protein supplies and the U S lean hog market as the mainland stepped up imports of pork beef and poultry it said
Updates to add global growth outlook in fifth paragraph |
C | SK Hynix eyeing part of MagnaChip Semiconductor source | SEOUL Reuters South Korea s SK Hynix Inc is looking at buying part of logic chip maker MagnaChip Semiconductor Corp a source familiar with the matter told Reuters on Monday adding nothing had been decided SK Hynix the world s second biggest memory chipmaker and its bigger rival Samsung Electronics KS 005930 have been beefing up development of logic chips such as mobile processors image sensors and automotive chips betting on their growth with memory chip demand slowing South Korea s Maeil Business Newspaper said on Monday that SK Hynix was considering bidding for Magnachip s foundry business and its factory in South Korean city of Cheongju citing chip industry sources SK Hynix and MagnaChip declined to comment In February MagnaChip said it has undertaken a strategic evaluation of the Company s Foundry business and Fab 4 with options including joint ventures strategic partnerships as well as M A possibilities MagnaChip said it has retained financial and legal advisors to assist in the evaluation Local media previously reported the businesses up for sale would be worth 300 million The former non memory unit of Hynix Semiconductor was bought by a consortium of Citigroup NYSE C Venture Capital CVC in the United States CVC Asia Pacific and another investment fund for 830 million in 2004
The South Korean company is owned by a number of investors including Brigade Capital Management Oaktree Capital Management and Evermore Global Advisors Refinitiv data shows |
C | All Eyes on China as Firms Worth Trillions Report | Bloomberg China and Hong Kong are firmly in the spotlight this week as a slew of earnings and economic data reports will keep investors plenty busy while Japan remains closed for the Golden Week holiday
The MSCI Asia Pacific ex Japan Index edged 0 4 percent higher Monday bouncing back after the regional gauge posted its biggest weekly decline in a month Japan markets will be closed until May 7
China Telecom Corp kicks things off as it s expected to report earnings at midday in Hong Kong but the real fireworks are slated for after the markets close today as dozens more companies will post their results In all more than 60 companies in China and Hong Kong worth some 2 6 trillion will report today according to data compiled by Bloomberg including these heavyweights
If that s not enough investors can also look forward to results from big banks Standard Chartered LON STAN Plc and HSBC Holdings Plc LON HSBA later on this week sandwiched around a holiday for much of the region on Wednesday
Even beyond earnings there s still no shortage of other market catalysts to choose from
Hong Kong s March trade data is expected after the market close Monday with economists forecasting the picture for exports to contract less than the prior month while imports deteriorate First quarter economic growth figures will come Thursday followed by retail sales on Friday
China manufacturing and non manufacturing Purchasing Managers Index values for April are expected Tuesday
The next round of China U S trade talks are scheduled to begin on Tuesday in Beijing with significant issues still unresolved
The Federal Reserve will announce its next interest rate decision May 2
What promises to be a busy week for investors comes as some of the steam has left the sparkling rally in China stocks this year The Shanghai Composite Index just posted its worst weekly slump since October 2018 as Beijing officials signaled they re less comfortable about adding stimulus to keep the good times rolling
Even so some see potential near term upside as the economic picture has brightened in China after a tough 2018
Citigroup NYSE C Global Markets analysts led by Johanna Chua saw a rebound in their Citi Early Growth Trackers for Asia emerging markets China and India in March Suggesting positive momentum on the region s growth and trade in a note to clients The trackers are designed to capture cyclical momentum of economic growth via financial variables and soft economic data
Favorable short term outlook for China suggests overweight EM equities including China the analysts said
Economists surveyed by Bloomberg have also upgraded their forecasts for GDP growth in 2019 now expecting China to expand by a median 6 3 percent this year up 0 1 percentage point from the previous result
Stock Market Summary
MSCI Asia Pacific Index ex Japan up 0 4
Hong Kong s Hang Seng Index up 0 7 Hang Seng China Enterprises up 0 8 Shanghai Composite little changed CSI 300 up 0 8
Taiwan s Taiex index down 0 1
South Korea s Kospi index up 0 9 Kospi 200 up 1 1
Australia s S P ASX 200 down 0 6 New Zealand s S P NZX 50 up 0 4
Singapore s Straits Times Index up 0 9 Malaysia s KLCI down 0 3 Philippine Stock Exchange Index little changed Jakarta Composite little changed Thailand s SET little changed Vietnam s VN Index up 0 6
S P 500 e mini futures little changed after index closed up 0 5 in last session |
JPM | Kennedy Wilson KW Signs Lease With Indeed At Capital Dock | Kennedy Wilson NYSE KW announced that it has signed a long term lease with global recruitment group Indeed to rent office blocks in the company s Capital Dock development This agreement makes Indeed the second largest tenant to occupy space in the campus development Thus Kennedy Wilson s offices in Capital Dock are now 100 leased Indeed has signed an Agreement for Lease to completely occupy Buildings 100 and 300 Capital Dock spanning 216 000 square feet of space Indeed will occupy the buildings in phases for 20 years with a lease break in the 13th year Notably this agreement follows Kennedy Wilson s earlier announcement of a forward funding sale agreement with JPMorgan NYSE JPM to let 130 000 square feet of space in the 200 Capital Dock building Capital Dock which spans across 4 8 acres of area is situated on Sir John Rogerson s Quay in Dublin One of the largest single phase ground up developments in Dublin this project will offer 346 000 square feet of office space at 100 200 and 300 Capital Dock and house around 3 500 staff 190 premium multi family apartments and a 23 storey tower When completed in fourth quarter 2018 the project will offer more than 690 000 square feet of mixed use space Per management the above mentioned agreement is the largest Dublin office lease that has been completed in this cycle The company remains focused to accelerate net operating income growth by completing and delivering its strong development pipeline Furthermore it is targeting expansion of the multi family portfolio in Europe and is aimed at offering best in class accommodation in cities with solid demographics Subsequent to the completion of Capital Dock and Clancy Quay Phase III management aims to expand the company s residential portfolio to 5 000 units in the upcoming years Shares of this Zacks Rank 3 Hold company have underperformed the year to date While the stock has declined 5 6 the industry has recorded growth of 16 9 during this period Some better ranked stocks in the real estate space are FirstService Corporation NASDAQ FSV Jones Lang LaSalle Incorporated NYSE JLL and Reis Inc NASDAQ REIS All three stocks sport a Zacks Rank of 1 Strong Buy You can see FirstService s Zacks Consensus Estimate for full year 2017 remained unchanged at 1 99 over the past month Its share price has rallied 44 3 year to date For Jones Lang LaSalle the Zacks Consensus Estimate for 2017 earnings has been revised upward to 8 31 in a week s time So far this year the company s shares have gained 49 4 For Reis the Zacks Consensus Estimate for current year earnings moved up to 15 cents in a month s time Its share price has increased 6 4 in the past 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 |
JPM | JESC Very Strong Performance Track Record | JPMorgan NYSE JPM Euro Small Companies Trust Plc LON JESC was launched in 1990 and aims to generate long term capital growth from a diversified portfolio of small cap European equities The investment process involves screening the c 1 500 company universe to construct a relatively concentrated portfolio of 50 75 positions in firms with positive fundamentals and reasonable valuations JESC has a very good investment track record outperforming its benchmark over one three five and 10 years It has also performed strongly versus the average of its four peers ranking second over one three and five years and first over the last 10 years where its NAV total return is 23 6pp higher than its closest peer
Investment strategy Bottom up stock selection
JESC s three managers Jim Campbell Francesco Conte and Edward Greaves are able to draw on the broad resources of J P Morgan Asset Management s European equity team to construct a portfolio of 50 75 holdings in European small cap equities They seek long term capital growth selecting quality companies with positive earnings and share price momentum that are trading on reasonable valuations JESC is benchmarked against the EMIX formerly Euromoney Smaller Europe ex UK Index Liquidity and gearing is actively managed with a range of 20 net cash to 20 gearing permitted At end October net gearing was 5 2
To read the entire report Please click on the pdf File Below |
MS | Morgan Stanley Emerging Markets Domestic Debt Fund declares 0 15 dividend | Morgan Stanley NYSE MS Emerging Markets Domestic Debt Fund NYSE EDD declares 0 15 share quarterly dividend 6 3 decrease from prior dividend of 0 16 Forward yield 7 3 Payable Oct 13 for shareholders of record Sept 29 ex div Sept 28 Now read |
MS | Arista Networks 2 as humble Morgan Stanley re upgrades to Buy | Arista Networks NYSE ANET is up 2 as Morgan Stanley NYSE MS eats its humble pie lifting the stock back up to Overweight after seeing shares nearly double since it went to Equal Weight nine months ago The firm s compensating by naming a Street high price target boosted to 210 from 125 implying 13 4 upside from today s higher price and now expects at least 8 in earnings power run rate Shares are up 126 over the past 12 months amid some key legal wins against Cisco Systems NASDAQ CSCO and as Arista takes more share in data center switching Meanwhile today Arista has introduced its Arista Any Cloud platform aiming to simplify integration and management of hybrid clouds across private cloud data centers and public providers Now read |
MS | Veon 4 6 as Telenor preps 90M share sale | Veon NASDAQ VEON is off 4 6 after hours following news that Telenor TELNY 0 6 is set to being divesting the rest of its stake in the former VimpelCom Telenor Norway s state owned telecom is commencing an offering of 90M of its common shares of Veon in the form of common shares on Euronext Amsterdam and ADS listed on Nasdaq Telenor s current holdings sit at 346 7M ADS representing 19 7 of Veon common shares so the new transaction makes up about 5 1 of Veon shares Citigroup NYSE C and Morgan Stanley NYSE MS are joint book runners for the offering Now read |
MS | Avis Hertz shares rise but remain in short seller cross hairs | By Lewis Krauskopf NEW YORK Reuters Shares of U S car rental companies Avis Budget Group Inc O CAR and Hertz Global Holdings Inc N HTZ have driven out of the ditch in recent weeks aided in part by storms that devastated the southern United States But skeptics remain including large positions held by short sellers in both stocks amid doubts about fundamental aspects of the car rental business Brad Lamensdorf co manager of the AdvisorShares Ranger Equity Bear ETF that bets on stock price declines and holds Avis short positions said Avis faces challenges including balance sheet leverage and strong competition If we were to have a really rough spot in the market I can t imagine a worse company to own Lamensdorf said Even with the stock s recent rise some remain bullish Tom Schindler a portfolio manager at Avis shareholder Diamond Hill Capital Management still sees Avis shares as attractive noting the company s potential to buy back more shares It s been a more volatile stock than most said Schindler Both stocks rebounded from multi year lows in June with Avis shares up some 80 percent since those lows and Hertz rising 160 percent Recent company results showed signs pricing could be improving Now during a seasonally slow time for rentals when travel tends to dip the companies could see stronger demand in Texas Florida and elsewhere after hurricanes Harvey and Irma analysts said Car damage stands to benefit Hertz and Avis by raising demand and prices for used vehicles a potential boon as the companies sell inventory to refresh fleets Irma and Harvey while they have caused destruction are probably going to create a financial windfall for both the rental car companies said John Healy an analyst with Northcoast Research Hertz and Avis are the second and third biggest players behind Enterprise in the U S rental car market where 2 3 million cars are available according to Fundstrat Global Advisors Fundstrat estimates 500 000 cars were destroyed during Harvey said managing director Sam Doctor which essentially has changed the dynamic because every car that was destroyed in Texas is going to be replaced But some have said the gains are overdone Morgan Stanley NYSE MS last week cut its Hertz stock rating to underweight its same rating as for Avis Avis shares are just over half their value of three years ago while Hertz shares are less than one fifth of theirs Doubts about over capacity and industry pricing have weighed as have concerns that off lease cars are flooding the used car market The rise of car sharing companies also make some investors wary The stocks have drawn high profile investors Carl Icahn s Icahn Associates owns about 35 percent of Hertz Gabelli Funds owns 8 percent of the company while Glenview Capital Management owns 9 4 percent of Avis and 6 8 percent of Hertz according to Thomson Reuters data Short sellers held 40 percent of shares outstanding in Avis as of Aug 30 and 33 percent of Hertz Hertz short sellers had 168 million in paper losses in 2017 as of Friday while Avis shorts are down 104 million said Ihor Dusaniwsky managing director of predictive analytics at financial analytics firm S3 Partners Relative to other stocks Hertz and Avis have a high likelihood of a short squeeze according to Thomson Reuters StarMine in which shares rise as shorts cover bearish bets
Over the course of the next two quarters there are going to be positive data points coming out of the car rental names said Hamzah Mazari analyst at Macquarie Research You are going to see guys cover their shorts which will continue to help stock performance |
MS | A private solution for China s zombie company problem Unlikely | By Julie Zhu and Sumeet Chatterjee HONG KONG Reuters China s latest push to revive its bloated state owned sector is set to pick up pace this year with bankers and investors expecting possible spin offs and asset sales to follow a key Communist Party Congress in October But the effort is likely to only involve a limited role for private money even as Beijing has been promoting it as crucial for reforming state owned enterprises SOEs according to people familiar with China s plans Beijing would likely lean on cash rich SOEs like China Life Insurance SS 601628 and Citic Group Corporation to bail out the largest of the struggling companies the people said They cited China Life stepping in to help China Unicom HK 0762 raise 12 billion last month A limited role for private capital would raise questions about the depth of any overhaul of the SOEs China hopes to speed up the reforms in order to meet ambitious economic growth targets and manage its corporate debt burden The current model allows winners companies doing better to partially own those doing worse said Alicia Garcia Herrero chief Asia Pacific economist at Natixis In other words this is a reshuffling of profit loss among SOEs to a large extent China Life is in talks with China Three Gorges New Energy a unit of the country s top hydropower developer according to sources familiar with the matter They said it could also be critical to others in line for so called mixed ownership the injection of private capital into state enterprises Those companies include China Southern Power Grid China State Shipbuilding Corp and China Nuclear Engineering Construction Corporation China Life and Citic Group did not respond to requests for comment China s state run companies dominate the country s key industries from banking to insurance energy and telecoms They retain an edge over their private rivals in investing both locally and overseas in part thanks to easier financing But they also produce lower returns than their private counterparts and account for the biggest proportion of the bad loans on the books of the country s banks The fund raising by Unicom a state owned telecoms group had sparked hopes for the mixed ownership effort as outlined in a 2015 government plan The partial privatization of Unicom in August involving 14 investors including the tech giants Alibaba N BABA and Tencent HK 0700 was welcomed by markets But as Beijing balanced the need for cash with the need for control China Life ended up with a 10 6 percent stake in the company nearly a third of the total sold New investors including China Life were given three of 15 board seats For the SOE reforms to really take off the ownership of these companies should be truly diversified both in terms of equity holding as well as governance said a Beijing based lawyer who works with the National Development and Reform Commission China s top economic planning body and private companies That will be difficult to achieve there is no incentive for private enterprises to invest in most of these state owned firms said the lawyer who declined to be named due to the sensitivity of the issue So it will be basically a case of using one SOE s cash balance to try and revive another The NDRC and SASAC did not respond to Reuters requests for comment CAPITAL RAISING BY INVITATION Private capital is still expected to play an increasing role Responding to stagnating foreign direct investment and even a possible decline this year China said last month that it would become more open to international investors its latest statement about opening up to foreign cash That includes areas like banking insurance and securities where foreign ownership limitations have long grated on overseas companies trying to penetrate the China market And bankers with one eye on next month s Party Congress expect the post October wave of state enterprise reform to be more than just tie ups It could some said extend to smaller sales of unwanted undervalued assets that may be more attractive to private investors if they are allowed control The Party Congress will be a very important inflection point Wei Sun Christianson China chief executive and Asia Pacific co chief executive for Morgan Stanley NYSE MS said at a conference this month referring to possible sales or spin offs in the aftermath All of that creates opportunities for investors For now the playing field is favoring the likes of China Life China Three Gorges New Energy its next likely investment according to the people familiar with the matter is planning to raise about 1 5 billion from new investors Other potential investors in China Three Gorges the next enterprise to receive outside cash are also state backed and there is tepid interest from private investors in the company said one of the people who has knowledge of the process We will actively participate in the next round of mixed ownership reforms China Life s chairman Yang Mingsheng said at an earnings news conference last month But while some mixed ownership candidates hold little appeal for private cash some private players will be considering more than just returns when they weigh their role in China s reform push In China you can t always think about how to make money said one private investor who joined Unicom s fundraising drive
