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MS | Former FrontPoint manager out of jail wants to run prison ministry | By Brendan Pierson Reuters A former manager at defunct hedge fund FrontPoint Partners who served more than three years in prison for insider trading on Monday asked a U S judge to end his supervised release early so he can help a run a Christian ministry aimed at prisoners In a letter to U S District Judge Denise Cote in Manhattan a lawyer for Joseph Chip Skowron said the request was warranted in light of his client s exemplary behavior since his April 2011 arrest While serving time at Schuylkill Federal Prison Camp in Pennsylvania Skowron 48 worked as a tutor started a Sunday Bible study and led Monday morning religious meetings according to his lawyer Joshua Epstein After serving the last several months of his sentence in home confinement and following his release last November Skowron co founded a chapter of the New Canaan Society a Connecticut based Christian group Epstein wrote The chapter NCS Inside is devoted to ministering to federal and state prison inmates The NCS website describes itself as a men s only group who gather together to encourage each other in friendship and faith Epstein said prisons have refused to let Skowron enter to meet with prisoners because he is on supervised release This is limiting Mr Skowron s efforts on behalf of NCS Inside as well as NCS Inside s effectiveness and reach Epstein wrote Federal prosecutors are not objecting to Skowron s request according to Dawn Dearden a spokeswoman for the U S attorney s office in Manhattan Skowron pleaded guilty in August 2011 to one count of conspiracy to commit securities fraud and obstruct justice admitting that he traded in the securities of Human Genome Sciences Inc in 2008 based on non public information In a separate civil case Skowron was ordered to pay back 31 million of his compensation to Morgan Stanley NYSE MS which owned FrontPoint between 2006 and 2011 minus a 6 million penalty he was already ordered to pay in his criminal case
Investors began pulling out of FrontPoint in the wake of the insider trading charges ultimately forcing the firm which once managed as much as 11 billion to shut down |
MS | Investors eye tracking differences liquidity as bond ETFs balloon | By Helen Reid and Abhinav Ramnarayan LONDON Reuters Focus has sharpened on how exchange traded bond funds react to market shocks after recent wobbles showed some performing out of line with the assets they are designed to mirror Although bond ETFs largely behaved as expected some didn t when European Central Bank chief Mario Draghi triggered a bond sell off by hinting the ECB s bond buying stimulus scheme may soon be scaled back Such market dislocations are making investors more selective and wary of these increasingly popular products Investors pumped around 81 billion into bond ETFs in the first six months of 2017 up 19 percent from the same period in 2016 according to ETF data provider ETFGI As the volume of ETFs has grown some investors have raised concerns that although the ETFs themselves are highly liquid the underlying assets may be less so especially under the strain of a major market fall ETFs trade like stocks but track a wider range of securities more cheaply than buying the underlying assets In this case so called physically replicated bond ETFs track a basket of bonds which resembles in duration and creditworthiness a wider underlying index The recent sell off driven by Draghi s comments in Sintra Portugal exposed divergences in how closely the ETFs replicate their index You will see the funds that do better those that are moving within averages and those that are not when there comes a big spread event or a big move in treasury yields said Antoine Lesne head of ETF strategy and research for EMEA at SPDR State Street Global Advisors ETF arm Two major European ETF providers said the tracking difference the gap between the performance of a tracker and its underlying index of bonds remained stable for most of their products Deutsche Asset Management s European government bond ETFs and high yield corporate bond ETFs stuck close to their indexes during the sell off while bid ask spreads which would widen if underlying liquidity was under strain remained near their average data showed But some products did not track their index as closely during the sell off On a day like Sintra you could see some funds that were not working the way they were supposed to be working said Lesne adding SPDR products remained close to their indexes Corporate events also have revealed some ETFs do not do what would be expected The tracking difference for one high yield corporate debt ETF blew out to 8 basis points when the ECB rescued Spain s troubled Banco Popular sending the bank s subordinated bonds plummeting This indicated the ETF provider had taken an active decision to avoid Banco Popular bonds causing an outperformance compared with the underlying iBoxx Markit high yield corporate debt index which includes them Taking an active stance like that may go in your favor or it may go against you Lesne said The premium or discount at which an ETF trades to its net asset value can also widen significantly in times of heightened buying or selling pressure data shows Premia on ETFs tracking high yield corporate debt shot up when the ECB said in March 2016 it would buy corporate debt under its stimulus program and fell significantly around the Brexit vote and the U S presidential election later that year LIQUIDITY CONCERNS Worries over low liquidity have grown as ETFs in relatively illiquid areas like emerging markets debt and high yield corporates have seen some of the biggest inflows this year Investors are concerned about the strong inflows into emerging market ETFs and the potential forced selling should the risk on environment reverse Morgan Stanley NYSE MS analysts said in a note Flows into emerging market debt ETFs accelerated to 3 2 billion in June bringing the year to date total to 13 6 billion already exceeding 2016 s full year record according to iShares Blackrock s ETF business In the more exotic niche strategies if the ETF needs to sell it s not very clear there would be someone on the other side of the market to bid for the bonds said Vincent Deluard head of global macro strategy at INTL FCStone But providers say the relatively small size of ETFs compared with the total market in these assets limits the impact a downturn could have The markets are so huge that no ETF is so big it could create an issue said Michael Mohr head of fixed income product development at Deutsche Asset Management Emerging market bonds are less liquid but if you compare the assets under management in ETFs to the total assets in that market the ratio is still very small he added Providers are also seeing less demand than they expected for some of their niche emerging market products indicating there may be a limit to how far investors want bond ETFs to go In February Deutsche Bank DE DBKGn liquidated one ETF tracking Indonesian bonds and one Korean bonds Lipper data shows |
JPM | OnDeck launches new subsidiary to partner with banks | By Anna Irrera
NEW YORK Reuters OnDeck Capital Inc has set up a subsidiary that will provide technology and other services to banks looking to lend to small businesses online it said on Tuesday
Called ODX the new company will expand OnDeck s existing business of providing online lending software to banks such as JPMorgan Chase Co NYSE JPM the company said
ODX plans to announce a new bank partnership imminently and has a pipeline of other potential bank partners across the world the company said
It believes ODX will make it faster and easier for banks to digitize their lending to small businesses
We felt that given the robust demand we are seeing by the largest banks it is not a question of if they are moving into online lending but of when Noah Breslow chief executive of OnDeck said in an interview We thought that by creating ODX we would set ourselves to take advantage of that opportunity
New York based OnDeck is one of the most established companies that extends credit to small businesses through its website and then sells loans to financial institutions such as banks
It announced a partnership with JPMorgan Chase in late 2015 through which the bank uses OnDeck s technology to lend to small businesses
Brian Geary who served as vice president of OnDeck s partnership unit has been appointed president of ODX
The company also hired financial technology executive Raj Kolluri to serve as ODX s head of product and technology
Kolluri joins ODX from financial services software provider SS C Primatics where he served as vice president of product and engineering |
JPM | Saudis Consider Blaming Khashoggi Death on Botched Interrogation | Bloomberg Saudi Arabia is considering saying missing journalist Jamal Khashoggi died in a botched interrogation according to media reports an explanation that could deflect blame from Crown Prince Mohammed bin Salman and give the U S and Turkey a way out of confronting a regional powerhouse
The possible narrative of an operation gone wrong reported by CNN the New York Times and the Wall Street Journal was being floated as U S Secretary of State Mike Pompeo arrived in Riyadh to discuss the disappearance of Khashoggi a Saudi government critic last seen entering the kingdom s consulate in Istanbul on Oct 2 President Donald Trump said he couldn t confirm that account but has suggested a rogue killer might be to blame
Skeptics say it s unlikely such an operation could have happened without the royal court s knowledge But Saudi Arabia stocks erased losses on the reports of a story line that could potentially diminish the risk of threatened punitive action from Washington The Tadawul All Share Index which had lost as much as 4 percent in the first six minutes of trading on Tuesday rebounded to rise 0 4 percent at 1 04 p m in Riyadh
Short Meeting
Pompeo met with King Salman immediately after his arrival for an estimated 15 minutes according to CNN He then sat down with Foreign Minister Adel Al Jubeir and is expected to meet Prince Mohammed in the afternoon Officials haven t commented on the substance of the conversations
A Saudi official told Bloomberg on Monday that the public prosecutor was launching an internal investigation and could hold people accountable if evidence warrants While Turkish officials have said privately that Khashoggi was killed inside the consulate the public Saudi line has been that the Washington Post contributor left the building unharmed so news of an internal probe was the first sign officials could be considering another narrative
Khashoggi s disappearance is the latest in a series of developments that have undercut Prince Mohammed s efforts to fashion himself as a reformer including his jailing of hundreds of businessmen royals and activists over the past year in an alleged crackdown on corruption and national security threats It s also threatened to spark a diplomatic crisis with the Trump administration which has built its Middle East policy around a close alliance with Saudi Arabia and with Turkey which has worked to maintain ties with oil rich kingdom despite serious differences over regional policy
Menacing Investment
Chris Van Hollen a Democratic senator from Maryland said on Twitter that President Trump s suggestion that Khashoggi s elaborately planned murder in the Saudi s own consulate was orchestrated by rogue killers defies reality Orders must have come from the top The U S must not be complicit in an effort to cover up this heinous crime
Khashoggi s disappearance has also had implications for Prince Mohammed s much touted plan to overhaul the Saudi economy On Monday Trump said he s uncertain whether his administration will participate in a Saudi investment conference later this month and a succession of sponsors and participants have already pulled out of the event with the chief executives of HSBC and Credit Suisse SIX CSGN joining a list that also includes JPMorgan Chase Co NYSE JPM Chief Executive Officer Jamie Dimon and Uber Technologies Inc s Dara Khosrowshahi
Consulate Search
A team of Turkish forensic experts and security officials entered the Saudi consulate on Monday night for an investigation that lasted for more than nine hours State run Anadolu news agency said the consul s residence would also be searched without giving a timetable Pompeo is expected to visit Turkey on Wednesday after his trip to Riyadh Both the U S and Turkey have refrained from implicating Saudi authorities outright
Trump has said the U S could take very very powerful very strong measures against Saudi Arabia if its leadership is found responsible for Khashoggi s disappearance a comment that provoked a Saudi threat of retaliation But while he s come under increasing pressure from Congress to cancel multibillion dollar arm sales to the kingdom Trump has resisted saying Riyadh will just turn to Russia or China instead
Determining what happened to Jamal Khashoggi is something of great importance to the president State Department spokeswoman Heather Nauert said on Monday as Pompeo prepared to depart Washington Trump said Treasury Secretary Steven Mnuchin will decide whether to attend the investment conference by Friday
Turkish leaders have also been circumspect about Khashoggi s disappearance giving no public comment at a time when their country is isolated in the Middle East over its regional policies and grappling with economic woes
Updates with Pompeo s meetings in fourth paragraph |
MS | NewRiver Retail Continued Growth In Difficult Markets | Continued growth in difficult marketsNewRiver Retail NRR L represents a way to capitalise upon a weak UK retail backdrop It acquires high yielding c 9 10 net initial yields town centre retail assets in better performing UK locations with a defensive tenant weighting in less discretionary areas of consumer spending such as food value and health beauty Despite media coverage of the challenges facing UK retail none of the recent high profile retailer failures Game Clintons HMV or Jessops operated in any the group s 23 retail centres Dividends are covered by earnings from affordable rents and an assumed 0 8m cash disposal gain in FY13 and growth predicated only on asset management initiatives with no increase in underlying market rental values NRR confirms a pipeline of suitable acquisitions and its recent JV with PIMCO reveals a commitment to take advantage of this and continued demand for new stores from food and value retailers to support plans for refurbishment and pre let development over the next few years Interim results were stable compared to the second half of FY12 with modest acquisitions in the period Growth reignited by new JV with PIMCO subsidiaryIn December NRR L entered a new joint venture with a subsidiary fund of PIMCO the world s largest bond investor which we regard as an endorsement for the investment strategy JV s first acquisition is an 85m portfolio of six UK shopping centres at a 9 7 net initial yield which we estimate will add 0 4m to NRR L s annual asset management fees and a c 0 6m pa share in the JV s net income after finance costs There will be a small contribution in FY13 but overall our forecast is lower in a tough retail and general economic environment with some increase in our interest cost assumption and lower income from the earlier Morgan Stanley joint venture post asset sales The new PIMCO JV shows ambitions to grow its portfolio in the next few years and NRR L is well into phase two of its strategy to upgrade existing assets Valuation sensitivities Covered 8 0 prospective yieldWe have reduced our dividend forecasts to 16p for both FY13 and FY14 previously 16 5p and 17 5p a covered 8 prospective yield supported in FY14 by a full year contribution from the new joint venture We have assumed a 0 8m profit from asset sales in FY13 The high yield and discount to NAV reflects concern over the UK retail focus However cash flows remain resilient and the new JV provides a platform for further acquisition growth subject to access to capital assets at high net initial yields and low cost fixed rate debt Our 240p share FY13 NAV forecast assumes no benefit from asset management in H2 and includes c 2 5 dilution from the share issue to fund the JV investment We continue to expect NRR L to create additional value from 400m of assets under management To Read the Entire Report Please Click on the pdf File Below |
MS | China What To Expect From The Year Of The Snake | During this Chinese New Year more than a billion people will be welcoming in the Year of the Black Water Snake celebrating with family and friends all week long The previous Year of the Black Water Snake was in 1953 which was when China launched its first five year plan and the average annual income for a family in the U S was about 4 000 As the Dragon took its last breath of the year it exhaled plenty of fire into China looking at year over year data as of the end of January new bank loans passenger car sales and exports all rose while inflation was slightly lower Imports of key commodities crude oil aluminum and copper were also exceptional with month over month increases of 6 4 and 3 respectively Increasing money supply and easing policy in China have also helped to breathe life back into China s equity market Below is an update of the chart we showed Investor Alert readers back in October when the venomous sentiment toward China was at extreme levels We believed Chinese stocks were significantly undervalued compared to emerging markets and that its equities were due for a rebound I indicated that an increase in money supply would be the needed oxygen for an equity resurgence Throughout 2013 we expect the government to continue its accommodative efforts which should reinforce the equity rally In addition the new pyramid of power is focused on growth as it seeks to improve and reform policies that will provide its residents with opportunities and social security increase incomes and raise standards of living which should encourage domestic consumption Growth is set to be considerable over the next several years Jefferies Equity Strategy team anticipates that China s GDP will grow at a compound annual growth rate of 6 9 and by 2025 will almost equal that of the U S In addition China s GDP per capita is projected to climb to about 18 000 on a purchasing power parity and domestic consumption is likely to make up a larger portion of its GDP jumping from about 49 percent in 2012 to 73 percent of GDP by 2025 says Jefferies Urban ReformTo achieve these goals there needs to be significant reforms to promote a new urbanization While China has been anticipating the rise of urbanization by building out the country s infrastructure of medical services housing water high speed rail system and roads the mobility of many residents remains restricted by its internal residence status called the hukou pronounced who cow First put into place in 1958 the hukou system was a means of controlling migration throughout the country It designates where a person or household may reside by geographic area According to J P Morgan s Jing Ulrich the system s primary function was to maintain a sufficient agricultural labor force while preventing excessive strain on urban resources Under this registration system if a resident does not have an urban hukou the family has no access to social benefits such as free education health care and pensions that are provided to permanent residents of that city Michael Ding portfolio manager of the China Region Fund USCOX was raised in rural Dalian and remembers what it was like living under the registration system which he says was driven by the government s need to ration food Still fresh in leaders minds were memories of millions of people dying from starvation and the government wanted to ensure there was enough food for urban residents With this upbringing Michael developed a knack for quickly understanding rationing systems as his family was unable to purchase additional food regardless if they had money or grow vegetables in their backyard Quasi UrbanizedSo while it was reported that more than half of China s population lives in an urban area only about one third of the total population holds an urban hukou Andy Rothman from CLSA calls these roughly 250 million migrants quasi urbanized which means that one worker lives in the city while the rest of the family remains in the rural home This equates to a real nationwide urbanization rate of only about 35 percent You can see in Jefferies chart how the official urban residence status differs across the country compared to the urbanization ratio If the government reforms the hukou it is estimated that 600 million people might move to the cities over the next 20 years This includes 300 million migrants becoming new urban residents and 300 million rural residents moving to urban areas by 2030 says Citi Research According to its data urbanization could bring another 150 million surplus rural laborers to the cities P otential reforms in hukou registration and healthcare systems together with extended substance allowance will likely encourage more migrant workers to live in cities for the long term with higher consumption propensities says Morgan Stanley Because urbanization is a big driver for the housing market CLSA believes property sales in China s 600 third tier cities could significantly benefit from hukou reform as about 100 million migrant workers currently reside in these cities The government has begun to factor in the massive ramifications of these families moving to the cities According to J P Morgan investments in urbanization are already placing a heavier emphasis on the human benefits of development Regarding social housing in 2012 the country met its goal of starting on 7 2 million units and completing about 5 million units according to the research firm For 2013 China s plans call for an additional 10 million units that will be under construction or complete by the end of the year What To Expect In The Year Of The Snake Bite or Might Maybe both if you follow CLSA s Feng Shui Index Every year since 1992 CLSA Asia Pacific Markets team takes a lighthearted look at the fortunes that may befall the Hang Seng Index During the Year of the Dragon CLSA s predictions of the Hang Seng Index came amazingly close to how stocks actually performed Equities in China fell into a bit of a slump toward the beginning of the year Then the Dragon woke up and fired up the markets toward the latter half of the Chinese year Over the next several months CLSA foresees Chinese stocks to slink like a snake rising in the beginning of the year before sidewinding in the latter half of the year According to CLSA the elements fall out of balance as the crucial Fire element all but dies away Earth falls Metal overshoots and Water puts a damper on prospects In times of growth a young snake sheds its skin often sloughing off a worn exterior to reveal a fresh layer of scales The Asian giant has experienced growth the world has never seen before and during the Year of the Snake we look forward to seeing a new leadership take action sloughing off worn policies to unveil a stronger vibrant economy See how we ve positioned the China Region Fund to benefit from this potential growth Don t miss Frank s presentation from the World Money Show that received more than a quarter million page views on businessinsider com To download your copy go to follow us on Twitter or like us on Facebook Please consider carefully a fund s investment objectives risks charges and expenses For this and other important information obtain a fund prospectus by visiting or by calling 1 800 US FUNDS 1 800 873 8637 Read it carefully before investing Distributed by U S Global Brokerage Inc Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure as well as economic and political risk By investing in a specific geographic region a regional fund s returns and share price may be more volatile than those of a less concentrated portfolio The Hang Seng Index is a capitalization weighted index of 33 companies that represent approximately 70 percent of the total market capitalization of The Stock Exchange of Hong Kong By clicking the link above you will be directed to a third party website U S Global Investors does not endorse all information supplied by this website and is not responsible for its content |