You also need to take part in such reforms to show your support for the government s policy |
MS | Carmakers coal plants seen suffering if Greens join German coalition | FRANKFURT Reuters The emergence of the Greens as likely powerbrokers in a future German government coalition could spell bad news for the country s struggling car and coal power industries Following Sunday s general election Chancellor Angela Merkel s recent coalition partner the Social Democrats SPD said it would go into opposition meaning she is now likely to seek a deal with the Free Democrats and Greens Coalition talks are sure to be highly complex but could see the Greens pressing their key policies on the energy and autos sectors which are already grappling with Germany s shift away of nuclear power and a diesel emissions scandal respectively Among their policies the Greens hope to ban the sale of new combustion engine cars from 2030 a decade earlier than plans already outlined in France and Britain On the whole the Greens pursue more ambitious goals and a more radical response to the diesel scandal Morgan Stanley NYSE MS analysts wrote in a note on Monday The Greens are also calling for a quick phasing out of coal power plants and their complete closure by 2030 Shares in carmakers BMW Daimler and Volkswagen DE VOWG p were down 0 1 0 7 percent on Monday while those in RWE which operates 15 25 gigawatts GW of coal fired plants in Germany 38 percent of its total European capacity fell 4 1 percent to a six week low Analysts at Jefferies however were skeptical coal plants could be phased out as quickly as desired by the Greens saying the 2030 deadline would withdraw capacity currently providing about half of the country s total electricity generation
Even if we assume that half of the market share gap is filled by the existing gas capacity in such a scenario Germany will have to build an additional 130 GW of renewables to balance the market We struggle to add the maths in such a scenario they wrote in a research note |
JPM | Japan s economy faces rising risks from U S China trade war Reuters poll | By Kaori Kaneko TOKYO Reuters Japan s economy which likely shrank in the third quarter is set to grow more slowly in the coming year than previously thought according to a Reuters poll of economists who cited the U S China trade war as the biggest threat Nearly all economists 33 of 36 said downside risks to Japan s economy have increased compared with three months ago the Nov 6 12 poll showed Asked to identify next year s biggest economic risk 16 economists picked U S China trade friction 10 selected China s economic slowdown and eight said New Japan U S trade negotiations the survey found One pointed to fallout stemming from further interest rate hikes from the U S Federal Reserve Japan s place in the global supply chain makes it vulnerable to higher tariffs on U S bound Chinese exports Manufacturers in China use parts and equipment from Japan to make smartphones and computers and Japanese factories in China also ship goods to the United States Potentially the biggest risk from intensified U S China trade tension is the indirect impact on corporate sentiment and capital expenditures said Hiroshi Ugai chief economist at JPMorgan NYSE JPM Securities Japan Japan s economy is expected to shrink in the third quarter according to a separate Reuters poll hurt by a string of natural disasters and a slump in export demand But for the whole year through March 2019 they predict it will grow 1 0 percent down from the 1 2 percent growth projected last month Looking ahead to next year the world s third biggest economy will likely take a big hit in the fourth quarter shrinking at an annual pace of 3 2 percent when authorities plan to hike the sales tax to 10 percent from 8 percent the poll showed The tax hike will raise revenue for increased pension and social welfare costs as the country s population ages NO POLICY CHANGE ANY TIME SOON The poll found core inflation which includes oil products but excludes fresh food prices is set to rise 0 9 percent in the current fiscal year ending March 2019 It is forecast to rise at the same pace excluding effects of the scheduled sales tax hike next fiscal year too The Bank of Japan is expected to keep its pledge to guide short term interest rates at minus 0 1 percent and long term rates around zero percent till the end of 2019 the poll found Nearly every respondent who answered an additional question said that the BOJ s next move would be to tighten policy not loosen it but a strong majority said that wouldn t likely happen until 2020 at the earliest The two most common replies on what steps the central bank would eventually take to tighten policy were to raise the 10 year Japanese government bond yield target or expand the range it allows the yield to trade CELL PHONE RATES Signs that Japan s major mobile phone carriers plan to cut fees next year will depress the core consumer price index CPI economists predicted possibly creating a headache for the central bank which is trying to spur inflation But views were split on whether such cuts would boost overall consumer spending Japan s mobile carrier NTT Docomo Inc T 9437 plans to cut mobile charges by up to 40 percent in the April June quarter following government criticism that fees are left artificially high due to a lack of competition in the industry Other big carriers like KDDI Corp T 9433 and SoftBank Group Corp T 9984 could follow suit Thirty four of 37 economists believe cuts in mobile phone fees will push down the core CPI Sixteen said that would boost consumption while 18 said it would not It could support consumer spending to some extent as people are conscious of the planned sales tax hike said Takashi Shiono economist at Credit Suisse SIX CSGN Securities Japan But we don t think it will have an effect on consumer spending as people will be inclined to save money
For other stories from the Reuters global long term economic outlook polls package see |
JPM | JPMorgan Says Don t Play the Downturn the S P Will Bounce Back | Bloomberg While many investors are getting anxious about the lateness of the economic and market cycle it s not yet time to abandon U S equities according to JPMorgan Chase Co NYSE JPM
An increasing chunk of the investor base is of the view that one has to be already positioned for the next downturn strategists Mislav Matejka Prabhav Bhadani and Nitya Saidanha wrote in a note Monday We continue to believe that S P 500 will recoup the October correction similar to what it achieved post the February one
A panoply of negatives has hit the U S and global stocks since the start of October starting with a rebound in benchmark Treasury yields which has enhanced the appeal of risk free investments Worries over a peak in corporate earnings growth a continuing escalation of trade tariffs a slowdown in China s domestic demand and a cooling in the outlook for technology products the iPhone prime among them have also dented sentiment
Against that there s no sign that the economy is rolling over just yet And the JPMorgan team cited a series of other reasons not to throw in the towel on American equities
The U S yield curve is still upward sloping and the current spread between two year and 10 year rates of about a quarter percentage point is historically consistent with S P 500 Index gains of 10 percent or more in the following 12 months
Premiums on high yield corporate bonds always jump materially ahead of a downturn yet U S junk spreads are only about 40 basis points off the lows of the current cycle
Inflation adjusted interest rates are still low While in the past six decades a slowdown never occurred with real rates below 1 8 percent today they aren t far from zero
The strategists also took heart from the recent surge in volatility saying the VIX or the Cboe Volatility Index has reached levels where stocks typically did well in subsequent months
Bottom line is the JPMorgan team calls for an overweight position in U S equities where positioning appears relatively light It has neutral positions on Europe where politics remain challenging and Japan where a stronger yen could pose a headwind |
JPM | JPMorgan Chase Blockchain Project is Scaling Effectively Report | US multinational bank JPMorgan Chase NYSE JPM has conducted successful tests of its blockchain based payment system dubbed Interbank Information Network IIN The project is now able to scale transactions effectively Financial Times on Monday
II N scaling capabilities are working very well but JPMorgan expects the system to settle around 300 000 transactions daily when fully launched In comparison the international Swift payment system manages 14 5 million cross border transactions on an average every day However the IIN capabilities can grow if more banks join the project which now has more than seventy participants JPMorgan told FT
Commenting on those results David Treat head of Accenture s capital markets blockchain practice said
Certainly from a size of ecosystem perspective and starting to do something in production having |
JPM | U S consumer inflation rises oil prices may slow momentum | By Lucia Mutikani WASHINGTON Reuters U S consumer prices increased by the most in nine months in October amid gains in the cost of gasoline and rents pointing to steadily rising inflation that likely will keep the Federal Reserve on track to raise interest rates again next month Though overall inflation could slow in the months ahead following a recent slump in oil prices economists said Fed officials were likely to regard any retreat as temporary and focus on underlying price pressures The U S central bank which has a 2 percent inflation target left interest rates unchanged last Thursday after a two day policy meeting In its policy statement the Fed noted that annual inflation measures remain near 2 percent Fed officials are likely to look past the swings in energy prices that could slow the overall CPI in coming months to see further upward pressure on underlying prices said Ben Ayers senior economist at Nationwide in Columbus Ohio As such we still expect the Fed to raise interest rates in December The Labor Department said on Wednesday its Consumer Price Index rose 0 3 percent last month the biggest gain since January after edging up 0 1 percent in September In the 12 months through October the CPI increased 2 5 percent picking up from September s 2 3 percent rise Excluding the volatile food and energy components the CPI climbed 0 2 percent The so called core CPI had gained 0 1 percent for two straight months In the 12 months through October the core CPI increased 2 1 percent after advancing 2 2 percent in September Economists polled by Reuters had forecast the CPI climbing 0 3 percent and the core CPI gaining 0 2 percent in October The dollar DXY was weaker against a basket of currencies after touching a 16 month high earlier this week while U S Treasury yields fell Stocks on Wall Street initially rose on the inflation data and a rebound in oil prices which tumbled more than 7 percent on Tuesday before moving lower Oil prices have lost more than a quarter of their value since early October amid a surge in supply and increasing concerns about an economic slowdown The drag on inflation from oil prices is likely to be offset by a tightening labor market which is spurring faster wage growth The unemployment rate is at nearly a 49 year low of 3 7 percent and annual wage growth recorded its largest increase in 9 1 2 years in October In the medium to longer run we believe this increase in wage growth will both push up business costs as well as support demand leading to firming price inflation said Michael Feroli an economist at JPMorgan NYSE JPM in New York In the shorter run however the consumer price outlook will be challenged by the stronger dollar and weaker energy prices CHEAPER FOOD The Fed s preferred inflation measure the personal consumption expenditures PCE price index excluding food and energy increased 2 0 percent for five straight months Economists believe the core PCE price index slipped just below 2 0 percent in October The government will publish the PCE price index data at the end of the month Core inflation that is close to but just below target will not prevent the Fed from raising rates in December said Andrew Hollenhorst an economist at Citigroup NYSE C in New York However it strengthens the argument that aggressive hikes are unnecessary despite continued strong growth Last month gasoline prices rebounded 3 0 percent accounting for more than one third of the increase in the CPI after slipping 0 2 percent in September Food prices fell 0 1 percent after being unchanged in September Food consumed at home declined for a second straight month in October held down by cheaper bread cereals pork dairy products fruits and vegetables Owners equivalent rent of primary residence which is what a homeowner would pay to rent or receive from renting a home rose 0 3 percent in October after advancing 0 2 percent in the prior month Healthcare costs increased 0 2 percent last month after a similar gain in September Apparel prices edged up 0 1 percent after jumping 0 9 percent in September There were also increases in the costs of household furnishings and used motor vehicles and trucks as well as motor vehicle insurance and tobacco
But prices for new motor vehicles dropped 0 2 percent last month Communications costs fell as did prices for recreation and personal care products |
MS | Taking Advantage Of The Panic In The Bond Market | Investors beware the bond market is treading in very rough waters The sell off we have seen of U S bonds might just lead to more troubles ahead for the bond market Just take a look at the chart below Thirty year U S bonds look to be in a freefall They have declined a little more than nine percent since the beginning of May plunging from around 148 50 to below 135 00 now As I have said before the sell off might just pick up speed as the losses of bond investors start to accumulate Keep in mind that long term U S bonds are used as a benchmark on how other bonds such as corporate bonds will be priced If the U S bonds decline in value other types of bonds in the bond market follow suit Central banks which normally buy U S bonds to protect their reserves are selling them Holdings of U S bonds held by the Federal Reserve fell by 32 4 billion to 2 93 trillion for the week ended June 26 That was the steepest reduction in their U S bonds holdings since August of 2007 And central banks have been reducing their U S bonds holdings for three out of the last four weeks Source CNBC June 28 2013 That s not all Individual bond investors are running for the door as well According to the Investment Company Institute the long term bond mutual funds have been witnessing a continuous outflow For the week ended on June 5 bond mutual funds had an outflow of 10 9 billion for the week ended on June 12 the outflow was 13 4 billion and for the week ended on June 19 bond investors pulled out 7 9 billion worth of bond mutual funds Source Investment Company Institute June 26 2013 While some are calling the recent plunge in the bond market a buying opportunity some major problems still persist Fitch Ratings recently provided a credit rating for the U S economy keeping the rating at AAA prime investment grade but remaining pessimistic about the country s outlook The credit rating firm reasoned that without cutting the budget deficit the high national debt level will keep the country vulnerable The firm said The outlook remains negative due to continuing uncertainty over the prospects for additional deficit reduction measures necessary over the medium to long term Source Fitch affirms U S AAA rating but outlook still negative Reuters June 28 2013 Increasing national debt and the government s expenses are making the country s debt questionable and the situation in U S bonds will be no different On top of all this the Federal Reserve which has provided the U S government with a line of credit by buying a significant amount of U S bonds is becoming hesitant to buy any more It has already hinted it will be slowing its U S bonds purchases later this year and will end its quantitative easing program by mid 2014 If that does happen a major buyer of U S bonds will be out of the market and this departure along with many other investors selling will leave the bond market even more vulnerable I ve been warning my readers about the risk of a bond market collapse for some time now What does that mean for you If the bond market continues to fall it means interest rates are going up Corporations that borrow heavily will see higher costs and lower profits One of my colleagues George Leong believes stocks will ultimately rise as investors leave the bond market and move into stocks But from where I sit I ve never seen a stock market rise as interest rates rise If you are invested in stocks and I assume you are if you are reading Profit Confidential my suggestion is to review each of your holdings to see how higher interest rates will affect them I d lower my exposure to companies sensitive to rate increases Michael s Personal Notes The Chinese economy is showing traits that you should be watching The country is experiencing an economic slowdown unlike any it has ever seen before The HSBC Purchasing Managers Index PMI for China has been contracting for two consecutive months In June the indicator which provides an overview of manufacturing in the Chinese economy registered at 48 2 down from 49 2 in May Any reading below 50 on the PMI suggests a contraction in the manufacturing sector New business from the global economy to China declined and companies in China have slashed their workforces