MS | Market Conditions Views On The Future Price Of Gold | There are many views on the future price of gold with a strong preponderance for higher prices It s tough to parse through them and to decide which to rely upon This article provides some statistical information about investor views that may help SOME OF THE QUALITATIVE ARGUMENTS On the positive side central banks are strong net buyers the U S not included Some countries are repatriating gold reserves held outside of their borders China and some others are diversifying their foreign reserves to include currencies other than the U S Dollar and gold bullion Central banks are debasing currencies around the world with various easy money programs that apparently have no visible signs of being tempered We are in a world or negative real interest rates Those things suggest gold may see price gains for a while On the negative side central banks have been net sellers at times if their appetites are satisfied a reduction in purchases would change the supply demand relationship and potentially push gold prices down significantly Interest rates will rise some time due to improving economic conditions at which time the emotional and financial appeal of gold would decline relative to bonds stocks and real estate Just as negative real interest rates supports the price of gold positive real interest rates create headwinds for gold which produces no income and has some costs of carry for storage and other costs of holding directly or through funds Importantly it is hard to be fully comfortable with gold when everybody and his brother feels it must be owned when the radio is saturated with advertisements by gold dealers with suggestions to buy gold coins and to convert IRAs to gold IRAs and when the web is fully of articles books and videos about the coming disaster for which owning gold is posed as a solution Lastly if the world was coming apart gold confiscation by governments as it was in the 1930 s by President Roosevelt is a clear risk and the vaults that hold bullion for gold ETFs could well be looted by criminal bankers or rioters Morgan Stanley thinks gold will rise to about 1775 in 2013 and then 1845 in 2014 it is at about 1650 It has a trailing 1 year high low range of approximately 1540 to 1790 Goldman Sachs thinks gold will rise in the early part of 2013 to about 1825 during US debt ceiling and sequestration debates but then decline in the second half as the U S economy improves reaching 1750 by 2014 Felix Zulauf of Zulauf Asset Management in Zurich believes that if gold goes above 1750 to 1800 and negative real interest rates continue gold will go to 2200 by 2014 PRICE CHARTS Gold has gone down in the past as well as up and has only been freely traded in the U S for less than 50 years It has a history as long as civilization but the investment alternatives that exist today did not exist over the history of civilization so ancient data while often cited is of questionable analytic utility Some analysts discuss gold and Roman Empire or other history but we think sticking with the modern era is best for finding insights For the past year gold has been rather dead money and its chart looks like it could be creating a rounding top instead of waiting to burst upward The chart shows price black line 1 year moving average price dash gold line and 1 year high to low price range tan shaded area It s nice to have the opinions of big name houses they generally don t tell you how they arrive at their views other than making broad statements about fiscal and monetary policy and that sort of thing hardly precise Unfortunately there are no fundamental data such as sales earnings dividends or interest rates to which valuation multiples can be applied To complement the gold forecasts of various analysts not all of whom can be relied upon to be objective or non conflicted we think it makes sense to canvas what the bulk of the investor community is forecasting with their risk capital To look forward for plausible gold price ranges we can be assisted by examining extrapolation of historical volatility of golddirectional signals from long and short futures positions in goldextrapolation of options implied volatility for goldExtrapolation Based On Historical Volatility of Gold This chart plots statistical price probability ranges for GLD the gold ETF that is priced at approximately 10 of the price of gold using historical volatility of GLD The green cone projects the 70 price probability range from 02 12 2013 to 02 12 2014 based on 1 year historical volatility of GLD The end point values are 174 and 146 equivalent to 1740 and 1460 for gold The purple cone projects the 90 price probability range with end point values of 184 and 139 equivalent to 1840 to 1390 for gold The tan colored line is the 1 year moving average price and the dashed black line is the linear regression best fit trend line from the beginning of 2007 through 02 12 2013 and extended to 02 12 2014 Those values are 162 and 200 respectively equivalent to gold 1620 to 2000 Directional Signals From Long and Short Gold FuturesThe CFTC Commodity Futures Trading Commission publishes weekly figures on the number of contracts that different types of investors hold called Open Interest or OI for gold and other commodities and financial indexes They call that report the Commitment of Traders Their most recent report on gold is shown below This report will not tell us what price level to expect but it provides clues as to whether to look to the upper half or lower half of the price probability ranges that we develop using historical and options implied volatility The data in this table is extracted from a larger data set in the Commitment of Traders report for February 5 We highlight three groups large professional money managers other large futures traders and small traders those whose holdings are not large enough to require reporting to the CFTC The first two are considered the smart money and the small traders are considered the dumb money We see that all three groups have a lot more long gold futures positions Long OI than short gold futures positions Short OI The money managers has a long to short ratio L S Ratio of 3 28 the large traders 3 35 and the small traders 2 55 Perhaps somewhat more revealing is that the money managers have increase their net long positions by 2 61 since last week the larger traders by 17 32 while the small traders have decreased their net long positions by 8 1 That patterns suggests gold is more likely to rise than fall near term We can t tell the mix of short term and long term futures contracts in these Open Interest figures but they tend to be more near than far so this data is not a long term indicator For now at least the signs from the futures markets are for gold price increases not decreases a rosier picture than the price chart would suggest Extrapolating Options Implied Volatility for GoldBased on the January 2014 options for GLD and assuming a continuing ratio of the price of GLD to gold at 1 10 and using the tools provided by OptionsExpress the 90 price probability range is bounded by 1310 and 1950 The 70 price probability range is 1410 to 1810 Statistical Views and Morgan Stanley Goldman Sachs ForecastsThe statistical projections make room for the Morgan Stanley and Goldman forecasts both of these are for prices in the upper half of the price probability ranges The Zulauf price forecast is outside of the statistically projected price ranges Events can totally upset all of these data but for now we go with what we ve got An issue to keep in mind is that in spite of all the excitement about gold the percentage price changes in the statistical projections and in the Morgan Stanley and Goldman scenarios are not spectacular They are broadly in line with what might be achieved by a selection of stocks as well Gold is minimally correlated with stocks and bonds which makes it a good diversifier to potentially help reduce overall portfolio volatility In the near term however unless the overall world and national situation changes gold is not destined to massively outperform and allocations to gold should not be overly large If income is important to the portfolio then gold might be avoided or held as GLD while writing short term out of the money covered calls on the position We hold GLD is some portfolios and write covered calls on GLD in some portfolios Our allocation limit is 5 GOLD VERSUS OTHER ASSET CATEGORIESHere are a series of 7 year weekly charts showing the ratio of the price of gold to the total return for different asset categories A rising line means gold is doing better A falling line means gold is doing worse Gold vs S P 500Gold vs Dow Jones Select Dividend IndexGold vs Dow Jones Liquid Investment Grade Corporate BondsGold vs Brent Crude OilGold vs SilverGold vs CopperGold vs PlatinumGold vs Gold MinersGold vs Corn |
MS | Copper May Touch 3 607 In The Short Term | The Group of 20 nations declared on Saturday there would be no currency war and deferred plans to set new debt cutting targets underlining broad concern about the fragile state of the world economy There were mixed signals from China as the top metals consumer returned from its lunar new year break on Monday Shanghai copper futures fell more than 1 percent tracking a similar loss in London copper last week but Shanghai based traders picked up bonded stock Copper 13th March Future Trading near Day Low 3 690 1 11 Copper open at 3 744 and created a day high 3 746 Shanghai copper fell to a three week low on Monday as traders returning from a week long break in china played catch up with recent losses in London prices while signs of a weaker global growth also hurt sentiments Copper Technical Analysis Copper Future creates on a semiannual chart a format of head and shoulder as a reversal pattern in an up trend It indicates that selling pressure can be at every high below 3 741 You can see 3 756 and 3 771 if copper cross and close above 3 741 Copper is currently trading near a very important support 3 688 traders Copper sell around 3 715 with strict sl 3 741 for short term target 3 657 and 3 632 Support 3 688 3 657 3 632 Resistance 3 741 3 756 3 771 |
C | Oil Notches Weekly Gain Record U S Output Threatens OPEC Cuts | By Barani Krishnan
Investing com If oil funds can t get any more news on Saudi production cuts then any positive news on the U S China trade war would seem to do