The country s new export orders in June fell at the fastest rate since March of 2009 Source Markit July 1 2013 In 2013 the Chinese economy is expected to grow at a pace slower than its historical growth rate For example Barclays PLC expects the gross domestic product GDP in the Chinese economy to grow at 7 4 this year If this turns out to be the case then this rate of GDP growth would be the slowest since 1990 Source Bloomberg June 13 2013 But that s not all Other banks like Morgan Stanley NYSE MS have also lowered their expectations of growth in the Chinese economy as well Morgan Stanley now expects the GDP of China to grow 7 6 in 2013 down from its original forecast of 8 2 The Chinese economy was able to show some improvement after the global crisis in 2009 The country s central bank reacted fast and flooded the financial system with liquidity But the effects of all those efforts seem to be dissipating What many don t realize is that the Chinese economy can actually be considered an indicator of growth for the global economy Not only is China the second largest economic hub in the global economy but China also exports a significant amount of its products to the global economy If the country experiences a GDP decline it s because there isn t demand in the global economy An economic slowdown in China can have many consequences throughout the world One of them is a toll on the growth of smaller nations Consider this in the first four months of this year China consumed 12 of all exports from Thailand If the economic troubles in China continue then countries like Thailand countries that depend on exports to the Chinese economy will see their own GDPs decline Source The Nation June 26 2013 A similar principle applies to the U S economy as well China is one of our trading partners If demand in the Chinese economy declines our exports will be hurt as well and this will have an impact on our GDP as U S based companies that depend on exports to China will suffer due to a persisting economic slowdown Keeping a close eye on the Chinese economy can keep you ahead of the curve when it comes to investing even in American companies What He Said Recipe for Catastrophe To me the accelerated rate at which American consumers are spending coupled with the drastic decline in the amount of their savings is a recipe for a financial catastrophe Michael Lombardi in Profit Confidential September 7 2005 Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else Disclaimer There is no magic formula to getting rich Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis The opinions in this e newsletter are just that opinions of the authors Information contained herein while believed to be correct is not guaranteed as accurate Warning Investing often involves high risks and you can lose a lot of money Please do not invest with money you cannot afford to lose |
MS | Rick Rule On Gold And Silver | Questions on Gold and Silver Answered by Rick Rule What s Going To Happen With Gold And silver They re going to be extremely volatile But these are the sort of times where gold and silver have done very well over time Remember as my friend John Mauldin puts it We want to own things central bankers can t print They can t print gold and silver Right now we re seeing a classic move from one set of hands to another For the last 10 years the pricing of gold and silver has been determined by the futures markets not the physical markets Futures markets are highly leveraged and momentum driven Currently long leveraged carry trades by institutions are unwinding The buyers are unleveraged individuals purchasing record amounts of physical gold and silver around the world A number of central banks in developing countries are also adding to their gold bullion reserves The Reserve Bank of India is doing everything it can to constrain purchases by individuals of physical gold and silver Government in India has historically done everything it can to impede access to legal gold and silver The citizens themselves happily go into real markets that smuggle gold I believe the government s efforts will fail What s Your Outlook On Gold And Silver If The Federal Reserve Succeeds In Putting An End To QE Without Triggering Runaway Inflation I don t know but lower I have substantial suspicions about the ability of the Federal Reserve to exit QE however What they are doing is liquefying the banks and issuing more debt than they can sell Right now new aggregate on balance liabilities on the Federal level is 1 5 trillion per year They finance that by selling 750 billion of debt and by printing up 750 billion of debt which they use to buy existing bonds The off balance sheet liabilities of the Treasury exceed 60 trillion and grow by about 4 trillion a year The idea that we are going to get through this without either defaulting on our obligations or inflating them away defies any rational analysis of the problem From my point of view you re safer with gold in your portfolio Experts who follow the market closely including Eric Sprott but also Morgan Stanley and the big bullion banks say that the anti gold what you consider in place of gold is the U S 10 year Treasury Mainstream institutional investors say that gold is risk on and the 10 year Treasury is risk off but I think that the world has it exactly confused The U S Treasury the anti gold pays a 1 75 interest rate which is well below the rate of inflation and assumes that there is no credit risk with regards to U S obligations If nothing else the lower interest rate lowers the cost in terms of avoided cost of owning gold Are You Concerned That The Government Will Put In Place Price Controls Or Confiscate Gold At Some Point In The Future I think that the risk of that is relatively low given the transportability of wealthy today They would have to put currency controls in place first in which case we would all have greater concerns than the price of gold or gold equities You can buy certificated instruments that hold gold outside the U S which may help protect you depending on how the law was enacted Will Investors Continue To Look To The U S As A Safe Haven For Investments Where Should I Invest If The U S Is No Longer Safe The US dollar is the worst currency in the world except all the others The US dollar is the most liquid currency on the planet As bad as we are in the US we started off from a very good place Compared to the Euro or to the Yen we re in pretty good shape But the ultimate outlook for the dollar remains bleak The Western World is going to have a very difficult time with the debt burden that we have taken on to sustain our standard of living over the last 30 years and that is going to have dire consequences for the dollar What types of investments make sense I think you have to have some cash despite the fact that your purchasing power will decline every year You need to have bullion to hedge your cash I think those of you who can afford to speculate will get some extraordinary bargains in the next six months and I suspect that the very volatility that I see in the next six months will give investors a once in 20 year opportunity to buy high quality natural resource and infrastructure stocks at once in 20 year style prices Are Any Gold Or Silver Miners Stockpiling Their Production Until Precious Metals Prices Go Up Why Don t More Gold And Silver Miners Do This Sadly most gold and silver mining managers don t believe in their product They do not necessarily believe that gold and silver are money Eric Sprott tried to convince many mining companies to hold their working capital in precious metals without success In my opinion the 20 year bear market in mining from 1982 to 2002 did not attract the best and brightest management teams That s not to say that there aren t bright minds But when gold goes from 250 per ounce to 1 250 per ounce and per share cash flow goes down the bulk of the businesses may be management challenged What Should I Be Buying Now Bullion Or Mining Shares If you think that the metals prices are going up own the metal not the miners Own the miners because you think that there is something intrinsic to them that will take them higher So to begin with own cash and the metals Buy the miners if you can withstand financially and psychologically the risks and the volatility of the sector Take particular attention if you re an accredited investor to the private placements and the full warrants that should someday be coming to us Sprott Global Chairman and Founder Rick Rule recently spoke on a conference call to clients He answered questions from clients on the current market environment for gold and silver |
C | OPEC Risks Gambling Away Success Again as 80 Oil Looms | Bloomberg After managing to revive oil prices through production cutbacks OPEC now risks squandering its victory again by letting crude surge too high
In the first quarter coordinated production curbs by the Organization of Petroleum Exporting Countries and its allies helped oil rally the most in almost a decade restoring prices to over 70 a barrel
Saudi Arabia the group s most powerful member has made clear that it s determined to keep supplies tight That risks a repeat of 2018 when production cuts propelled oil to a four year high provoking a backlash from President Donald Trump and a hasty reversal by the kingdom
It appears that the producer group is over tightening the market said Ed Morse head of commodities research at Citigroup Inc NYSE C in New York
OPEC and its partners launched a new round of output cuts at the beginning of the year when it looked like booming U S shale oil production and fragile global demand growth would lead to a supply surplus But as the group implements the curbs and as supplies are squeezed further by crises in Venezuela and Iran there s now a greater risk of a shortage
Supply Contraction
If the group continues with its cutbacks global oil inventories will contract by almost 1 million barrels a day in the third quarter the steepest drop in nearly two years data from the organization shows However the group won t make a decision whether to extend until it meets in late June
The strain on markets could go even deeper A conflict is flaring in Libya output is plunging in Venezuela because of a spiraling economic crisis and the U S will soon decide whether to tighten sanctions on Iran s oil exports
OPEC is one major shutdown Libya say from a very damaging price surge that throws all the plans out the window said Derek Brower a director at consultant RS Energy Group
That could easily send crude prices to levels that prompt disapproval from the White House the Saudis most important political ally
There s no doubt that in a scenario where Brent crude heads to 80 President Trump will voice his concern said Harry Tchilinguirian head of commodity markets strategy at BNP Paribas PA BNPP SA
Pursuing higher prices also risks straining the Saudis critical alliance with Russia which is co operating with OPEC in the pact to curtail supply President Vladimir Putin said last week that he s comfortable with current price levels and that it s too soon to decide whether output needs to be restrained in the second half
To avoid a repeat of last year Saudi Arabia could increase production slightly stopping a surge in prices The kingdom is cutting output by considerably more than required under the OPEC accord and so it could raise supplies without breaching the pact
The Search For Balance
On April 8 less than two weeks after President Trump urged OPEC to increase production Saudi Energy Minister Khalid Al Falih said that his priority of bringing back inventories to a reasonable level remains unchanged
Saudi Arabia faces powerful domestic pressures to press on with the policy from Crown Prince Mohammad Bin Salman s plans for radical economic transformation to a government budget that hinges on oil prices of 80 a barrel
A year ago Riyadh s decision to let prices approach that level back fired
In April 2018 when oil was trading at about 70 the Saudis signaled at an OPEC gathering in Jeddah they were comfortable allowing crude to climb even higher Their stance provoked a furious response from President Trump and though Riyadh initially brushed off his concerns within two months they bowed to his wishes and raised production
The kingdom subsequently bolstered output to record levels flooding the market and sending prices crashing below 50 a barrel The move was strongly influenced by U S promises to choke off Iranian shipments using sanctions a pledge the Trump administration reneged on at the last minute
This time the Saudis are probably holding off on any action while they await a U S decision early next month on how to proceed with sanctions on Iran s exports Tchilinguirian said
Regardless of Trump s decision on Iran with inventories set to shrink and supply losses looming elsewhere the Saudis could face the same boom and bust outcome seen last year
OPEC has been very good lately at getting the market moving in the direction it wants but less good at steering the market once it nears the destination said Brower It s never really understood when to call time on a rally for its own good |
C | China Is Producing More Steel Than Ever | Bloomberg China s steel industry notched another production record in the first quarter spurred by consumption in the infrastructure sector as government stimulus props up demand
The maker of half the world s steel churned out 231 million tons between January and March up almost 10 percent from a year earlier and the highest for any first quarter on record Production in March climbed 10 percent to 80 3 million tons according to data from the statistics bureau
Output is rebounding with steel prices as China s economy holds up with pro growth policies helping arrest a slowdown that had weighed on materials demand since the middle of 2018 Spot prices for rebar climbed this week to their highest since November boosting producer margins and spurring higher output
It s a extremely strong steel output number Tomas Gutierrez an analyst at consultancy Kallanish Commodities Ltd said by phone from Shanghai There is the expectation that local governments will have more money to spend on new projects and that seems to be speeding up demand There is a growing reliance on state spending to support growth
China s economy grew at 6 4 percent in the first quarter beating estimates and fueling the debate over whether the economy needs further stimulus measures The demand environment for metals is improving Citigroup Inc NYSE C said earlier this week with gauges such as new credit and manufacturing activity signaling a bullish turn in Chinese growth sentiment and activity
There are caveats on the steel numbers Kallanish notes that steel purchasing is peaking earlier than normal and is probably lower than last year due to an earlier Spring Festival The country s steel use will expand 1 percent over 2019 compared with an earlier estimate of flat growth before declining next year the World Steel Association said in its twice yearly outlook on Tuesday
Iron Ructions
Busier activity at China s steel mills coincides with serious disruptions in supply of iron ore that s sent benchmark spot prices surging more than 30 percent this year While Vale SA said a major shuttered mine is set to reopen imminently the miner didn t change its lowered sales guidance for 2019 Rivals BHP Group and Rio Tinto LON RIO Group have also trimmed annual production guidance after bad weather and operational issues
The iron ore market was already tightening before Vale s disaster as seaborne supply contracts and steel output continues to expand Siddarth Aggarwal Anglo American LON AAL Plc s research manager for steel and iron ore said in an April 13 presentation in Shanghai He said the trend for higher output would continue this year China s steel production will rise 1 8 percent this year to a record with rising prices extending into the third quarter on better demand according to Shanghai Steelhome Information Technology
To contact Bloomberg News staff for this story Martin Ritchie in Shanghai at mritchie14 bloomberg net
To contact the editors responsible for this story Phoebe Sedgman at psedgman2 bloomberg net Jake Lloyd Smith
2019 Bloomberg L P |