Prices of New York traded West Texas Intermediate crude and London s Brent rose on Friday heading for a third weekly gain in four as traders awaited President Donald Trump s trade meeting with China s Vice Premier Liu He
WTI settled up 30 cents or 0 5 at 57 26 per barrel It hit a three month high of 57 81 earlier
Brent the global oil benchmark was down 10 cents or 0 2 at 66 97 per barrel by 3 03 PM ET 20 03 GMT after hitting 67 73 surpassing a November peak of 67 72
For the week WTI was up about 2 3 while Brent was around 1 higher
Crude prices were also supported somewhat by this week s drop in the U S oil rig count The rig reading published by industry firm Baker Hughes showed drillers cut four rigs this week after raising them by 10 over two prior weeks An early indicator of future output the total rig count at 853 is still higher than the 799 rigs active at this time a year ago
Analysts said the path of least resistance in oil was certainly higher although counteracting fundamentals were strongly building against the crude rally
I feel like the rally we have seen has been a combination of CTA buying and strong physical markets said Scott Shelton energy futures broker at ICAP LON NXGN in Durham N C
But Shelton one of the more pragmatic bulls in oil thinks that some of the CTAs behind this year s 25 rally in crude were also neutral in their mid and long term view on the commodity
The question is whether or not they will get long he said Spending another week above the 100 Day Moving Average may generate that as the market confirms the level but I am dubious about the general macro as the last shoe to drop to me on that side is the Chinese U S trade deal I wonder what will be next to drive the bullish rhetoric
Record crude exports out of America were saving the day for oil bears data from the U S Energy Information Administration showed on Thursday as domestic production hit the magic 12 million barrels per day figure last week
The EIA forecasts that U S output will reach 13 million bpd by the end of 2020 the most that any country has ever achieved in daily production But some analysts including those at Citigroup NYSE C believe that figure will be achieved this year
We see total U S crude production hitting 13 million bpd by year end with 2019 averaging 12 5 million bpd Citigroup s analysts said Exports could scale 4 6 million by then versus last week s record of 3 6 million
The surge in U S production could offset OPEC cuts led by Saudi Arabia warn oil bears who say that total supply is what will matter to the market despite American shale being a lighter variant oil of the heavier grade produced in the Middle East |
C | Emerging Markets Beholden to Yuan Fate as Trump Extends Deadline | Bloomberg Emerging markets are becoming more sensitive to the slings and arrows of the U S China trade dispute just as talks between the two sides enter their most crucial phase
President Donald Trump said Sunday he ll extend a deadline to raise tariffs on Chinese goods until he can meet Chinese President Xi Jinping spurring gains in the offshore yuan in early Asia trading With representatives of the two governments still haggling over a deal that would ensure Beijing lives up to its promise not to depreciate the yuan the tendency of developing nation currencies to shadow the dollar yuan exchange rate is back near its highest since July
Trump said the U S and China have made substantial progress in the latest round of talks in Washington which will help appease investors worried that an escalation of the trade war will derail global growth This week is also due to serve up a second meeting between the U S President and North Korean leader Kim Jong Un a rate decision in South Korea and gross domestic product reports from Brazil India and Mexico Not forgetting of course the result of the delayed election in Nigeria
It appears that progress is being made and in this respect it ought to buoy EM assets into this week said Mitul Kotecha a senior emerging markets strategist at TD Securities in Singapore Markets have been anticipating some sort of a deal though there has been concern about structural issues
Markets Want Change
Nigerian officials are preparing to announce which of the two main candidates the incumbent Muhammadu Buhari and Atiku Abubakar won Saturday s election analysts were more or less split down the middle over who would win
Wall Street banks such as Citigroup Inc NYSE C say Nigerian equities and bonds will probably rally if Abubakar wins Since Buhari came to office Nigeria s stock market has been the world s worst performer losing about half its value in dollar terms
Read more Here s What to Watch as Nigeria s Election Results Come in
Trump Kim Sequel
Trump and North Korean leader Kim will hold their second meeting on Feb 27 28 in Vietnam
The dismantlement of the Yongbyon Nuclear Scientific Research Center a complex located in the mountains north of Pyongyang has emerged in recent months as a potential outcome from the summit
South Korea s sovereign bond risk has fallen to an 11 year low on optimism that there will be progress in the denuclearization of the Korean peninsula
The central bank is expected to keep rates on hold in its second monetary policy meeting this year on Thursday
Economic Pulse
India will probably report on Thursday that economic growth slowed in the fourth quarter It will also provide an estimate for 2019
The rupee is Asia s worst performing currency this year as Prime Minister Narendra Modi plans to spend billions of dollars to buoy the economy ahead of a general election due by May
Investors will also get a fresh round of data on Latin America s two biggest economies just as some say a regional currency rally may soon lose steam Mexico s growth probably slowed in the fourth quarter from a year earlier according to the median estimate of analysts surveyed by Bloomberg In Brazil activity may have ticked up slightly on a year over year basis as consumer confidence spiked
Brazil s nominee to head the central bank will breeze through his Senate confirmation hearing on Tuesday following a damaging cabinet crisis Roberto Campos Neto will probably be questioned whether policy makers are doing enough to support economic growth promote financial sector competition and slash bank fees and spreads according to a lawmaker
Mexico s central bank will present its quarterly inflation report on Wednesday the first since two new members joined the board While prices are still rising faster than the bank s target swap traders see the key rate unchanged over the next three months
Global purchasing managers indexes including China s will be of high interest as investors assess the outlook for economic activity Michael Bolliger the Zurich based head of emerging market asset allocation at UBS Wealth Management s chief investment office said
The Polish finance ministry will announce the sovereign s bond issuance plan for March as part of the quarterly target of selling 20 billion to 30 billion zloty in new bonds at regular auctions
South Africa swung to a trade deficit of 14 5 billion rand 1 billion in January from a surplus of of 17 2 billion rand the month before data may show on Thursday according to the median estimate of economists The country its budget balance on the same day
Updates with latest developments on trade talks in 2nd and 3rd paragraphs |
C | European shares rise as trade war resolution hopes lift sentiment | By Julien Ponthus LONDON Reuters European shares opened higher on Monday as optimism over a deal to end the U S Sino trade war lifted sentiment and a risk on mood spread from Asia to European bourses in an otherwise slow day in terms of corporate earnings or economic indicators The pan regional STOXX 600 index was up 0 4 percent by 0916 GMT hovering around levels not seen since the beginning of October The Wall Street Journal reported on Sunday that Washington could lift most or all of its tariffs on Beijing while a summit between U S President Donald Trump and his Chinese counterpart Xi Jinping to sign a final trade deal could happen later this month Sentiment has improved overnight on the positive trade headlines with China s bourses leading the advance commented Deutsche Bank DE DBKGn strategist Jim Reid There were however strong losses such as Britain s Rotork which posted the worst performance losing 7 4 percent after disappointing earnings A surprise big loser was lender Nordea which fell 5 7 pct with traders citing a Finnish TV program reporting allegations of money laundering to be aired later on Monday Contacted by Reuters Nordea declined to comment Fashion retailer Ted Baker fell after it announced that its Chief Executive Officer Ray Kelvin had resigned with immediate effect following an investigation into allegations of misconduct Shares gradually recouped losses however to stand 0 9 percent higher The chemical sector was the only one trading in negative territory weighed down by Victrex downgraded by Citigroup NYSE C and Linde for which JP Morgan cut its target price Swiss utility Alpiq shed 1 7 percent after reporting its fourth annual loss in five years as its hydropower and nuclear facilities again struggled Among top gainers were the shares of publisher Daily Mail General Trust which jumped 5 4 percent after announcing plans to return all of its shares in Euromoney Institutional Investor and 200 million pounds 265 million cash to eligible shareholders
French perfumes maker Interparfums rose 4 4 percent after raising its full year revenue guidance following a strong start to the year |
JPM | Gold Set To Sparkle In Q4 ETFs To Consider | Despite the bullishness in the stock market gold maintained its sheen this year thanks to geopolitical concerns instability in Europe and United States as well as lofty stock valuations This is especially true as the bullion has risen about 9 2 while the S P 500 Index has gained 13 2 in the year to date time frame After the fourth consecutive weekly loss gold price rebounded to a two week high toward 1 300 per ounce level as uptick in geopolitical uncertainty raised demand for the precious metal as a safe haven Tensions between the United States and North Korea flared up again this week after President Donald Trump tweeted that years of talking with North Korea over its nuclear buildup have proved futile and that only one thing will work This sparked fears of World War 3 raising the appeal for the metal as a store of value and hedge against market turmoil In addition a Russian report shows that North Korea is preparing to test a missile that could potentially reach the United States read Further a soft dollar and dovish Fed minutes added to the strength Though the December rate hike expectation remains intact the minutes revealed low inflation concerns pushing the greenback down The dollar index which measures the greenback s value against a basket of six major currencies touched its A rise in euro is putting further pressure on the greenback A weak dollar is a huge boon to gold prices as it makes gold cheap for holders of other currencies Moreover higher demand in India the world s second biggest consumer of gold is lending support to the price of the yellow metal Notably demand in India tends to rise in the final quarter due to the wedding and festive season read How to Play Given the optimism and intense buying pressure on gold investors have a long list of options in the ETF world to tap the metal s rally Gold ETFsWhile there are many products that are directly linked to the spot gold price or futures we have highlighted the three most