JPM | 5 Growth Funds To Buy On Highest GDP Growth Since 2014 | The U S economy expanded at a better pace in the third quarter of this year than was earlier estimated leading to the best quarterly GDP growth in the last three years In its second estimate the Department of Commerce upwardly revised economic growth for the third quarter The report highlighted moderate growth in consumer spending a rise in business investment and an expansion in government spending Given this performance it is likely that the U S economy will register a steady growth pace even in the final quarter of this year With the domestic economy witnessing stable expansion reaching full capacity growth mutual funds have emerged as prudent investment options Q3 GDPAdvances in Second EstimateIn its second estimate GDP increased from the previous estimate of 3 to 3 3 the best since the third quarter of 2014 It also improved from the second quarter s pace of 3 1 Moreover corporate profits after tax increased 5 8 year over year after a 0 1 uptick in the second quarter of this year Additionally both consumer spending and business investment gained traction in the third quarter Consumer spending which accounts for a bulk of U S economic output decreased from 2 4 to 2 3 in the second estimate Despite moderation in consumer spending strong increase in business investment and a rebound in government expenditure gave a boost to the GDP Business investment registered strong increase which outweighed the fall in consumer spending Business investment witnessed an increase of 10 4 its fastest growth pace in the last three years Strong spending in equipment and software boosted business investment in the third quarter According to the second estimate business investment contributed 1 2 to total GDP growth higher than previous estimate of around 1 contribution Additionally government spending increased 0 4 after reporting a decline of 0 1 in the advance estimate for the third quarter Government expenditure managed to increase after contracting in the first two quarters of this year Why Choose Growth Mutual Funds With the U S economy registering steady growth in recent times growth funds have become a natural choice for investors who prefer capital appreciation over the long term to dividend payouts These funds generally invest in the assets of those companies that carry an above average growth potential Here we have selected growth funds with small to medium market capitalization and have significant exposure to the domestic market Small cap funds generally have a higher risk exposure but are good choices for investors seeking diversification across different sectors Small cap companies have lesser international exposure and are most likely to benefit from recent economic expansion Mid cap funds are not highly susceptible to volatility in broader markets and bear better growth potential than their large cap counterparts making them ideal investments Buy These 5 Growth Mutual FundsFollowing these improvements in the U S economy investors may consider growth mutual funds According to Morningstar the mid cap and small cap growth mutual funds have one year annualized returns of 15 and 16 respectively Here we have selected five growth mutual funds that have a Zacks Mutual Fund Rank 1 Strong Buy Moreover these funds have encouraging year to date YTD returns They also have minimum initial investment within 5000 and low expense ratios 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 JPMorgan NYSE JPM Small Cap Growth seeks long term growth of capital PGSGX invests heavily in securities issued by small capitalization companies The fund also invests in securities of emerging growth companies The small capitalization companies are those whose market capitalization is similar to that of Russell 2000 Growth Index stocks PGSGX has YTD returns of 37 and an expense ratio of 1 24 compared with the category average of 1 34 TCM Small Cap Growth invests a large share of its assets in companies having market capitalization similar to those listed on the Russell 2000 Index TCMSX seeks growth of capital over the long term TCMSX has YTD returns of 24 7 and an expense ratio of 0 95 compared with the category average of 1 34 Hartford Small Company HLS Fund IA seeks appreciation of capital HIASX primarily invests its assets in common stocks issued by small cap companies The fund may also invest almost one fifth of its assets in securities of non U S issuers Here small capitalization companies are those whose market capitalization falls within the collective range of the Russell 2000 and S P SmallCap 600 indices HIASX has YTD returns of 25 4 and an expense ratio of 0 76 compared with the category average of 1 34 Scout Mid Cap Fund seeks capital appreciation for the long run UMBMX invests a majority of its assets in securities of mid cap companies whose market cap are similar to those listed on the Russell Midcap Index The fund maintains a diversified portfolio UMBMX has YTD returns of 23 9 and an expense ratio of 1 03 compared with the category average of 1 06 T Rowe Price Mid Cap Growth Advisor seeks appreciation of capital for the long run PAMCX maintains a diversified portfolio by investing in common stocks of mid cap companies earnings of which are expected to have above average growth prospects Companies that fall within the range of the Russell Midcap Growth Index or S P MidCap 400 Index are considered mid cap PAMCX has YTD returns of 24 8 and an expense ratio of 1 02 compared with the category average of 1 22 Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
MS | Morgan Stanley sees 24 Y Y decline in FICC revenue for big banks | Tweaking her models following management comments at investor conferences over the past couple of weeks Morgan Stanley s Betsy Graseck sees the major money center banks as reporting a 24 year over year decline in FICC revenue in Q3 Lower volume and volatility are the culprits
Looking at her own bank Graseck now expects Morgan Stanley NYSE MS to report an 18 drop vs her previous forecast of 13
ETFs XLF FAS FAZ VFH UYG IYF FNCL BTO IYG FXO SEF RYF FINU KCE FINZ RWW FAZZ JHMF FNCF
Previously Citi sees trading revenue down 15 in Q3 Sept 11
Previously JPMorgan NYSE JPM sees 20 Q3 trading revenue decline Sept 12
Now read |
MS | Forex Dollar Higher as Investors Expect Fed to Stick to plans for year end hike | Investing com The dollar rose against a basket of major currencies on Monday following strong gains in U S treasury yields amid rising expectations that the Federal Reserve will reaffirm its plan to hike rates at least once this year when it concludes its two day policy meeting which gets underway on Tuesday
The U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies rose by 0 26 to 91 89
In what was a slow day on the economic calendar for top tier data investors turned attention to the two day Federal Reserve Open Market Committee FOMC meeting for fresh insight into the central bank s thinking on monetary policy
U S treasury yields jumped underpinning a move higher in the greenback as investors expect the central bank to announce that it will begin unwinding its 4 5tn bond portfolio and reaffirm its outlook that an additional rate hike this year remains appropriate
As well as plans for balance sheet unwinding the Fed s Summary of Economic Projections and dot plot are expected garner much of the attention as investors are keen to assess whether the slowing pace of inflation has altered the central bank s longer term view on interest rates
Away from the balance sheet investors should focus on the Summary of Economic Projections and the well known dot plot Analysts at Morgan Stanley NYSE MS said in a note We see the biggest risk to our economist s call for status quo as a lower median longer run dot possibly falling to 2 75 from 3 00
The rise in the dollar weighed on sterling which turned negative following a surge to fifteen month highs on Monday despite Bank of England governor Mark Carney reiterating that an interest rate hike is on the agenda in the coming months
GBP USD rose to 1 3488 down 0 78 while USD CAD gained 0 33 to C 1 2231
EUR USD fell 0 05 to 1 1934 while EUR GBP added 0 68 to 0 8850
USD JPY rose 0 64 to Y111 53 |
MS | Forex Aussie Ticks Higher Ahead Of Central Bank Minutes | Investing com The Aussie ticked higher in early Asia on Tuesday ahead of central bank minutes with investors also focused on the start of a two day Fed meeting in the U S
AUD USD traded at 0 7961 up 0 03 while USD JPY changed hands at 111 55 down 0 01
The U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies was last quoted up 0 17 to 91 81
In Asia Australia reports its house price index for the second quarter with a 1 1 gain seen while the RBA meeting minutes from September are due
Overnight the dollar rose against a basket of major currencies on Monday following strong gains in U S treasury yields amid rising expectations that the Federal Reserve will reaffirm its plan to hike rates at least once this year when it concludes its two day policy meeting which gets underway on Tuesday
In what was a slow day on the economic calendar for top tier data investors turned attention to the two day Federal Reserve Open Market Committee FOMC meeting for fresh insight into the central bank s thinking on monetary policy
U S treasury yields jumped underpinning a move higher in the greenback as investors expect the central bank to announce that it will begin unwinding its 4 5 trillion bond portfolio and reaffirm its outlook that an additional rate hike this year remains appropriate
As well as plans for balance sheet unwinding the Fed s Summary of Economic Projections and dot plot are expected garner much of the attention as investors are keen to assess whether the slowing pace of inflation has altered the central bank s longer term view on interest rates
Away from the balance sheet investors should focus on the Summary of Economic Projections and the well known dot plot Analysts at Morgan Stanley NYSE NYSE MS said in a note We see the biggest risk to our economist s call for status quo as a lower median longer run dot possibly falling to 2 75 from 3 00 |
MS | Forex Aussie Gets A Bump Higher Form Home Prices Jump | Investing com The Aussie got a bump higher on Tuesday from a better than expected gain in home prices and as central bank minutes repeated a steady policy views as investors also focused on the start of a two day Fed meeting in the U S
AUD USD traded at 0 7921 up 0 16 while USD JPY changed hands at 111 52 down 0 04
The U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies fell 0 09 to 91 73
Australia reported its house price index for the second quarter jumped 1 9 compared with a 1 1 gain seen
The Reserve Bank of Australia repeated that monetary policy is expected steady for some time in the minutes of its September rate review released Tueday and at which it held steady at a record low 1 50
Overnight the dollar rose against a basket of major currencies on Monday following strong gains in U S treasury yields amid rising expectations that the Federal Reserve will reaffirm its plan to hike rates at least once this year when it concludes its two day policy meeting which gets underway on Tuesday
In what was a slow day on the economic calendar for top tier data investors turned attention to the two day Federal Reserve Open Market Committee FOMC meeting for fresh insight into the central bank s thinking on monetary policy
U S treasury yields jumped underpinning a move higher in the greenback as investors expect the central bank to announce that it will begin unwinding its 4 5 trillion bond portfolio and reaffirm its outlook that an additional rate hike this year remains appropriate
As well as plans for balance sheet unwinding the Fed s Summary of Economic Projections and dot plot are expected garner much of the attention as investors are keen to assess whether the slowing pace of inflation has altered the central bank s longer term view on interest rates
Away from the balance sheet investors should focus on the Summary of Economic Projections and the well known dot plot Analysts at Morgan Stanley NYSE NYSE MS said in a note We see the biggest risk to our economist s call for status quo as a lower median longer run dot possibly falling to 2 75 from 3 00 |
MS | European bourses cautiously wait for Fed update on tapering | By Julien Ponthus LONDON Reuters European shares opened slightly lower on Tuesday as traders awaited clues from a Federal Reserve meeting on its plans to move towards unwinding its 4 2 trillion portfolio of Treasuries and mortgage backed securities Despite Wall Street reaching new highs yet again shares in Europe followed Asia s overnight caution with the pan European STOXX STOXX index down 0 2 percent but still in range of six week highs As the FOMC Federal Open Market Committee convenes and starts its two day meeting markets will probably remain somewhat muted awaiting tomorrow s Wednesday s decision Rabobank s analysts said in a morning note Financials were trading in positive territory as monetary tightening typically benefits lenders The European banking index SX7P was up 0 1 percent with HSBC L HSBA at the top of the list with a 1 percent rise Most sectors posted very limited losses or gains The prospect of the Fed meeting is triggering little worries as the market has already digested the idea that the reduction of the balance sheet will be done on homeopathic dosage thereby limiting negative impacts on stocks wrote Saxo Bank s economist Christopher Dembik noting that geopolitical concerns were also easing off A steady flow of corporate news fueled strong price swings on a number of stocks British online grocer Ocado L OCDO topped Europe s losers list with a 5 5 percent fall after the firm reported third quarter results saying short term costs could increase due to investment in a new distribution center nL5N1M00UX Heineken AS HEIN retreated 4 5 percent after Fomento Economico Mexicano Femsa sold a 5 24 percent stake in the world s second largest brewer for about 2 5 billion euros 3 billion Morgan Stanley NYSE MS cut its rating for Hugo Boss DE BOSSn to underweight prompting a 3 8 percent fall for the German fashion group nL5N1M00YT On the M A front Eurofins PA EUFI got a boost from the acquisition of EAG Laboratories in North America and rose 4 1 percent Shares in Solvay BR SOLB didn t benefit from the announcement of the sale of its polyamides business to BASF DE BASFn for 1 6 billion euros The Belgian company lost 1 1 percent while Germany BASF was 0 1 percent down nL5N1M00H5 Shares in Solvay which bought France s Rhodia for 3 4 billion in 2011 remain however close to their 2015 highs of 132 euros per share
Clariant PA CLNS edged up 0 3 percent as news emerged the hedge funds fighting the Swiss chemical firm s planned 20 billion merger with Huntsman Corp built a 15 1 percent stake |
MS | Morgan Stanley Emerging Markets Debt Fund declares 0 14 dividend | Morgan Stanley NYSE MS Emerging Markets Debt Fund NYSE MSD declares 0 14 share quarterly dividend 6 7 decrease from prior dividend of 0 15 Forward yield 5 48 Payable Oct 13 for shareholders of record Sept 29 ex div Sept 28 Now read |
JPM | Bank of France partners with JPMorgan to boost gold bullion services sources | By Peter Hobson LONDON Reuters The Bank of France has partnered with U S banking group JPMorgan N JPM to expand its range of gold bullion services for central banks sources familiar with the matter said on Monday The French central bank s second deputy governor Sylvie Goulard wrote in the Alchemist the magazine of the London Bullion Market Association LBMA that it had partnered with a large commercial bank to offer swaps leases and gold deposits from Paris Sources said the bank was JPMorgan one of the world s largest bullion trading banks and a member of a group that settles trades in London s 25 billion a day gold market The Bank of England acts as a gold custodian and service provider for many other central banks and has the advantage of operating within the London market by far the world s largest commercial bullion trading pool Until now central banks holding gold at the Bank of France had to go through London if they wanted to perform market transactions JPMorgan said it had opened an account with Bank of France and declined to comment further The Bank of France declined to comment One source said the Bank of France was positioning itself to take advantage of uncertainty over Britain s withdrawal from the EU thinking that some central banks may seek alternatives to London They are convinced that Brexit is going to change things and they want to be there the source said They are pitching to European potential customers Such a move would fit into a wider push by Paris to become a European financial markets hub after Brexit The head of the Bank of France said in May it aimed to be the markets central bank in Europe
The Bank of France began to expand gold services in 2012 Goulard said in the Alchemist article It is also renovating its vaults to allow operations by heavy forklift trucks and upgrading the quality of its gold reserves so they can trade on the international market she said |
MS | Stock Rally Continues On Lukewarm Growth | Lower than expected consumer spending only 9000 fewer unemployed applicants for benefits last week point together to more lukewarm growth in the United States The numbers published today confirm the impression created by the downgrading yesterday when US growth was from 3 4 and adjusted to 2 6 in the first quarter Major banks such as Goldman Sachs and Morgan Stanley lowered onThurday their growth prognosis for 2013 substantially down to between 1 4 1 7 Optimistic forecasts have been as high as 3 The weaker growth has given strong ammunition to those who don t want to set any deadline for monetary easing as suggested by Federal Reserve and Chairman Ben Bernanke two weeks ago Their statements led to steep falls in global stock markets and eradicated earlier profit The influential Chairman of the NewYork stock exchange William Dudley said on Thursday that attention should be paid to effects of monetary easing and not on artificial deadlines The weaker data and Dudley s statement gave the stock market a strong injection The rally seen over the last two days continued Dow Jones again reached the psychological important 15 000 level and traded up 0 89 Nasdag equally added 0 94 European bourses had another good day after EU finance ministers urged to fight youth unemployment and took new important steps towards a European bank union The ministers simultaneously took criticism on the handling of the Cyprus bank crisis and haircutting of private accounts These developments had an immediate impact on the currency market which is deemed to continue to be volatile EUR USD recovered from 1 2999 and traded at 1 3032 It needs a clear and more thorough brake to avoid being stuck in bearish territory The belief in continued easing also hit the other safe haven currency JPY British Pound Sterling GBP fell dramatically to 1 52 This is the lowest level seen in 3 weeks The weaker pound came as a reaction to an adjustment of British economic growth in the first quarter Growth is much lower than expected |