popular ETFs These have gained more than 12 in the year to date time frame and carry a favorable Zacks ETF Rank 3 Hold with a Medium risk outlook SPDR Gold Trust ETF V GLD This is the largest and most popular ETF in the gold space with AUM of 35 3 billion and average daily volume of around 7 8 million shares The fund tracks the price of gold bullion measured in U S dollars and kept in London under the custody of HSBC Bank USA Expense ratio comes in at 0 40 iShares Gold Trust AX IAU This ETF offers exposure to the day to day movement of the price of gold bullion and is backed by physical gold under the custody of JP Morgan Chase NYSE JPM Bank in London It has AUM of 9 4 billion and trades in solid volume of 8 8 million shares a day on average The ETF charges 25 bps in annual fees ETFS Physical Swiss Gold Shares This product also tracks the price of gold bullion and is backed by physical bullion under the custody of JPMorgan Chase Bank It has amassed more than 1 0 billion in its asset base and trades in lower volume of 32 000 shares per day The product has an expense ratio of 0 39 read Leveraged Gold ETFsInvestors who are bullish on gold may consider a near term long on the precious metal with the following ETFs depending on their risk appetite ProShares Ultra Gold ETF NYSE GLD This fund seeks to deliver twice 2x or 200 the return of the daily performance of gold bullion in U S dollars It charges 95 bps in fees a year and has amassed 90 6 million in its asset base Volume is light at about 41 000 shares per day The ETF has gained 21 6 so far this year DB Gold Double Long ETN BS DGP This ETN seeks to deliver twice the return of the daily performance of the DBIQ Optimum Yield Gold Index Excess Return charging 75 bps in fees per year It has accumulated 118 4 million in its asset base so far and trades in an average daily volume of 34 000 shares The ETN is up 24 6 this year see VelocityShares 3x Long Gold ETN V GLD This product provides three times 3x or 300 exposure to the daily performance of the S P GSCI Gold Index Excess Return plus returns from U S T bills net of fees and expenses The ETN has been able to manage an asset base of 108 million while charging a higher fee of 1 35 annually However the note trades in a solid volume of about 669 000 shares a day on average and has surged 32 3 in the year to date time frame Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
JPM | December Rate Hike A Done Deal | Thursday October 12 2017For those market participants not yet convinced the Fed is serious about raising rates again before the end of the year particularly at its December meeting this morning s Producer Price Index PPI numbers for September ought to finish you off With a lofty 0 4 PPI read as expected but still lofty double the August figure of 0 2 and also 0 4 ex food and energy this is the type of inflation metric the Fed had long been seeking It s here now PPI ex energy year over year core reached 2 2 in this latest read trade year over year was 2 1 These are signs of solid and maintainable inflation now clear and present within the domestic economy As the Fed minutes from the committee s last meeting released just yesterday attest our monetary safekeepers were unconvinced inflation had made enough of an impression within the economy to justify another rate hike this year
And while the Federal Open Market Committee FOMC does meet in November currently analysts are looking at only a very slim chance of a hike next month however prior to this morning s PPI read estimates were roughly 80 that the FOMC would raise another quarter percent in December The Consumer Price Index CPI to be released before the opening bell tomorrow is an even more important number regarding the FOMC s likelihood to bump up rates And if we do see a raise in December it may have an immediate positive effect on U S banks including the biggest players on Wall Street which are in the process of reporting today tomorrow and into next week JPMorgan Chase NYSE JPM beat on both top and bottom lines 1 76 per share on 26 2 billion in quarterly revenues bested the 1 67 and 25 7 billion expected respectively This marks at least the fifth straight quarter of earnings beats with the trailing 4 quarter average positive surprise was north of 14 These figures are particularly impressive considering the challenging quarter just passed with investment banking fees 1 equity market revenues 4 and fixed income 27 Citigroup NYSE C also topped estimates for both earnings and revenues 1 42 per share surpassed the 1 32 expected and 18 2 billion on the top line improved on the 17 7 billion in the Zacks consensus Citi has also beaten earnings estimates for at least five straight quarters with the trailing 4 quarter average above 6 Net income of 8 year over year was a highlight of Citi s solid Q3 results Finally Initial Jobless Claims fell back within their long term range of 225 250K 15 000 claims lower from the downwardly adjusted previous week to 243K What s remarkable about this is that the labor market has endured 2 massive hurricanes in recent weeks and we never saw jobless claims peak above 300K This illustrates a real resilience in the U S jobs market nationwide Continuing claims also fell to 1 89 million from 1 92 million the previous week another good sign At first glance it would not appear Puerto Rico devastated by Hurricane Maria two weeks ago job losses are tallied here Also massive wildfires throughout inland California are causing loss of life and millions of dollars in damage Although these fires have not struck populous hubs like Los Angeles or San Francisco iconic regions like wine country in Napa Valley have been decimated To whatever extent jobs are going up in smoke along with everything else there the wildfires show no end in sight through the rest of this week we may see this pass through in next week s jobless claims Mark VickerySenior EditorToday s Stocks from Zacks Hottest Strategies
It s hard to believe even for us at Zacks But while the market gained 18 8 from 2016 Q1 2017 our top stock picking screens have returned 157 0 128 0 97 8 94 7 and 90 2 respectively
And this outperformance has not just been a recent phenomenon Over the years it has been remarkably consistent From 2000 Q1 2017 the composite yearly average gain for these strategies has beaten the market more than 11X over Maybe even more remarkable is the fact that we re willing to share their latest stocks with you without cost or obligation |
MS | China s Sunac to raise 1 billion to refinance debt amid deal spree | HONG KONG SHANGHAI Reuters Acquisitive Chinese property developer Sunac China Holdings Ltd HK 1918 will raise 1 billion from banks to refinance its current debts the firm said in a filing on Thursday Sunac has been making a spate of high profile deals including a deal last month to buy theme parks and tourism developments from Dalian Wanda Group for 43 8 billion yuan 6 52 billion Other deals include 2 1 billion for the real estate assets of Legend Holdings parent of PC maker Lenovo and 2 2 billion for a stake in Leshi Internet SZ 300104 a unit of LeEco a Chinese Netflix to Tesla like conglomerate Sunac said the fund raising would see it issue 400 million of senior notes due in 2020 and 600 million due in 2022 which would help optimize its debt structure The proceeds from the Notes Issue are intended to be used for re financing the group s existing indebtedness it said The recent deal with Wanda which saw both firms come under regulatory scrutiny over potential credit risks had to be amended from an earlier planned deal with Sunac scrapping plans to buy close to 80 hotels from Wanda as well Sunac s Sun said at the time the adjusted deal would help the company s liquidity and lower its debt level He added the firm had ample cash flow with 90 billion yuan of cash on hand Chinese conglomerates are coming under scrutiny over showy deals amid fears about firms taking on too much debt creating a potential risk for China s financial system Sunac said the current rights issue involved banks HSBC L HSBA Morgan Stanley N MS China CITIC Bank International Citigroup N C CMB International Haitong International HK 0665 IBC ICBC International and SPDB International
The new fundraising comes a week after Sunac said it had agreed a private share sale worth 516 4 million |
MS | Premarket analyst action healthcare | AveXis NASDAQ AVXS initiated with Overweight rating and 118 25 upside price target by Morgan Stanley NYSE MS Spark Therapeutics NASDAQ ONCE price target raised to 92 15 upside by UBS Now read |
MS | New cyber firm BlueteamGlobal opens with 125 million in funding | Reuters BlueteamGlobal a new firm founded by executives with ties to Morgan Stanley N MS said on Thursday that it has raised more than 125 million and plans to offer managed security services and cyber threat intelligence The firm s co founders are former Morgan Stanley Chief Operating Officer Jim Rosenthal who is its chief executive and Tom Glocer former CEO of Thomson Reuters and a member of Morgan Stanley s board who is BlueteamGlobal s executive chairman The company said it plans to initially target businesses in North America and Europe opening offices in New York Washington London Madrid and Tel Aviv Employees include Daniel Ennis former director of the National Security Agency s Threat Operations Center and Ron Feler former deputy commander of the Israel Defense Forces elite cyber squad Unit 8200 Robert Hannigan former director of British intelligence agency GCHQ will head the company s European Advisory Board
Former Federal Bureau of Investigation cyber officials Austin Berglas and Milan Patel will run managed security and professional services |
JPM | Innocent bystanders Emerging economies struggle to contain capital outflows | By Ed Davies Sumeet Chatterjee and Gayatri Suroyo NUSA DUA Indonesia Reuters After suffering months of capital outflows policy makers from emerging markets attending IMF World Bank meetings in Indonesia had a message for leading economies current monetary and trade policies risk undermining us all The International Monetary Fund World Bank meetings wrapping up on Sunday gave central bankers and finance ministers from around the world a chance to meet face to face in Indonesia whose rupiah currency hit a new 20 year low this week Poorer and populous emerging markets have been particularly vulnerable to the escalating U S Sino tariff war and rate rises by the U S central bank Investors dumped assets seen as riskier sparking painful currency plunges that have punished countries from India to recession hit South Africa as well as triggering crises in Turkey and Argentina We are all aware that the normalization of the monetary policy in the U S combined with their fiscal policy and trade policy are all creating a systemic impact to the whole economy in the world Indonesian Finance Minister Sri Mulyani Indrawati said in an interview during the meetings in Bali The Federal Reserve s nearly three year old tightening cycle has in part prompted a global shift in capital away from emerging markets and after three hikes this year it foresees another December rise three more next year and one in 2020 A senior Fed official in Bali said the rate rises were right for domestic policy and ensuring they were gradual and predictable was the best solution for minimizing unintended volatility in emerging markets In a bid to support the rupiah Bank Indonesia has raised rates five times since mid May and intervened regularly but still the currency has lost nearly 11 percent this year leaving it at the weakest levels since the 1998 Asian financial crisis Bank Indonesia Governor Perry Warjiyo said that the 150 basis point rate hikes since mid May aimed to keep Indonesian assets attractive enough for foreigners to stay invested but calibrating this in the current environment was hard The risk premia are very difficult to incorporate because risk premia are responding to geopolitical responding to trade tension Warjiyo told a panel in Bali SPILLOVER RISKS Finance ministers for developing nations in the Group of 24 economies urged major economies to reform the global trading system rather than discard it The G24 statement issued on the sidelines of the Bali meetings said all emerging markets were adversely affected by excessive capital flow volatility While many countries shared common fears Indrawati said it was difficult to forge cooperation to counter the risks It s not really clear how the world is going to coordinate more effectively especially when each country has their own domestic issues she said The Philippine peso has shed nearly 8 percent this year and its deputy central bank governor Diwa Guinigundo said the IMF and other global institutions should advise advanced economies on the potential negative consequences of their moves It s the spillovers that we are concerned with the spillover could have effects from one market to the other from the financial market to the real market said Guinigundo He said while it was good for policymakers to be ahead of the curve in tightening they should take account of the growing clout of emerging markets It should also be emphasized that ASEAN 3 China Japan Korea we account for a good bulk of the world s population and GDP EITHER ALL ARE WINNERS OR ALL ARE LOSERS IMF Managing Director Christine Lagarde urged members at the meeting to de escalate trade tensions and work on fixing global trade rules She also warned against adding currency to the trade conflict saying this would hurt global growth as well as innocent bystander nations including emerging markets that supply commodities to China Egyptian Finance Minister Mohamed Maait said policy makers in developed countries should understand that if their actions hurt other countries it would have knock on effects You need me I am a market for you I am an opportunity for you Maait told Reuters I don t believe there will be a winner and a loser Either all are winners or all are losers Indeed market ructions have now cascaded through to developed markets with Wall Street seeing a six session slide until a rebound on Friday amid fears over the trade war between China and the United States However other than having effective monetary policies developing markets can do little to cope with the impact of rate hikes and trade battles said Jacob Frenkel chairman of JPMorgan Chase NYSE JPM International
When elephants fight the grass suffers |
JPM | Saudi Arabia says will retaliate against any sanctions over Khashoggi case | By Andrew Torchia and Arshad Mohammed DUBAI WASHINGTON Reuters Saudi Arabia on Sunday warned against threats to punish it over last week s disappearance of journalist Jamal Khashoggi as European leaders piled on pressure and two more U S executives scrapped plans to attend a Saudi investor conference Khashoggi a U S resident and Washington Post columnist critical of Riyadh s policies disappeared on Oct 2 after entering the Saudi consulate in Istanbul Turkey believes he was murdered and his body removed Saudi Arabia has denied that U S President Donald Trump has threatened severe punishment if it turns out Khashoggi was killed in the consulate though he said Washington would be punishing itself if it halted military sales to Riyadh The Kingdom affirms its total rejection of any threats and attempts to undermine it whether by threatening to impose economic sanctions using political pressures or repeating false accusations the official Saudi Press Agency SPA quoted an unnamed official as saying The Kingdom also affirms that if it receives any action it will respond with greater action and that the Kingdom s economy has an influential and vital role in the global economy the official added without elaborating The Saudi Embassy in Washington later tweeted what it called a clarification thanking countries including the United States for refraining from jumping to conclusions over the case In a sign Saudi King Salman bin Abdulaziz Al Saud may seek a diplomatic solution to the incident he stressed the strength of Saudi Turkish ties in a telephone call with President Tayyip Erdogan of Turkey the Saudi press agency said late on Sunday The king thanked Erdogan for welcoming a Saudi proposal to form a joint working group to discuss Khashoggi s disappearance and said no one could undermine their relationship EUROPE SEEKS CREDIBLE INVESTIGATION Europe s largest economies Britain France and Germany said on Sunday they were treating the case with the utmost seriousness There needs to be a credible investigation to establish the truth about what happened and if relevant to identify those bearing responsibility for the disappearance of Jamal Khashoggi and ensure that they are held to account the countries said in a joint statement We encourage joint Saudi Turkish efforts in that regard and expect the Saudi Government to provide a complete and detailed response We have conveyed this message directly to the Saudi authorities The statement by Britain s Jeremy Hunt France s Jean Yves Le Drian and Germany s Heiko Maas made no mention of potential actions the countries might take Hunt later said that if Saudi Arabia were proven to be guilty we would have to think about the appropriate way to react in that situation OIL PRICE WARNING In a column published just after the SPA statement Saudi owned Al Arabiya channel s General Manager Turki Aldakhil warned that imposing sanctions on the world s largest oil exporter could spark global economic disaster It would lead to Saudi Arabia s failure to commit to producing 7 5 million barrels If the price of oil reaching 80 angered President Trump no one should rule out the price jumping to 100 or 200 or even double that figure he wrote Investor concern is growing that Khashoggi s disappearance could add to a sense that Saudi policy has become more unpredictable under Crown Prince Mohammed bin Salman who is pushing social and economic reforms but has also presided over a rise in tensions between with several countries A Gulf banker said the Khashoggi case combined with other events had become a significant factor for some potential investors It s cumulative the Yemen war the dispute with Qatar the tensions with Canada and Germany the arrests of women activists They add up to an impression of impulsive policy making and that worries investors the banker said Foreign capital is key to Saudi plans for economic diversification and job creation But in response to Khashoggi s disappearance media organizations and a growing number of executives have pulled out of a Riyadh investment conference scheduled for next week dubbed Davos in the Desert On Sunday JP Morgan Chase NYSE JPM Co said Chief Executive Jamie Dimon has canceled plans to attend the Saudi Arabian investor conference later this month Ford Motor NYSE F Co said Chairman Bill Ford has canceled his trip to the Middle East which included an appearance at the Saudi investment conference JP Morgan Chase and Ford did not comment on whether the decision was related to concerns about the disappearance of Khashoggi U S Treasury Secretary Steve Mnuchin still plans to attend the conference but that could change Larry Kudlow director of the White House National Economic Council said on ABC s This Week WASHINGTON REACTS U S senators called for reactions ranging from boycotting an upcoming economic summit in Riyadh to ending support for Saudi military operations in Yemen If they lured this man into that consulate they went medieval on him and he was killed and he was chopped up and they sent a death crew down there to kill him and do all of this that would be an outrage Florida Senator Marco Rubio told CNN s State of the Union Just because they are an ally in an important mission which is containing Iranian expansion in the region cannot allow us to overlook or walk away from that Fellow Republican Arizona Senator Jeff Flake appearing on This Week called for severe action which he said would affect arms sales and involvement in Yemen The Saudi stock market fell as much as 7 percent in early trade on Sunday one of the first signs of economic pain Riyadh could suffer over the affair By close it had recovered some losses ending down 3 5 percent and losing 16 5 billion of market value Senators have triggered a provision of the Global Magnitsky Human Rights Accountability Act requiring the president to determine whether a foreign person is responsible for a gross human rights violation The act has in the past imposed visa bans and asset freezes on Russian officials Anti Saudi sentiment in the U S Congress could conceivably raise pressure to pass the No Oil Producing and Exporting Cartels Act which would end sovereign immunity shielding OPEC members from U S legal action ACCESSING CONSULATE The crisis has polarized Saudis with some blaming the nation s enemies and others concerned about the direction the country is heading under Prince Mohammed Prince Khaled al Faisal a senior member of Saudi Arabia s ruling family and senior advisor to King Salman has met Erdogan to discuss Khashoggi s disappearance two sources with knowledge of the matter told Reuters without providing details A Turkish official told Reuters on Sunday that the Saudis had said they would allow the consulate to be searched and that this would happen by the end of the weekend though he conceded to flexibility on this date
But Turkey is determined on the subject of entering the consulate and carrying out a criminal inspection There is no alternative to carrying out this inspection Time is important in terms of evidence the official said |
MS | Gold Inches From One Month High | Those in gold investment had been hoping to see the gold price reach its one month high Wednesday but were disappointed as it inched further away yet again Wednesday the US House of Representatives passed a Republican plan which allows the federal government to keep borrowing money until May The plan was endorsed by the top Senate Democrat and White House The plan was passed after it became clear the US Treasury would exhaust its remaining borrowing capacity of 16 4 trillion by early March Expect further volatility as the debt ceiling once again becomes an issue The gold price stumble was partly down to the US vote but also thanks to renewed hopes of a global recovery as China posted its best manufacturing data showing the best growth in over two years whilst the IMF reportedly expect global growth to accelerate in 2013 We also saw some profit taking after reaching monthly highs which is to be expected The HSBC and Markit Economics flash manufacturing index for China saw a climb to 51 9 this month prompting signs of a higher growth for the second largest economy Despite the improvement in the economy gold buying in China remains fairly lackluster given the time of year Here in the UK after the hubbub surrounding Cameron s EU speech yesterday jobs numbers are on the rise as employment levels reached 29 68m a record high The data has prompted many to suggest we ve avoided the dreaded triple dip recession Despite indexes and statements suggesting things are on the mend we still do not see a sign of tightening monetary policy in any of the major economies Until we do gold investment will remain a popular option Morgan Stanley agrees their forecast released yesterday expects to see gold rally into this year and next thanks to on going asset purchases from the Federal Reserve As we have said many times the on going bull market is expected to continue thanks to increased gold investing and central bank buying Holdings of SPDR Gold Trust whilst falling to 1 334 115 tonnes remain 6 above levels this time last year Silver also proved a bit disappointing Wednesday breaking its 8 day rally its longest run since April 2011 Platinum remained uneventful however palladium posted the biggest loss of the day of 0 8 its biggest decline in a fortnight These declines are slightly surprising given the renewed sense of optimism regarding the Chinese economy one would expect to see a pick up in price thanks to forecast increased demand for industrial precious metals Disclosure Information published here is provided to aid your thinking and investment decisions not lead them You should independently decide the best place for your money and any investment decision you make is done so at your own risk Data included here within may already be out of date |