MS | Moving Averages Month End Update Loss For SP | The S P 500 closed May with a monthly loss of 1 50 All three S P 500 MAs and three of the five the Ivy Portfolio ETF MAs are signaling Invested The Ivy Portfolio The table below shows the current 10 month simple moving average SMA signal for each of the five ETFs featured in The Ivy Portfolio I ve also included a table of 12 month SMAs for the same ETFs for this popular alternative strategy three of which IEF and DBC are signaling cash for the benchmark 10 month MA and two for the 12 month MA alternate strategy Backtesting Moving Averages Over the past few years I ve used Excel to track the performance of various moving average timing strategies But now I use the backtesting tools available on the ETFReplay com website Anyone who is interested in market timing with ETFs should have a look at this website Here are the two tools I most frequently use requires a paid subscription Background on Moving Averages Buying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets In essence when the monthly close of the index is above the moving average value you hold the index When the index closes below you move to cash The disadvantage is that it never gets you out at the top or back in at the bottom Also it can produce the occasional whipsaw short term buy or sell signal such as we ve occasionally experienced over the past year Nevertheless a chart of the S P 500 monthly closes since 1995 shows that a 10 or 12 month simple moving average SMA strategy would have insured participation in most of the upside price movement while dramatically reducing losses The 10 month exponential moving average EMA is a slight variant on the simple moving average This version mathematically increases the weighting of newer data in the 10 month sequence Since 1995 it has produced fewer whipsaws than the equivalent simple moving average although it was a month slower to signal a sell after these two market tops A look back at the 10 and 12 month moving averages in the Dow during the shows the effectiveness of these strategies during those dangerous times The Psychology of Momentum Signals Timing works because of a basic human trait People imitate successful behavior When they hear of others making money in the market they buy in Eventually the trend reverses It may be merely the normal expansions and contractions of the business cycle Sometimes the cause is more dramatic an asset bubble a major war a pandemic or an unexpected financial shock When the trend reverses successful investors sell early The imitation of success gradually turns the previous buying momentum into selling momentum Implementing the Strategy My illustrations from the S P 500 are just that illustrations I use the S P because of the extensive historical data that s readily available However followers of a moving average strategy should make buy sell decisions on the signals for the each specific investment not a broad index Even if you re investing in a fund that tracks the S P 500 e g Vanguard s VFINX or the SPY ETF the moving average signals for the funds will occasionally differ from the underlying index because of dividend reinvestment The S P 500 numbers in my illustrations exclude dividends The strategy is most effective in a tax advantaged account with a low cost brokerage service You want the gains for yourself not your broker or your Uncle Sam Note For anyone who would like to see the 10 and 12 month simple moving averages in the S P 500 and the equity versus cash positions since 1950 here s an xls format of the data My source for the monthly closes Column B is Yahoo Finance Columns D and F shows the positions signaled by the month end close for the two SMA strategies Recommended Reading In the past we ve recommended Mebane Faber s thoughtful article The article has now been updated and expanded as Part Three Active Management his book The Ivy Portfolio coauthored with Eric Richardson This is a must read for anyone contemplating the use of a timing signal for investment decisions The book analyzes the application of moving averages the S P 500 and four additional asset classes the Morgan Stanley Capital International EAFE Index MSCI EAFE Goldman Sachs Commodity Index GSCI National Association of Real Estate Investment Trusts Index NAREIT and United States government 10 year Treasury bonds As a regular feature of this website I try to update the signals at the end of each month Footnote on calculating monthly moving averages If you re making your own calculations of moving averages for dividend paying stocks or ETFs you will occasionally get different results if you don t adjust for dividends For example late last year VNQ remained invested at the end of November based on adjusted monthly closes but there was a sell signal if you ignored dividend adjustments Because the data for earlier months will change when dividends are paid you must update the data for all the months in the calculation if a dividend was paid since the previous monthly close This will be the case for any dividend paying stocks or funds |
MS | BTG Gets EU Nod For Lemtrada | The positive European regulatory opinion on Lemtrada multiple sclerosis therapy points to EU approval in Q313 and potential launch shortly thereafter The recommended indication represents in our view a best case scenario for BTG BGC L and partner Sanofi SNY Separately an FDA decision on Lemtrada is expected late 2013 With the positive EU opinion adding 10p to our risk adjusted DCF our new fair value for BTG is 510p Positive EU regulatory opinion on Lemtrada The European regulator CHMP has recommended that Lemtrada should be approved to treat multiple sclerosis MS As a reminder Lemtrada is partnered with Sanofi Genzyme and we estimate BTG receives a c 6 gross c 3 net royalty on global sales until September 2017 The recommended indication adult patients with relapsing remitting MS RRMS with active disease defined by clinical of imaging features and dosing two annual treatment courses is consistent with Lemtrada s use in Phase III studies This represents in our view a best case scenario given the lack of other restrictions to use in RRMS patients Despite this we expect initial Lemtrada use in more severe patients given the availability of other MS therapies and the potential side effects autoimmune thyroid disorders Should trigger formal approval in Q313We anticipate formal EU approval in Q313 and potential launch shortly thereafter Edison sees Lemtrada sales achieving 750m c 40 in EU in 2016 BTG s last full year of royalty entitlement with BTG receiving gross royalties of 29m 14 5m net in FY17 However the key unknown is pricing Sanofi is faced with an unusual pricing issue given the drug s infrequent dosing two courses only rather than chronic use Separately the FDA recently extended the review cycle by 3 months which means a US approval decision is expected late 2013 Valuation Fair value of 510p per shareFollowing the CHMP opinion we have raised our probability of success on EU Lemtrada sales to 100 from 80 We now value BTG at 1 83bn or 510p per share based on a probability weighted sum of the parts SOTP DCF analysis We value the business segments at 2 06bn deduct R D 208m and capex 43m costs and add net cash 28m to arrive at our fair value Our fair value of 510p per share offers c 40 upside to the current share price and moreover is underpinned by a value of 341p for marketed assets This implies downside protection and potential if the pipeline fails to achieve key data and regulatory milestones To Read the Entire Report Please Click on the pdf File Below |
MS | Asian Stocks Fall On Low Metal Prices Weak Chinese Data | Asian Stocks fell on Wednesday for the first time in six days led by mining companies as a result of low metal prices in addition to negative Chinese data showed slowing growth in the services sector during the month of June raising concerns about recovery in the world s second largest economy Shares of BHP Billiton Ltd the largest mining company in the world decreased to record 3 3 percent Still it was down the Rio Tinto Group shares 3 3 percent as a result of the stock exchange index fell for the London Metal LMEX 0 4 percent yesterday Index of Morgan Stanley Capital International Asia Pacific lost 1 2 percent to 129 97 by 10 54 am in Hong Kong At this times investors are awaiting impatiently numbers of jobs in the United States looking for signs of the likely date for the start of the Federal Reserve reduced the bond buying program Chinese data showed slowing growth in the services sector in the month of June to the level of 53 9 compared to the previous reading which recorded a growth of 54 3 while the index data came in the HSBC Services PMI for the month of June marking the high level of 51 3 compared with the previous recorded high level of 51 2 Nikkei Index fell for shares of major Japanese companies 0 45 to 14 035 83 points while the broader TOPIX index fell 0 1 range to 1 171 15 points In Australia fell Index S P ASX200 by 2 15 to 4 730 10 points in China SHSZ300 index fell by 1 61 to 2 186 14 points and SHCOMP index fell 1 32 to 1 979 98 points And Hang Seng Index fell by 1 87 to 20 272 38 points and in South Korea KOSPI Index fell 1 29 to 1 831 11 points |
MS | Global Economic Data Pushing The Markets Up | Asian markets closed mixed today but mostly up by adding further gains on top of yesterday s gain Tokyo and Australia both added further gains on the back of better than anticipated data released in the US and in Europe The manufacturing PMI data released in US showed there was an increase in the country s manufacturing index and a similar situation was witnessed in the euro zone s Purchasing Manager s Index which soared to a 16 month high However mainland China failed to convince investors because the Chinese manufacturing data which was released yesterday was missing export orders import and inventories of finished goods There was no explanation for these holes Bloomberg reportedThe Nikkei Index was the best performing index during the session which closed with a gain of 1 78 The index is up nearly 6 31 so far a month The Shanghai index was the second best performer and closed with a gain of 0 59 However the Hang Seng index slipped in a negative territory and closed with a loss of 0 69 Banks and property developers came under pressure in Hong Kong due to the Chinese PMI data and shares of China Construction Bank Corp and China overseas Land Investment Ltd both lost nearly 3 3 and 2 Gold miners soared as the precious metal bounced strongly back up from its support and shares of Newcrest Mining Ltd increased by nearly 5 9 European stock markets are also trading higher during the early hours of trading The economic data Construction PMI reading for the UK came slightly lower than the expectations with the final reading of 51 0 while the forecast was for 51 3 However the final reading was better than last month s reading of 50 8 which confirmed that the country s economy is improving Shares of Utility firm RWE tumbled by nearly 2 3 on the back of a downgrade from Morgan Stanley from overweight to equal weight Insurance companies are also under pressure during the session after JP Morgan Cazenove confirmed that they are expecting nearly a 10 decline in natural catastrophe reinsurance and reduced the earnings per share estimates for major insurers during 2014 Munich Re and Swiss Re AG both fell nearly 0 8 DISCLOSURE DISCLAIMER The above is for informational purposes only and NOT to be construed as specific trading advice responsibility for trade decisions is solely with the reader by Naeem Aslam |
MS | Why It s Important To Watch The Changes In The Chinese Economy | The Chinese economy is showing traits that you should be watching The country is experiencing an economic slowdown unlike any it has ever seen before The HSBC Purchasing Managers Index PMI for China has been contracting for two consecutive months In June the indicator which provides an overview of manufacturing in the Chinese economy registered at 48 2 down from 49 2 in May Any reading below 50 on the PMI suggests a contraction in the manufacturing sector New business from the global economy to China declined and companies in China have slashed their workforces The country s new export orders in June fell at the fastest rate since March of 2009 Source Markit July 1 2013 In 2013 the Chinese economy is expected to grow at a pace slower than its historical growth rate For example Barclays PLC expects the gross domestic product GDP in the Chinese economy to grow at 7 4 this year If this turns out to be the case then this rate of GDP growth would be the slowest since 1990 Source Bloomberg June 13 2013 But that s not all Other banks like Morgan Stanley NYSE MS have also lowered their expectations of growth in the Chinese economy as well Morgan Stanley now expects the GDP of China to grow 7 6 in 2013 down from its original forecast of 8 2 The Chinese economy was able to show some improvement after the global crisis in 2009 The country s central bank reacted fast and flooded the financial system with liquidity But the effects of all those efforts seem to be dissipating What many don t realize is that the Chinese economy can actually be considered an indicator of growth for the global economy Not only is China the second largest economic hub in the global economy but China also exports a significant amount of its products to the global economy If the country experiences a GDP decline it s because there isn t demand in the global economy An economic slowdown in China can have many consequences throughout the world One of them is a toll on the growth of smaller nations Consider this in the first four months of this year China consumed 12 of all exports from Thailand If the economic troubles in China continue then countries like Thailand countries that depend on exports to the Chinese economy will see their own GDPs decline Source The Nation June 26 2013 A similar principle applies to the U S economy as well China is one of our trading partners If demand in the Chinese economy declines our exports will be hurt as well and this will have an impact on our GDP as U S based companies that depend on exports to China will suffer due to a persisting economic slowdown Keeping a close eye on the Chinese economy can keep you ahead of the curve when it comes to investing even in American companies What He Said Recipe for Catastrophe To me the accelerated rate at which American consumers are spending coupled with the drastic decline in the amount of their savings is a recipe for a financial catastrophe Michael Lombardi in Profit Confidential September 7 2005 Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else Disclaimer There is no magic formula to getting rich Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis The opinions in this e newsletter are just that opinions of the authors Information contained herein while believed to be correct is not guaranteed as accurate Warning Investing often involves high risks and you can lose a lot of money Please do not invest with money you cannot afford to lose |
C | Citigroup Produces Mixed Q1 Results as Equities Hit Revenues | nvesting com Citigroup reported better than expected earnings for the first quarter but its equity division drove revenues lower settling below consensus
The bank reported earnings per share of 1 87 on revenue of 18 58 billion Analysts polled by Investing com forecast EPS of 1 80 on revenue of 18 61 billion
At 8 34 AM ET 12 34 GMT shares in Citigroup NYSE C gained 0 3 at 67 65 in premarket trade following the report
Citi said that that the 2 decrease in revenues from a year earlier was largely driven by lower revenues in Equity Markets as well as mark to market losses on loan hedges Revenue from equity trading was down 24 to 842 million
The bank highlighted that its 2 increase in net income was driven by a reduction in expenses and a lower effective tax rate although the performance was partially offset by lower revenues and higher cost of credit First quarter EPS rose 11 from the same period a year earlier
Our earnings reflect the progress we are making to improve our return on and return of capital Chief Executive Office Michael Corbat said in the press release We remain committed to executing our strategy and continuing to make steady progress towards our financial targets
Citigroup follows other major Financial sector earnings this month
Earlier on Monday Goldman Sachs reported earnings per share of 5 71 on revenue of 8 81 billion Analysts polled by Investing com forecast EPS of 4 89 on revenue of 8 93 billion
On Friday JPMorgan reported first quarter EPS of 2 65 on revenue of 29 85 billion compared to forecasts of EPS of 2 35 on revenue of 28 44 billion
Wells Fargo Co earnings beat analysts expectations on Friday with first quarter EPS of 1 2 on revenue of 21 61 billion Investing com analysts expected EPS of 1 11 on revenue of 20 99 billion
Stay up to date on all of the upcoming earnings reports by visiting Investing com s earnings calendar |
JPM | Examining Silver Manipulation What Some Analysts Miss | One of the major topics discussed in the precious metals community is the manipulation of the gold and silver prices by the large bullion banks Many precious metals analysts point to the massive commercial short positions held by JP Morgan and Scotiabank as the root cause for the low silver price While I agree that the bullion banks massive short contracts are controlling the silver price to a certain degree there s another factor that is overlooked by the majority of precious metals analysts
According to Ed Steers recent article titled he stated the following
For the current reporting week the Big 4 are short 148 days of world silver production and the 5 through 8 large traders are short an additional 62 days of world silver production for a total of 210 days which is seven months of world silver production or about 510 3 million troy ounces of paper silver held short by the Big 8 In the COT Report last week the Big 8 were short 203 days of world silver production
As I also stated in the above COT Report Ted pegs JPMorgan s short position at about 39 000 contracts or around 195 million troy ounces which is up about 35 million troy ounces from what they were short in last week s COT Report 195 million ounces works out to around 80 days of world silver production that JPMorgan NYSE JPM is short That s compared to the 210 days that the Big 8 are short in total JPM is short about 38 percent of the entire short position held by the Big 8 traders
The two largest silver shorts on Planet Earth JP Morgan and Canada s Scotiabank are short about 111 days of world silver production between the two of them and that 111 days represents 75 percent of the length of the red bar in silver in the above chart three quarters of it The other two traders in the Big 4 category are short on average about 18 5 days of world silver production apiece which is unchanged from last week and the prior week The four traders in the 5 through 8 category are short on average 15 5 days of world silver production each which is up a hair from last week s COT Report
Ed Steer is making the point that two banks JP Morgan and Scotiabank control approximately 53 of the 210 days worth of global silver production to cover these short positions If we look at the chart above we can clearly see that silver has the highest amount of short positions in days of a production compared to any other metal or commodity
Furthermore Ted Butler well known silver analyst made the following remarks in his recent article
We as individuals have little or no control over the state of markets all we can do is adapt to market realities In the case of silver the reality is that it is in the grip of a price manipulation History shows that various world governments have often artificially set the price of silver and gold in connection with official monetary policies However for the past 35 years a specific type of price manipulation has existed in silver via futures contract positioning on the Commodities Exchange Inc COMEX
Nothing can be more significant than the fact that silver is manipulated Whether to participate in a manipulated market is something everyone must decide To me the choice is easy Virtually all price manipulations in history have been of the upside variety which caused prices to be higher than they should have been Buying an asset priced artificially high is a surefire prescription for eventual financial loss But because the manipulation in silver is of the rare downside variety the price of silver is artificially low thereby guaranteeing eventual profits for those taking advantage of the opportunity
Please understand that if the bulk of the COMEX silver short position was held by hundreds or thousands of separate traders there would be no manipulation possible and I wouldn t contend otherwise But the COMEX silver short position is held by very few traders and it is that concentration that equals price manipulation Since there is no obvious explanation why just 4 and 8 large traders would be more heavily short silver than in any other commodity away from seeking to cap and control prices the most plausible conclusion is that they are protecting and continuing their perfect trading record scam