MS | Russia To Buy More Gold Silver Finishes With A Loss | Gold took a knock yesterday as short term investors got bored waiting for it to go to 1 700 Instead they saw some positive economic data from the US to China and put their faith into stocks prompting the FTSE to close at its highest since May 2008 and the S P to smash through 1 500 Gold at the time of writing is down below 1 670 at 1 669 Support is expected to be found at 1 661 during the day Gold hit its lowest level in over two weeks overnight and we suspect it to test further lows in the short term The price below 1 670 does appear to have triggered a small increase in physical sales but we suspect many are waiting for the price to drop further before increasing purchases Speaking of physical buying the Central Bank of Russia said yesterday that it would continue to buy gold bullion We are buying metal and will continue to pursue this course First Deputy Chairman Alexei Ulyukayev told reporters at Davos Since 2006 the bank s gold reserves have more than doubled from 400 tonnes to 950 tonnes Silver futures finished with a loss the first in eight sessions yesterday This may have surprised many particularly the mainstream media who have been asking why the restless metal has been having such a great January and what s so special about silver investment this month Silver as we know follows gold to some extent seen as a safe haven by many Its movement above its 50 day moving average could also not maintain momentum and some selling was triggered here Platinum investment As we reported last week platinum is in the running for precious metal of the month which is set to make its biggest weekly gains in over a year Following on from Morgan Stanley s perspective on gold they also see platinum and palladium as distinctly more attractive in the medium term Last week we discussed platinum s future performance thanks to Amplats plans to cut back production Morgan Stanley said of this Such a development would reinforce our long held view that platinum s historical premium to gold would eventually be restored as platinum market fundamentals improve and investor appetite for gold as a hedge against financial market uncertainty gradually fades as the world economy and financial markets finally improve Not all world leaders could pat themselves on the back yesterday Other data releases yesterday showed private sector output had fallen in France unemployment up again in Spain 26 with 60 youth and retail sales down again in Italy Markit s PMI for January was 48 2 indicating there is a further contraction in the Eurozone s private output Is faith in metals waning as the mainstream media say I suspect not we ve seen this before and we ll see it again data suggests the global economy is getting back on its feet so everyone follows that sheepdog Meanwhile those of us who hold a slightly broader perspective on things keep the price supported until they fancy returning to the fray Disclosure Information published here is provided to aid your thinking and investment decisions not lead them You should independently decide the best place for your money and any investment decision you make is done so at your own risk Data included here within may already be out of date |
MS | MCX Gold Slumps As India Cuts Rate To Trigger Growth | India lowered interest rates taking comfort from cooling Inflation as it made the first cut in nine months to support an economy headed for its slowest growth in a decade Since a 50 basis point cut in April 2012 the central bank had kept interest rates on hold as inflation stayed stubbornly high ignoring repeated calls from the Government of India for a cut The RBI unexpectedly also cut the CRR The amount of deposits lenders must set aside as reserves easing policy to aid growth as inflation cools and the government curbs the The Reserve Bank of India reduced the repurchase rate to 7 75 from 8 Governor Duvvuri Subbarao cut the CRR Cash Reserve Ratio to 4 from 4 25 effective Feb 9 adding 180 billion rupees into the banking system becomes the first major Asian economy to ease borrowing costs in 2013 after Inflation moderated to a three year low and the government called for cheaper credit as it vows prudence in next month s budget to damp price pressures While the cost of living is still rising by more than 7 the central bank said today there s space albeit limited to spur expansion as it cut the inflation forecast reported The yield on the 8 15 government bond due June 2022 fell three basis points after the rate decision The BSE Sensex rose 0 4 while the INR gained 0 5 to 53 66 per The Bombay Stock Exchange benchmark was now up 0 5 at 20200 while was up 0 5 at at 6109 The Indian has strengthened more than 1 against the dollar since mid September when Prime Minister Manmohan Singh began a policy overhaul to contain subsidies lure foreign investment and speed up infrastructure projects There is an increasing likelihood of inflation remaining range bound around current levels going into 2013 2014 the said This provides space albeit limited for monetary policy to give greater emphasis to growth risks The Current Account Deficit CAD is expected to have widened in the quarter ended December the central bank said It was 5 4 of GDP in the previous three month period The Reserve Bank said it s critical now to arrest the loss of growth momentum without endangering external stability India partially freed diesel prices from state control on Jan 17 to curb fuel subsidies adding to recent policy steps A rise of 0 45 rupees a liter every month until March 2014 will add around 64 basis points to inflation and lower the budget gap by 14 basis points according to Nomura Holdings Inc India expects Inflation to remain Range bound India s headline inflation rate moderated to a three year low of 7 18 in December and the central bank said there was likelihood that inflation would remain range bound around current levels heading into 2013 14 fiscal year starting April High inflation a volatile exchange rate and commodity prices pose huge macroeconomic risks RBI has not abandoned its cautious stance stressing on the calibrated and limited nature of rate support from hereon The scale of rate cuts is closely tied to the government s sustained efforts to correct the twin imbalances and moderating inflation trajectory Financing the CAD with increasingly risky and volatile flows increases the economy s vulnerability to sudden shifts in risk appetite and liquidity preference potentially threatening macroeconomic and exchange rate stability the RBI said Having grown at near double digit pace before the Lehman Brothers crisis the economy has suffered a rapid deceleration The RBI cut its GDP growth forecast for Asia s third largest economy to 5 5 for the current fiscal year from 5 8 previously and lowered its projection for headline inflation in March to 6 8 from 7 5 earlier India to Join Tax the Rich Club Like gilded bowling pins against the rolling forces of global populism the long favorable tax policies for the wealthy are rapidly falling one by one First to the scene came Britain and France then Australia and the United States And now it may be India s turn The chairman of the prime minister s economic advisory council C Rangarajan seemed to be channeling Obama when he announced that we need to raise more revenues and the people with larger incomes must be willing to contribute more He didn t identify the rate or income cut off But the idea has already stirred a firestorm of debate in the country which has seen falling tax rates for high earners for much of the past decade reported India s top tax rate of 30 was set in 1997 Also recently the country s former finance minister cited the need for an estate tax in India saying the country may be seeing too much accumulation of wealth in a few hands The papers are now filled with quotes from Warren Buffett and others highlighting the need for a fairer tax system amidst growing inequality The top 10 of wage earners now make 12 times more than the bottom 10 up from a ratio of six in the 1990 s Critics of a new tax say it would chase away capital and jobs Just because we need to increase tax revenues to meet the lower fiscal deficit targets should we adopt the easiest method of further soaking the rich by imposing a surcharge on those who already contribute as much as 63 of total revenues from personal income tax asked Rajiv Kumar Senior Fellow a India s Center for Policy Research There is also wide disagreement on what counts as rich After one politician cited 24 000 as rich in India one commentator said that few Indians earning that amount think of themselves as rich And they are already contributing the bulk of the country s income taxes anyway Taxing them will only sour the negative mood further India is by some measures more equal than the United States The top one percent of earners in the United States took in more than 17 of total income in 2005 according to research from Thomas Picketty and Emmanuel Saez In India the share of income for the top 1 is around 9 which is down from 12 in 1949 India Finance Minister on Ratings Upgrade India s Finance Minister P in Singapore on a day trip to woo investors made a case for a upgrade for the country telling CNBC that ratings agencies which have threatened to downgrade Asia s third largest economy to junk status could be forced to change their mind after he presents his annual budget next month Chidambaram who returned as India s finance minister in July last year has taken several steps to boost investor confidence from allowing foreign equity in several sectors to cutting subsidies to rein in the fiscal deficit Indian stocks are up 15 since July last year and the rupee hit an almost three month high against the dollar on Tuesday a day after the government decided to increase the tax on gold imports which have put pressure on the country s finances I think it s possible an outlook upgrade if I show on February 28 that I have kept the fiscal deficit below 5 3 and if my budget estimates show that next year the fiscal deficit will be 4 8 at that time the ratings agencies should consider improving the negative outlook and then the rating Chidambaram said India has set a fiscal deficit target of 5 3 of gross domestic product for the fiscal year ending on March 31 but many experts think it could overshoot this target The finance minister added that India was on course to bring the deficit down to 3 in the next