Ted like Ed Steer is implying that the silver market price is being manipulated by the bullion banks massive short positions While I agree with these analysts that silver does indeed have the largest concentration of short positions compared to any other metal or commodity there is another factor that needs to be considered
As I have mentioned in many articles and interviews the prices of energy metals and commodities are based on their cost of production rather than supply and demand forces Yes it is true that supply and demand forces impact the price but on a short term basis If we take a look at the following two charts we can plainly see that cost to produce gold and silver parallel the market price
In the first chart Barrick and Newmont s cost of production was always lower than the gold market price Even though these gold miners may have suffered net income losses during certain periods I used adjusted income rather than net income The same was done for Pan American Silver When the silver price was 35 in 2011 Pan American Silver enjoyed a 9 profit per ounce However as the price fell so did its cost of production The reason for the lower silver cost at Pan American Silver was due to falling energy prices and massive cutbacks in exploration and spending
The following chart shows how Pan American Silver s cost of production paralleled the change in the price of oil
Regardless the cost to produce silver has always been tied the market price This is also true for gold and copper I looked at the top gold silver and copper miners Q1 Q3 2017 financials and here were their profit margins
According to Barrick and Newmont s financial results the average profit margin for these two gold miners was 9 versus 6 for Pan American Silver and Coeur Mining and 5 for Chile s Codelco and Freeport McMoRan Thus the cost to produce gold silver and copper by the top major companies was still less than the market price
So if we take the Concentration of Traders Short Positions in days of production and add the profit margin we can see that there s more to the story
While it s true that silver has the largest concentrated short position of any other metal or commodity most of the silver miners are still making profits Furthermore it is also true for companies producing platinum
Now this is an older chart from 2015 However we can see that even platinum s production cost was very close to its market price Even though platinum has the second largest concentration of short positions in days of production the market price is still very close to its cost of production
Unfortunately Ted Butler and Ed Steer do not include the cost of production in their analysis of the silver market price While I agree that the banks are controlling the silver price the majority of manipulation is taking place by the propping up the STOCKS BONDS REAL ESTATE values According to the Savills World Research the value of global assets in 2015 equaled 372 trillion With the majority of the world s wealth invested in stocks bonds and real estate the Central Banks manipulation is focused on keeping these values from falling
The coming surge in the silver price will be due to the disintegration of the global oil industry and the negative impact on the value of stocks bonds and real estate rather than the number of bullion banks silver short positions |
JPM | Navient Continues To Grow Inorganically Legal Costs A Woe | On Nov 24 we issued an updated research report on Navient NASDAQ NAVI The company continues to benefit from strong position in the educational loan industry Further its inorganic growth strategies and improving economic conditions are likely to bolster top line However higher expenses remain a concern
Buoyed by strong fundamentals Navient reported an earnings beat in third quarter 2017 The results benefitted from higher non interest income which was partially offset by lower net interest income and higher expenses
Navient has been focused on boosting its business Recently it acquired Earnest a San Francisco based financial technology company Navient took over education refinancing loans of more than 500 million as part of this deal In August 2017 the lender extended its reach beyond the educational loans by acquiring Duncan Solutions provider of technology enabled parking and toll services In April 2017 it obtained educational loan portfolio from JPMorgan NYSE JPM and the deal is expected to contribute 9 cents to earnings per share in 2017
Further the stock remains undervalued as its trailing 12 month price to book and price to earnings ratios remain below the respective industry averages It currently has a of A
Also increasing awareness for educational benefits and declining unemployment rate are likely to aid Navient s growth
However the company remains exposed to increasing expenses Several litigations issues and strict regulatory scrutiny in the U S student loan industry are likely to affect its financials In October 2017 a lawsuit was filled against Navient accusing it of conducting deceptive practices It was alleged of having provided loans to students with low graduation rates a high percentage of which have not been repaid
Navient s top line remains under pressure due to the declining FFELP Federal Family Education Loan Program loan portfolio Interest earned on FFELP loans is primarily indexed to one month LIBOR rates whereas the cost of funds is mainly indexed to three month LIBOR rates In the rising interest rate environment this difference in timing may create pressure on net interest margin for FFELP loans On the other hand rise in interest rates might also lower Navient s floor income
Shares of Navient have lost 24 9 year to date against 2 8 growth of the it belongs to
The Zacks Consensus Estimate for current year earnings has remained stable at 1 76 over the past 30 days As a result the stock carries a Zacks Rank 3 Hold
Stocks to Consider
Washington Federal NASDAQ WAFD carries a Zacks Rank 2 Buy The Zacks Consensus Estimate for the company s current year earnings has been revised around 1 upward for 2017 in the last 60 days Also its share price has risen 5 6 over the past six months You can see
First Commonwealth Financial Corporation NYSE FCF currently has a Zacks Rank of 2 Its earnings estimates for 2017 have been revised 2 5 upward over the last 60 days Further in the past six months the company s shares have gained 15
Will You Make a Fortune on the Shift to Electric Cars
Here s another stock idea to consider Much like petroleum 150 years ago lithium power may soon shake the world creating millionaires and reshaping geo politics Soon electric vehicles EVs may be cheaper than gas guzzlers Some are already reaching 265 miles on a single charge With battery prices plummeting and charging stations set to multiply one company stands out as the 1 stock to buy according to Zacks research It s not the one you think |
JPM | Pound Set To Rally | The British pound continues to rise today against its US counterpart after rumors surfaced yesterday that the UK has reached a settlement to leave the European union
The deal will see Britain pay between 45 55 billion pounds as it leaves the bloc with the exact figure depending on how it is calculated
This is one major hurdle out of the way for the British government as it tries to cut ties with the EU and leaves the BOE free to tighten monetary policy which should further benefit the sterling
The seemingly increased likelihood a Brexit transition deal makes it easier for the Bank of England to deliver on its signal that it intends to follow its first hike in a decade with further gradual tightening over the next few years noted S amus Mac G r in a fixed income portfolio manager at JPMorgan NYSE JPM Asset Management
There are still 2 major unsolved issues at the moment about Brexit and if they are not solved in the coming weeks the pounds rise may quickly reverse
The first is the free movement of citizens between the 2 countries which the EU has said is not negotiable but at this time the UK government is reluctant to agree to such terms
The 2nd point is the border between Northern Ireland and Ireland which is a member of the EU Installing a hard border would create chaos in the Area as well as significant problems for the UK economy |
MS | Morgan Stanley sees Hertz Global rally played out | Morgan Stanley NYSE MS sees a negative impact on car rental pricing for Hertz Global NYSE HTZ from the hurricanes as it calls out a good exit point for investors Shares of Hertz are up 150 over the last 90 days a powerful run that MS thinks has played out due to the challenged fundamental outlook for the car rental company The investment firm lowers Hertz to Underweight and sets a price target of 14 Souece Bloomberg HTZ 4 93 premarket to 22 75 Now read |
MS | What crackdown Expect more China deals bankers say | SINGAPORE Reuters China will remain a major source of deals as local firms invest overseas and foreign companies put money into the world s second largest economy despite a government crackdown on splashy acquisitions bankers and investors said
While new rules to curb irrational spending and outflows have dragged down overseas investments by China s acquisitive companies this year versus blockbuster 2016 levels deals are still being made and 2017 promises to be a year on par with 2015 the sources said over a two day gathering in Singapore
But the road is not without hurdles as some countries are raising barriers for Chinese buyers The United States has become more aggressive in limiting investment in key sectors with President Donald Trump this week blocking a Chinese backed private equity firm from buying chipmaker Lattice Semiconductor Corp O LSCC
Partly due to this and Beijing s curbs China s outbound M A volumes nearly halved in the first six months of 2017 according to Thomson Reuters data The deals that have come under pressure are in sectors like films entertainment and sports
However the desire for Chinese companies to go out has stayed intact said Wei Sun Christianson China chief executive and Asia Pacific co chief executive for Morgan Stanley NYSE MS
There are a lot of very credible buyers Certainly there is higher execution risk but deals do get approved
Sellers are demanding more guarantees but many also see Chinese companies as long term partners who can help promote a global presence especially in Asia a major area for investment several industry participants said
Among Chinese buyers the most active are those that get Beijing s blessing by investing in sectors the government is focusing on such as technology and green energy
If Chinese buyers are clever have the blessing of government and focus on non sensitive sectors there are good assets out there Christianson said
Jing Ulrich vice chairman of Asia Pacific at JP Morgan Chase NYSE JPM agreed that the desire of Chinese companies to expand overseas continues
There will be deals from companies pursuing projects associated with Beijing s Belt and Road initiative to build a modern day Silk Road Ulrich said
Earlier this year ChemChina bought pesticides and seeds group Syngenta which was advised by JP Morgan in what is China s largest ever outbound deal
The purchase was prompted by Beijing s desire to use the Swiss firm s portfolio of top tier chemicals and patent protected seeds to improve domestic agricultural output
More inbound deals are also expected as China welcomes foreign direct investment investors and bankers said Any move to ease curbs on majority ownership in many sectors including financial services will spur more such deals they added
The 19th Party Congress this autumn could mark an inflection point for deals involving state run companies the sources said
Specific changes could involve broadening the scope of reform of state owned enterprises SOEs moving beyond just consolidation and into spin offs of non core assets and the restructuring of subsidiaries with undervalued assets
So far we have not seen much movement in SOE reform said Weijian Shan chairman and CEO of private equity firm PAG Group
What we see of interest is the private sector which is much more scaleable Ten years ago it was hard to put in 100 million today you can easily put in several billion |
JPM | The Most Vulnerable Emerging Market of Them All Is Still Turkey | Bloomberg The turnaround in sentiment toward Turkey s assets since September has done nothing to alter the economic fundamentals that make it the most exposed emerging market to external shocks according to Bloomberg Economics
Inflation is the highest among peers after Argentina well above the central bank s target and its projected current account deficit is the widest according to analysis by economists including Scott Johnson and Ziad Daoud That said though the lira has rallied since the central bank s 625 basis point rate hike in September and the country s rapprochement with the U S it s still down 30 percent this year meaning the shortfall should narrow in the future
Argentina is next most vulnerable followed by South Africa and Egypt according to the study
Even though currencies and bonds have held up well compared with stocks this quarter there are a host of headwinds that could reignite a sell off It s anyone s guess if the U S and China will diffuse their trade war later this month Borrowing costs in the U S will continue to rise and the dollar has been holding its ground
Investors are going to need to be increasingly selective going forward said Hannah Anderson a global market strategist at JPMorgan NYSE JPM Asset Management in Hong Kong Some of the headwinds that have caused market sentiment to sour are still in place
At the other end of the scale Thailand Russia and Saudi Arabia are the most robust markets the analysis concluded |
JPM | Emerging Markets Rally as Midterm Elections Result Saps Dollar | Bloomberg President Donald Trump s loss of full control of Congress is being given a thumbs up by emerging markets
Bonds currencies and stocks rose as speculation the midterm election result will produce policy gridlock in Washington weakened the dollar and took the edge off U S Treasury yields
But with one source of uncertainty out of the way focus is now shifting to what it means for Trump s tax cuts and U S China trade relations and how quickly the Federal Reserve will press ahead with the removal of stimulus
Investors are going to be relieved to have mid term election news out of the headlines said Hannah Anderson a global market strategist at JPMorgan NYSE JPM Asset Management in Hong Kong Still nothing s going to change on the trade front Fears and sentiment about trade are going to continue to be reflected across the EM complex at least for the next couple of months she said
There were enough domestic reasons for some of the biggest gains The Indonesian rupiah had its fifth advance in six days as data showed the country s foreign reserves rose in October for the first time this year Brazil s Ibovespa stock index jumped with the real as President elect Jair Bolsonaro indicated he will preserve the central bank s independence and data showed an unexpected easing of inflation South Africa s rand climbed to its strongest level in three months
Below are investor and analyst comments on the impact of the mid term elections
Nicholas Ferres chief investment officer at Vantage Point Asset Management in Singapore
The developments today might take the sting out of the dollar risk for EM
The fund scaled up its wagers on Chinese and other developing nation equities after the October sell off before taking some profit as the market bounced this month
It maintains a positive tactical bias on emerging markets
I am not aggressively bullish EM amid concerns about the deteriorating growth outlook
The fund also added a net long position in 30 year U S Treasuries
Saed Abukarsh the co founder of Dubai based hedge fund Ark Capital Management
We are looking at a consolidation in EM and further gains in the Mexican peso and South African rand
The fund holds small wagers that seek to profit from gains in the peso and rand
The House Senate vote was priced in The real cat in the hat is the Fed and the risk is that we could see the back end of the curve dip again
The risk is that the Fed may begin to rein in their language on potential future hikes in 2019 The risk is that the Fed takes a strong look at the housing numbers and begins to make that a focal point
Jan Dehn head of research at Ashmore Group in London
The most obvious implication for EM is that the second of three major risks which have been holding back investors from returning to EM local markets in the second half of 2018 is now behind us
The first of these risks was the Brazilian election and the final one for the year is position squaring which typically occurs toward year end but unlikely to have lasting or fundamental implications
The green light for EM local markets just got significantly greener
As politicians begin to focus on the 2020 election and seek to keep the U S economy buoyed Republicans will likely push the Trump administration to pursue more cautious economic policies particularly on trade
Investors should lower their U S growth expectations as the Fed may do so with the reduced likelihood of large stimulus measures the probability of recession is also higher at the margin
These factors will weigh on the dollar and support EM currencies
Arthur Lau Hong Kong based co head of EM fixed income at PineBridge Investment
This is likely to be positive for emerging market bonds which have suffered since President Trump came into power
If the U S dollar softens or it strengthens at a slower pace this will help local currencies for example Indonesia s rupiah which has rallied
Trump s implementation of tax cuts is likely to be challenging reducing the positive impact on the U S economy
Mitul Kotecha senior emerging markets strategist in Singapore at TD Securities
A divided Congress is unlikely to change the outlook for emerging markets significantly as the Trump administration retains a lot of power over trade policy
Should a split Congress result in less dollar bullishness at a time when positioning is heavily long this could help emerging market currencies eventually
Shane Oliver head of investment strategy in Sydney at AMP Capital Investors Ltd
It all depends on how Trump reacts because he might regard the loss of control of the House as a negative which could mean he becomes even more extremist and dial up the populism even further
That s probably the biggest risk which could possibly mean that he goes in even tougher in terms of dealing with China
Samsara Wang emerging market strategist at Credit Agricole PA CAGR CIB in Hong Kong
The result is expected to support emerging markets as Trump s political power will weaken and there is less likelihood he will take a tougher stance against China
If the U S and China agree to a trade deal at the Group of 20 meeting at the end of November it will boost developing nation assets further especially the yuan
The market is set for a short period of consolidation with the Fed likely to keep rates on hold on Thursday before hiking again in December
Hamish Pepper head of FX and emerging market macro strategy research for Asia at Barclays LON BARC Plc in Singapore
The dollar is expected to continue to strengthen against emerging market currencies while remaining range bound against its Group of 10 peers
Additional fiscal stimulus is unlikely to come under a divided Congress with Barclays assigning a small probability to bipartisan support for a modest infrastructure plan
But the U S economy should continue to outperform the rest of the world as the boost from the current fiscal expansion remains
Nader Naeimi head of dynamic markets at Sydney based AMP Capital Investors Ltd
A split U S Congress means a better outlook for emerging markets
There s reduced upward pressure increased downward pressure on the dollar reduced pressure on the Fed to hike too far and increased likelihood of a trade deal between Washington and Beijing
As trade worries start to show up in business sentiment and increased cost pressures to avoid a bigger damage to the U S economy Trump will be motivated to turn the heat down on China in bid to reduce recession risk
Naeimi s fund bought Chinese equities and is adding his holdings in other emerging market assets including long positions in high yielding currencies
Closed remaining short positions in South Korean won and Taiwan s dollar
There will be rotation from growth to value and that should benefit EM |
JPM | Investors pull 18 5 billion from U S bond funds in one week ICI | By Trevor Hunnicutt NEW YORK Reuters U S fund investors fled bonds at the fastest pace since 2013 in the final week of October worried about rising interest rates and tightening monetary policy Investment Company Institute ICI data showed on Wednesday More than 18 5 billion of mutual fund and exchange traded fund assets flowed out the debt market during the week ended Oct 31 the most since the Taper Tantrum panic of June 2013 when markets worried about the U S Federal Reserve planning to stop buying bonds Fed policy has again helped drive investors to reconsider their bond holdings after pouring hundreds of billions of dollars into debt products since the 2007 2009 global financial crisis The latest withdrawals marked a fourth straight week of outflows according to the trade group U S Federal Reserve policymakers seem on course to deliver their fourth rate hike of the year in December the most in any calendar year since 2006 while letting the Fed s large holdings of bonds accumulated during the financial crisis roll off When rates rise from a very low level bond yields and stocks can go up at the same time said David Kelly chief global strategist at JPMorgan Chase NYSE JPM Co s funds business Investors added the most cash in six weeks 5 6 billion to stock funds during the same week as strong quarterly earnings reports rolled in ICI said Year over year profit growth for the S P 500 is at 27 7 percent with most companies beating Wall Street forecasts according to Refinitiv IBES data |
JPM | China s Fosun Is in Talks for Minerva Overseas Investment | Bloomberg Minerva SA is in talks with China s Fosun International Ltd to invest in the Brazilian beef producer s businesses overseas according to a person with direct knowledge of the matter
The Sao Paulo based company is looking for anchor investors for a possible initial public offering of its Athena Foods unit in Chile that could be priced as early as March or even a private placement the person said asking not to be named as discussions are private It s part of a plan to cut leverage after a slump in the Brazilian real inflated external debt
Minerva has signed a non disclosure agreement with Shanghai based Fosun and has held talks with other prospective investors the person said It s being advised by a consortium of banks led by Banco BTG Pactual SA and JP Morgan Chase NYSE JPM Co the person said Neither immediately responded to requests for comment
In September Minerva said it planned to raise as much as 1 5 billion reais 400 million by selling a minority stake in Athena which has operations in Chile Argentina Paraguay Uruguay and Colombia The division accounts for about 40 percent of its revenue
The company plans to file for the IPO on Chile s exchange later this month but could opt instead for a private placement Both Minerva and Fosun declined to comment |
JPM | U S Crop Giants are Doing More Brazil Deals Thanks to Trade War | Bloomberg Some of the most iconic names in U S agriculture just agreed to do more business with China But it s coming at the expense of American farmers as the companies agree to ship more soybeans from Brazil amid Donald Trump s trade war with Beijing
Cargill Inc the biggest privately held U S company as well as its century old rivals Archer Daniels Midland Co and Bunge Ltd among others inked soybean deals with China s state owned grain buyer this week the Beijing based company said on its official wechat account Under the agreement the crop will be sourced from South American countries including Brazil Argentina and Uruguay
China slapped a retaliatory 25 percent tariff on American grown supplies of the oilseed in July This week s agreement shows how the largest agricultural trading houses are working through the trade war It also reflects the measures that China the largest global soy importer is willing to take to avoid U S beans
It s all adding up to bad news for American farmers On Thursday the U S Department of Agriculture s World Agricultural Supply and Demand Estimates report showed domestic inventories will be bigger than projected last month as it cut its outlook for exports
While that s incrementally negative for U S farmers and the companies that sell them equipment it s generally positive for the processors like Cargill and ADM Ann Duignan an analyst at JPMorgan Chase Co NYSE JPM in New York wrote in a report Thursday
Cargill didn t immediately respond to messages seeking comment ADM didn t immediately comment Bunge declined to comment |
MS | The Daily Nugget Mixed Messages Over Tomorrow s FOMC | As expected gold has remained quiet so far this week head of the FOMC announcement and subsequent Bernanke press conference To add further to the Fed s belief that everything is improving data yesterday showed home builders are feeling confident about industry conditions for the first time since pre crisis Holdings of gold backed ETFs in the SPDR Gold Trust fell once again to a four year low yesterday SocGen report bearish on goldAs reported widely yesterday SocGen released a report saying a paradigm shift amongst those who invest in gold will see the price fall to 1200 They also expect to see holdings in gold backed ETFs fall bay further 285 tonnes this year exceeding the expected increase in physical demand for jewellery bars and coins The fall in the gold price is hurting producers the report said and therefore they expect to see a substantial step up in hedging this year compared to last year An increase in hedging would push prices lower Indian gold demand still vulnerableIndian gold futures traded lower whilst physical demand also remains subdued following a busy buying season and citizens managing a weak rupee alongside increased import duties Yesterday Economic Affairs Secretary Arvind Mayaram told Bloomberg television that the government was prepared to take further measures when it comes to gold imports If required there are other measures that can be taken and they will be considered at the appropriate time China s gold ETFsGold s second largest importer China is also experiencing low sentiment Premiums have fallen from 6 in April to 2 Shanghai gold futures fell 0 5 this morning Many gold investors will not only be looking towards the Fed meeting but also the health of the Chinese economy as a gauge of the health of the gold price Barclays said yesterday that they are looking to see whether two upcoming gold backed ETFs will attract new demand to the gold market or replace physical demand Comparing it India the bank finds that similar products launched in India have not seen a shift in the preference to hold physical However it may be different in China close ended products that have been listed in China have been well received therefore it will be essential to track whether physical demand is replaced by ETP buying or is fresh net demand FOMC meetingToday the June FOMC meeting will commence we do not expect to see any significant moves prior to tomorrow s press conference Morgan Stanley said yesterday that they expect the FOMC to indicate that the shortfall of inflation below target is becoming a concern which should help push expectations of a start of slowing QE in December Bernanke is expected to calm the markets and perhaps clarify his comments made during an appearance in front of the Joint Economics Committee during which he was purposefully vague Whilst we expect him to remind markets that the committee may reduce purchases given outlook and sustainability of the recovery we also expect Bernanke to reiterate the Fed s commitment to remaining accommodative to monetary policy In regard to how gold will respond Deutsche Bank believe it remains vulnerable to renewed selling pressure depending on the outcome of the meeting tomorrow Should the FOMC reiterate commitment to the programme for the next few months then expect to see an increase in the gold price |
MS | The S P 500 Looks Like A Game Changer | Could a breach of the 50 day MA dark blue line at 1610 today be a game changer As seen on the chart below that level has acted as support at all attempts in recent weeks I am a believer that a settlement under this pivot point confirms an interim top and will be preceded by a deeper correction False Equities PictureMy next objective in September futures would be the 100 day MA light blue line at 1565 The run up in the equity markets over the last seven months has painted a false picture that circumstances are much improved and while I do not intend to be a Debbie downer numerous headwinds still exist If the wind is taken from the bulls sails I expect to see that spill over into weakness in outside markets i e Treasuries and commodities It s a baby out with the bath water scenario Expect PainTraders domestically and abroad are hitting the sell button and we see much more red than green on the screen This is not going to be a one or two day event expect to feel some pain and irrational moves in the coming weeks That said keep your size small trade with stops and be willing to hedge futures with options and perhaps most importantly let go of losers It s all just a part of trading Procede With CautionIf you take form this one piece advice HEDGE a large stock of your portfolio as a 7 10 correction can put now profitable positions under water Imagine using bearish positioning in ES futures or options making money on a correction and then taking the proceeds to average down on your stock holdings imagine that Cuts At Morgan StanleyOn a separate note the fact that Morgan Stanley MS is cutting 10 of its commodity staff makes me very encouraged that we are in for very good times in the commodity markets in the coming years Using the logic that far less revenue is available and secular headwinds is mumbo jumbo to me The reduction to me is more about Dodd Frank and new regulations Bottom LineUse the swoon that will likely take place in the coming weeks to set up longer term buys at lower levels make a trade plan and execute |
MS | Credit Suisse Bank Impact On Alibaba IPO | The IPO of Alibaba Group is poised to be lead by Credit Suisse Bank Alibaba s public offering is expected to occur before the end of 2013 The past weeks for Alibaba have spurred meetings with investment banks though no official announcement from Alibaba Group Holding Ltd has been made to IPO Expected valuation of Alibaba would be at 60 100 billion and could raise 15 billion The 8 billion loan that was made has also drawn significant attention for the IPO by Alibaba from investment banks Australian and New Zealand Banking Group Deutsche Bank HSBC JPMorgan Mizuho Corporate Bank Citigroup Credit Suisse DBS Bank Morgan Stanley and Goldman Sachs recently offering 500 million in financing Investment bank and executives from firms such as Citigroup Morgan Stanley and Credit Suisse have been involved in meetings causing even more speculation of the IPO with investors Last year Credit Suisse Bank was the lead investment banking adviser to Alibaba when it bought back 7 1 billion worth of its stock from Yahoo Inc leaving Yahoo with a 24 percent investment in the company Billionaire founder and Chairman Jack Ma stated to Wall Street Journal The company was ready for an IPO The challenges with regulation concerns arose in which he recently stated in an interview and called for greater openness in an industry he said does not serve the majority of Chinese China s financial industry especially the banking industry only serves 20 of clients and I see there are 80 of the clients are not covered by their services he also in the interview Credit Suisse has a history of holding important roles with Alibaba from financing a 2 5 billion deal to take private the Alibaba com business to business unit to purchasing its Yahoo Inc stock buyback Jack Ma spoke last year at the Credit Suisse s Asian investment conference on behalf of Alibaba It is still questionable with Alibaba s IPO and how Asia s financial regulations and regulators will respond to Alibaba s most recent indications IPO moves |
MS | Last Call For Europe | The biggest problem with being a contrarian is having the nerve to actually buck conventional wisdom Most people don t have the contrarian gene in their DNA which means missing out on tons of moneymaking opportunities It s a real shame too I mean playing it safe is easily the worst form of self torture one can inflict on his portfolio Long live the contrarian I say Of course being a true contrarian also requires a bit of patience That s a tough reality to swallow in this day and age of instant gratification That being said the wait might finally be over for one of my most contrarian calls in 2013 Let me explain Not Just Another Head Fake Back in January I told you to overlook lingering financial turmoil social unrest in Greece and Spain and an economic rebound that still seems a long way off and just buy European stocks To be fair Barron s beat me to the punch by a few weeks But they didn t offer up a feasible way for everyday investors like you and me to play an imminent rebound Instead they expected us to buy shares listed on overseas exchanges Based on my years of managing money that s not happening for the average investor More about that in a moment though What s most important right now is the fact that European stocks just staged their most impressive rally in almost a year Since Monday s close the STOXX Europe 600 Index is up 3 2 which is its biggest two day jump since July 27 of last year according to Bloomberg Of course the move could be just another dreaded head fake Or it could signal that the long anticipated rally in European stocks is beginning in earnest I m inclined to think it s the latter And here s why Cheaper Higher Yielding and Long Overdue for a Rally Fundamentally speaking a move much higher is warranted Remember blue chip European stocks trade much cheaper than their U S counterparts And they yield more too The average U S stock trades for 14 26 times forward earnings and yields 2 15 In contrast the average European stock trades for 12 61 times forward earnings and yields 3 75 So yes European stocks definitely represent the better bargain right now And it appears other investors might finally be waking up to that reality too Rest assured a two day price swing isn t the only reason I m getting more optimistic about my contrarian call on Europe Yesterday I happened to speak with Morgan Stanley s MS Head of Emerging Markets Ruchir Sharma who oversees more than 25 billion in investments And he also believes Europe represents a compelling opportunity right now As far as specific European countries he s particularly optimistic about Germany s prospects The data backs him up too The June consumer confidence reading in Germany came in higher than expected at 6 8 And analysts at GfK AG expect July s reading to cross the board at its highest level since 2007 Add it all up and we could be approaching that critical turning point in sentiment for European stocks Once that occurs the buying will naturally follow suit And that s where my recommendation of the SPDR EURO STOXX 50 Fund FEZ comes in Remember it s a low cost exchange traded fund that invests in 56 of the bluest of blue chip stocks in Europe And it s traded on a U S exchange so we don t have to worry about the hassle or expense of investing on overseas exchanges While Barron s might forget about the little guys we never will because I m one of them What s more 33 of the fund is invested in German companies including Bayer BAYN DE Siemens SIE MU and BASF BAS DE Granted the fund has failed to impress so far It s down about 1 8 including dividends since I first recommended it But if the broad market rally in Europe over the last two days along with the sentiment of some of the world s most savvy investors is any indication we could be on the cusp of a breakout Bottom line Being early doesn t necessarily mean we re wrong when it comes to contrarian investments It just means we might have to wait a little while for average investors to wise up to the opportunity And thankfully that moment might be upon us for European stocks So don t miss out |
C | Another Warning Is Flashing on Asia s 11 Stock Market Rally | Bloomberg The wall of worry surrounding Asia s double digit stock market growth this year just got another impetus equity ETFs inflows have dwindled
Despite a 9 percent increase to 502 billion in assets under management for Asia equity exchange traded funds so far this year net inflows have been tapering off according to data compiled by Citigroup Inc NYSE C On top of that a monthly net outflow the second time in more than two years was recorded in March
The MSCI Asia Pacific Index s 11 percent rally this year adding about 4 trillion in value has already been attracting some skepticism Market watchers have been warning that investors should be cautious after the best first quarter rally since 2012 for the regional benchmark index
Concerns about global economic strength and whether some developed markets will enter a recession a year or two from now
This year s lack of volatility not just in equities but across asset classes
Japan is getting ready for a bilateral trade battle with the U S set for center stage in Washington this week as U S China tensions cool
Weak fund flows into Asia ex Japan equity funds
Regional equity valuations have risen at a tremendous pace of 20 percent since the December low
Early earnings results tell a cautionary tale
At the end of last year we were pricing something like Armageddon in regards to rates and the trade outlook said Christopher Watson London based fund manager with Finisterre Capital in an interview in Hong Kong Friday The equity market is convinced everything seems to be rainbow and sunshine for the remainder of the year And I guess one of the things we find somewhat disconcerting is the disconnect between rates and equity he said
Some investors might be quietly pulling out of this surge the regional benchmark gauge posted a loss last week
And in China the first in Asia to enter a bull market this year the Shanghai Composite Index posted its worst week this year Chinese investors boosted leverage for 10 straight sessions through Wednesday to a 10 month high of 960 3 billion yuan 143 billion That amount which is more than the five year average might prompt the government to cool the country s world beating stocks rally
It s hard to ignore the reasons behind the buoyant market a dovish tilt in central banks hopes for a U S China trade deal investors expecting more inflows due to a bigger weighting of Chinese companies in MSCI Inc s gauges and government policies to boost the market Though this might somewhat be stymied by MSCI Inc s statement last week that it will delay the transition of MSCI All China Indexes to the MSCI China All Shares Indexes to Nov 26 from June 1 following feedback from market participants
Still China s trade and lending data released on Friday signaled that the world s second largest economy was on more stable footing sending U S stocks higher
For Frank Benzimra the head of Asia equity strategy at Societe Generale PA SOGN Asian stocks have more upside than the U S market which he expects to bottom out next year The Asia equities rebound will continue in the coming quarter as policy fundamentals are improving equity valuations remain moderate and equity market position is still light he wrote in a March report
JPMorgan s Kerry Craig sees a light at the end of the tunnel with somewhat stronger economic data coming out of parts of Asia pointing to a lifting in that industrial production cycle that manufacturing cycle that can help maintain the equity outlook he said That creates a floor under it and if we look at the Asian market in particular it s going to benefit from that
While earlier this year economic data for the region fell short of projections by the most in three years that seems to be turning around Since mid March the Citi Economic Surprise Index for Asia Pacific has indicated that even though data releases have been worse than expected the trend is shifting to in line expectations
Even so on Saturday global finance ministers and central bankers said they were prepared to act promptly to shore up growth in a world economy that faces downside risks including trade tensions according to a statement by the International Monetary and Financial Committee the main advisory panel of the IMF s 189 member countries
And flows don t paint an optimistic picture Global equity fund withdrawals continued for a fourth week during the April 4 to 10 period according to the latest report from Jefferies Financial Group Inc citing EPFR data For Asia equity funds saw 1 9 billion in outflows for that time frame
Updates market levels throughout plus reference to IMF meeting |
C | Another Warning Is Flashing on Asia s 12 Stock Market Rally | Bloomberg Skeptics watching Asia s double digit stock market growth this year just got some data to help their case equity ETF inflows have dwindled
Despite a 9 percent increase to 502 billion in assets under management for Asia equity exchange traded funds so far this year net inflows have been tapering off according to data compiled by Citigroup Inc NYSE C On top of that a monthly net outflow the second time in more than two years was recorded in March
The MSCI Asia Pacific Index s 12 percent rally this year adding about 4 trillion in value has already been attracting some skepticism Market watchers have been warning that investors should be cautious after the best first quarter rally since 2012 for the regional benchmark index
Concerns about global economic strength and whether some developed markets will enter a recession a year or two from now
This year s lack of volatility not just in equities but across asset classes
Japan is getting ready for a bilateral trade battle with the U S set for center stage in Washington this week as U S China tensions cool
Weak fund flows into Asia ex Japan equity funds
Regional equity valuations have risen at a tremendous pace of 20 percent since the December low
Early earnings results tell a cautionary tale
At the end of last year we were pricing something like Armageddon in regards to rates and the trade outlook said Christopher Watson London based fund manager with Finisterre Capital in an interview in Hong Kong Friday The equity market is convinced everything seems to be rainbow and sunshine for the remainder of the year And I guess one of the things we find somewhat disconcerting is the disconnect between rates and equity he said
Some investors might be quietly pulling out of this surge the regional benchmark gauge posted a loss last week
And in China the first in Asia to enter a bull market this year the Shanghai Composite Index posted its worst week this year Chinese investors boosted leverage for 10 straight sessions through Wednesday to a 10 month high of 960 3 billion yuan 143 billion That amount which is more than the five year average might prompt the government to cool the country s world beating stocks rally
It s hard to ignore the reasons behind the buoyant market a dovish tilt in central banks hopes for a U S China trade deal investors expecting more inflows due to a bigger weighting of Chinese companies in MSCI Inc s gauges and government policies to boost the market Though this might somewhat be stymied by MSCI Inc s statement last week that it will delay the transition of MSCI All China Indexes to the MSCI China All Shares Indexes to Nov 26 from June 1 following feedback from market participants
Still China s trade and lending data released on Friday signaled that the world s second largest economy was on more stable footing sending U S stocks higher
For Frank Benzimra the head of Asia equity strategy at Societe Generale PA SOGN Asian stocks have more upside than the U S market which he expects to bottom out next year The Asia equities rebound will continue in the coming quarter as policy fundamentals are improving equity valuations remain moderate and equity market position is still light he wrote in a March report
JPMorgan s Kerry Craig sees a light at the end of the tunnel with somewhat stronger economic data coming out of parts of Asia pointing to a lifting in that industrial production cycle that manufacturing cycle that can help maintain the equity outlook he said That creates a floor under it and if we look at the Asian market in particular it s going to benefit from that
While earlier this year economic data for the region fell short of projections by the most in three years that seems to be turning around Since mid March the Citi Economic Surprise Index for Asia Pacific has indicated that even though data releases have been worse than expected the trend is shifting to in line expectations
Even so on Saturday global finance ministers and central bankers said they were prepared to act promptly to shore up growth in a world economy that faces downside risks including trade tensions according to a statement by the International Monetary and Financial Committee the main advisory panel of the IMF s 189 member countries
And flows don t paint an optimistic picture Global equity fund withdrawals continued for a fourth week during the April 4 to 10 period according to the latest report from Jefferies Financial Group Inc citing EPFR data For Asia equity funds saw 1 9 billion in outflows for that time frame
Updates market levels throughout |
C | China Isn t Ready for Iron Deficit Industry Veteran Warns | Bloomberg China s steel industry the world s largest isn t prepared for a looming shortage of iron ore in the second half that s set to drive prices higher according to a prominent industry adviser who warned of devastating volatility should mainland holdings sink below 100 million tons
Prices will absolutely continue to rise as mine closures in Brazil spur a deficit Wu Wenzhang founder and president of Shanghai Steelhome Information Technology Co said in an interview Mills in Europe and the Middle East will be in a worse position than China s in the event of a prolonged shortage he said
The global market is reeling from a January dam disaster at a Vale SA operation that triggered a sweep of mine closures across Brazil and boosted prices to the highest since 2014 Shipments from the South American nation are collapsing while Australian disruptions and signs of a pick up in China s steel demand offer a further boost to prices So far mills in China have played down the potential disruption saying supplies will pick up elsewhere
They don t realize what s going to happen Wu said on Saturday on the sidelines of Steelhome s conference which attracts about 1 000 delegates from around China The disruptions will amount to 60 million tons of lost supply this year according to his conservative estimate
The only thing we can do is try to convince the steelmakers to believe what could happen with iron ore supply and to prepare for the upcoming shortage he said
Wu says he s watching stockpiles for signs of stress with any slide below 100 million tons likely to trigger devastating volatility Inventories sank 3 4 percent to 143 9 million tons in the week to April 12 according to Steelhome s own data on Monday The safe minimum is about 120 million tons Wu said
The benchmark price of spot ore climbed to 95 90 a ton on Friday rising for a fifth straight week according to Mysteel and aiding top suppliers BHP Group and Rio Tinto LON RIO Group Citigroup Inc NYSE C has forecast that a looming supply crunch will drive the commodity to 100
In other comments from Wu
Iron ore mines in China have limited capacity to plug any supply gap given environmental constraints and high costs If prices stay above 100 a ton China miners may ramp up production
While China s steel prices will continue to rebound into the second half of the year as the economy stabilizes and demand recovers average rates over the year will be lower than 2018 Wu noted the solid credit growth in the first quarter
Adds latest stockpile total in sixth paragraph
To contact Bloomberg News staff for this story Martin Ritchie in Shanghai at mritchie14 bloomberg net
To contact the editors responsible for this story Shamim Adam at sadam2 bloomberg net Phoebe Sedgman at psedgman2 bloomberg net Jake Lloyd Smith Alpana Sarma
2019 Bloomberg L P |
C | Citigroup to refund retail customers for investment losses Australian regulator | By Paulina Duran SYDNEY Reuters Citigroup NYSE C is refunding more than A 3 million 2 2 million to retail customers in Australia who suffered losses from complex investments sold by the bank without adequate advice the country s corporate watchdog said on Monday The Australian Securities and Investments Commission ASIC said it had concerns the bank s financial advisers had sold the complex products without complying with regulatory and disclosure obligations required to provide personal financial advice Following an investigation by the regulator Citi will refund 114 customers who invested in complex fixed coupon products and other capital at risk products between 2013 and 2017 and lost money the regulator said in a statement The bank will also give customers with remaining investments in the products an opportunity to exit without cost the regulator said Following ASIC s investigation Citi on Jan 1 2018 stopped selling structured products to retail clients without adequate personal financial advice it said While Citi maintains the view that none of its actions amounted to a breach of its obligations Citi has acknowledged ASIC s concerns and is making a payment to this small group of clients a Citi spokeswoman said in an emailed statement The bank confirmed it no longer offers the products to Australian retail investors without taking into account their personal circumstances and providing them with personal advice It has completed about 75 percent of the refunds the spokeswoman said
Citi is also defending a lawsuit brought against it by the country s competition regulator over a 2015 capital raising |
C | BitMEX CEO Arthur Hayes Reveals Plans to Open Crypto Options Platform | Arthur Hayes co founder and CEO of major crypto derivatives exchange BitMEX has revealed that the firm is hoping to open a cryptocurrency options platform in the medium term Hayes made his remarks during an interview on the Venture Coinist podcast on April 12
Hayes a former equities trader for Citigroup NYSE C indicated a rough timeline for the prospective launch stating that |
C | Corbyn Government as Bad for Banks as a Hard Brexit Citi Says | Bloomberg Jeremy Corbyn being elected U K prime minister would be just as damaging to British banks profits as the country crashing out of the European Union without a withdrawal agreement according to Citigroup Inc NYSE C
While London listed bank stocks have recovered from last year s lows as the risk of a no deal Brexit gradually subsides a snap election is becoming more likely as lawmakers in Westminster remain unable to agree on a future relationship with the EU Citigroup s review of Labour Party pledges doesn t bode well for the financial sector
The impact on U K domestic bank EPS could potentially be similar in magnitude to a no deal Brexit outcome mainly due to a fall in business investment housing controls less cost flexibility and higher taxes analysts including Andrew Coombs wrote in a note to clients
Domestic banks would initially move sharply lower with the pound if Labour came to power due to the business unfriendly deficit financed policies included in the party s current manifesto that would likely lead to capital outflows from the U K Citigroup says The more international banks would likely hold firm however given the boost from an expected decline in sterling
On Labour s intention to nationalize and break up The Royal Bank of Scotland Group LON RBS Plc Citigroup says it remains unclear how such a plan would be financed |
MS | Euro rally keeps dollar in the doldrums | By Vikram Subhedar LONDON Reuters The dollar remained mired near its lowest levels since early 2015 as European Central Bank President Mario Draghi s suggestion that the ECB may begin tapering its massive stimulus program this autumn continued to underpin the euro Meanwhile expectations of another interest rate hike in the U S this year have subsided as stubbornly weak inflation continues to surprise Federal Reserve policymakers In a speech on Thursday New York Fed President William Dudley did not repeat an assertion from three weeks ago that he expects to raise rates once more this year An agreement to push U S debt ceiling talks three months down the road to December coinciding with the Fed s policy meeting have also cut chances of another rate hike Further muddying the outlook for the future path of U S interest rates was the ongoing uncertainty over what the make up of the Fed and White House staff is going to be next year Overnight sources told Reuters that the fraying relationship between U S President Donald Trump and top White House economic adviser Gary Cohn has raised questions about how long Cohn will stay in his job The concerns stem from a report in the Wall Street Journal confirmed by other news media including Reuters that Cohn was unlikely to be nominated by Trump as a potential successor to Fed Chair Janet Yellen In Europe the euro rose to a fresh 2 1 2 year high on Friday as currency bulls judged the central bank s concerns about the strengthening currency at Thursday s policy meeting as lukewarm at best We think the ECB would be concerned about currency strength if that occurred at the same time as higher bond yields said analysts at Morgan Stanley NYSE MS led by Hans Redeker while reiterating their bullish view on the euro The USD decline has gained momentum now after the Fed s Dudley did not state explicitly that there would be a hike this year but instead focused on gradual removal of accommodation Morgan Stanley analysts added A Reuters report that ECB policymakers were in broad agreement that their next step will be reducing their bond purchases and discussed four options at their latest meeting also helped the euro on the day The euro jumped around 20 ticks to 1 2069 putting it on track for its biggest weekly gain since end June Fears that the euro s rally would hurt profits at Europe s large exporters has weighed on regional stocks in recent months The pan European STOXX 600 STOXX is down about 6 percent from its May highs On Friday it came off its lows as the bounce in European government bond yields after the Reuters story on the ECB helped bank shares SX7E U S stock futures ESc1 were 0 3 percent lower indicating a lower open on Wall Street HARVEY AND IRMA Market participants focus is increasingly shifting to a series of natural disasters hitting North American coasts and worries that Pyongyang could launch another missile test on Saturday North Korea s founding day keeping risk appetite in check going into the weekend Investors continued to track Hurricane Irma bearing down on Florida even as Texas struggles with the devastation caused by Hurricane Harvey which economists have said could weigh on U S economic growth for the third quarter An earthquake of magnitude 8 1 struck off the southern coast of Mexico late on Thursday killing at least five people triggering minor tsunami waves and damaging buildings Oil markets were mixed on Friday with Brent crude supported by expectations that Saudi Arabia could cut its October supplies while U S crude was weighed down by refinery outages due to damage from Hurricane Harvey Brent crude futures LCOc1 were up 8 cents at 54 57 a barrel with the benchmark for international oil prices earlier marking its highest since April at 54 79 a barrel U S West Texas Intermediate WTI crude futures CLc1 were at 48 98 barrel 11 cents below their last settlement |
MS | Midday Gainers Losers | Gainers FWP 55 ALDX 50 AEMD 42 QTNT 33 RTNB 24 FRTA 21 INOV 20 SAEX 17 ATOM 15 CDXC 13 Losers OPNT 22 HIIQ 17 ADXS 17 SAGE 16 ICPT 13 NLNK 11 EVI 10 PLSE 9 IMGN 8 EBIO 9 Now read |
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