four years According to Chidambaram the ratings agencies have no case to downgrade India s credit rating to junk status from investment grade I don t believe any ratings agency will downgrade us I said this on Aug 6 and six months later say it again that there is no case for a downgrade Chidambaram said there were a lot of other candidates in the world whose fiscal position was worse than India s plus India was still growing at 5 7 with only four or five other countries growing at a faster pace We also have healthy Forex reserves at 300 billion and a high savings ratio of 32 of GDP we certainly don t deserve a downgrade he said When asked whether elections scheduled for 2014 could force a populist budget next month and lead to a pause in economic reforms Chidambaram said The elections are 14 months away and budgets are not drawn keeping elections in mind It will be a responsible budget Gold Heads for worst month in 2 years are poised for a fourth monthly decline in January the worst run since the period to last May As the global economy shows more signs of growth the incentive to hold Gold is reduced in exchange traded products are poised for the biggest monthly decline in more than a year as signs that the global economic recovery is strengthening curb demand for haven investments Assets contracted 0 8 so far in January the largest decrease since December 2011 according to data compiled by Bloomberg The holdings which reached a record in December dropped to a two month low of 2 610 272 metric tons yesterday ETPs trade like shares and enable investors to hold commodities without taking physical delivery Assets in gold backed products have risen every year since 2004 expanding 12 in 2012 as futures rose 7 While the holdings have dropped this month they remain within 1 percent of the record 2 632 5 tons reached on Dec 20 Morgan Stanley forecasts that investors will add a net 100 tons of gold to ETPs this year and has forecast higher average prices each quarter of 2013 as central banks maintain stimulus and expand holdings according Jan 24 report MCX Gold Futures traded on the in India slumped to Rs 30 230 after the RBI announced the widely expected Rate cuts MCX Silver too dipped a little to Rs 57 711 Both Prices have been on the decline since the last 4 to 5 trading sessions on Global cues also as the appreciated against the US Dollar |
MS | Why Isn t Gold Higher | My colleague and erstwhile nemesis Gonzalo Lira posed the question above in a recent essay and it is indeed a most puzzling one Given that the world s central banks joined most recently by a shockingly reckless Switzerland are waging all out economic war by inflating their currencies shouldn t gold be soaring In fact prices have continued to meander between 1500 and 1700 since September of 2011 when gold topped out at 1945 after a spectacular run up from 728 in just three years What could have caused the bull market to go lifeless since then even as more and more countries appear hell bent on devaluing their currencies to keep their exports competitive The is novel and engaging but it did not persuade me perhaps because the underlying conceit seems forced He has likened the current gold market to the one for credit default swaps CDS prior to the Great Financial Crash of 2008 Because swaps provided insurance against bond defaults they rose in value as the crisis mounted But then suddenly they ceased to appreciate Lira says because the markets collectively realized that the counterparties to those CDS contracts might not be able to pay up This Lira asserts is exactly what is occurring in gold as paper certificates have come to greatly exceed the supply of ingots held in vaults The result he says is that the global precious metals markets are essentially a game of musical chairs with far fewer seats than players far less gold than gold holders And market participants collectively know this Which is why they don t trust their counterparties Which is why gold isn t rising like a shot I think there s a more convincing explanation for why gold isn t rising and I will get to it in a moment But first let me say that my intention is not to assail Lira or his ideas Even though we had a nasty spat on the Web a couple of years ago over the inflation vs deflation conundrum I ve always found his essays insightful original and well wrought Putting aside our differences over whether the inevitable collapse of the financial system will be brought on by hyperinflation or deflation we probably agree on 90 of the things we write about Vague Insurance This time however his logic would seem to equate apples and oranges To begin with the swaps he would compare to gold are a contractual form of insurance against default risks in certain types of financial instruments As such it is at least theoretically possible to calculate exactly how much risk is insured even in a market as large as mortgage securities Gold on the other hand and relative to inflation offers only a vague kind of insurance Moreover unlike swaps gold does not give its owner a claim on anything Lira s argument might have been more persuasive if he had simply asserted that an effectively unlimited supply of paper gold has been absorbing enough demand to suppress the price of physical But if as he evidently believes ruinous inflation never mind hyperinflation were immediately in prospect then we should have expected to see the demand for bullion soar pushing up paper gold no matter how large the supply Physical vs Paper Gold Lira lumps paper and physical together to argue that the current spot price of gold is reflecting market uncertainty as to who has actual gold and who has worthless paper certificates of gold Again if this were so then we should have expected uncertainty itself to have spiked the preference of investors for physical over paper overwhelming carry traders and other feather merchants playing gold from the short side And if investors were indeed worried about whether the insurance they hold is properly matched to the endgame would they be buying the Treasury paper of a country that owes so much more than it will ever be able to repay In fact the risk of a U S default is the last thing on their minds at the moment and it will likely remain so until the day when events no one can predict cause creditors or debtors it will have to be one or the other to get stiffed In the meantime whither gold My own theory as to why prices aren t bounding above 2000 is simply this the central banks have so far failed to produce any meaningful inflation The untold trillions worth of stimulus they have shot at this goal have barely kept deflation at bay Granted prices for groceries health care and some other necessities have gone through the roof But the inflationary impact of all of these things together is inconsequential in comparison to the deflationary down force of a quadrillion dollar financial edifice that remains in a state of incipient collapse Hyperinflation Scenario Under the circumstances I continue to believe that deflation rather than hyperinflation will wreck the global financial system I did not by the way switch sides in this argument as Gary North asserted in an essay he wrote for LewRockwell com It was when the debate turned unendurably ugly that I was impelled to take a closer look at what some of the hyperinflationists were saying for one In his scenario which along with the running debate at is the most persuasive case for hyperinflation that I ve come across a run on the dollar would force the Fed to absorb the entire supply of Treasury paper at auction An unintended result says Schiff is that ostensibly unsupported bond markets such as corporates and municipals would collapse forcing the Fed to extend open ended buying to all fixed income securities This would most surely trigger a hyperinflation would in fact be a hyperinflation However this scenario and virtually every other hyperinflation scenario of which I am aware envision hyperinflation occurring as a result of political decisions made Fed actions taken and markets rescued My gut feeling however is that the collapse of global markets will be so swift as to preclude intervention let alone rescue Pent up forces will take their course and the entire financial system will experience an instantaneous collapse for which the May 2010 Flash Crash will seem to have been just a warm up Whatever we might predict about the outcome one result that seems entirely likely is that banks in the U S and elsewhere will not open for business the next day Over the short run a few weeks perhaps this would be ruinously deflationary since a hitherto inexhaustible supply of digital money will have become inaccessible via checks ATMs or charge cards The fragility of the clearing system that allows such money conduits to function will be tragically obvious by then as will the distinction between cyber money and the real stuff And you had better have some of the real stuff stashed away in your home by the way since The Morning After that s the only kind of money Safeway cashiers and gas station attendants will understand Nor should you expect them to be up to speed right away on the junk silver you ve socked away since at the retail level although perhaps not in barter circles pre 1964 coins are likely to be treated the same as the pot metal coins that have driven silver dimes quarters halfs and dollars into secure storage Gold Hoarders Beware A couple of caveats for gold hoarders Don t count on exchanging gold at 5000 an ounce for something with high intrinsic value such as farmland For all we know supply chain disruptions could be so severe that you ll pay a Krugerrand just for a loaf of bread And while it has always been possible in theory for short squeeze pressures to push gold well above the 5000 level this is most unlikely for reasons that Lira s essay implicitly recognizes Consider who is short all of that paper gold carry traders such as Morgan Stanley J P Morgan Goldman Sachs and other bullion bankers who have always been able to borrow gold for next to nothing The likelihood of regulators forcing them to make good on their paper gold obligations can be dismissed in advance as negligible Despite the seeming paradox of intrinsically worthless fiat money gaining traction in a post apocalyptic economy there will remain the possibility of a hyperinflationary spike It could happen if say the Fed were to attempt a lump sum pension payment to all government workers For political reasons this would have to be matched by similar windfall benefits to private sector workers in the form of Social Security welfare payments unemployment compensation and food stamps The Catch 22 of this approach is that any benefits in excess of what is needed to keep the economy functioning if only barely would touch off an inflationary spiral Imagine how the world would react if someone in Congress merely mentioned that The Government was going to cover all of the obligations and liabilities of public and private pensions and health plans If and when that day arrives I will have no argument with Lira and the hyperinflationists about the likely outcome |
MS | Currency Wars To Shoot Gold High And Silver To Infinity | Gold and Silver Investors have nothing to worry on price declines and should if fact look at all such dips as an opportunity presented on a platter Gold and Silver will soon break through all hurdles and previous Price barriers also Silver as explained in much detail in many of my previous articles and posts on Silver Investment has the huge potential to rise to astonishing highs once the momentum picks up Gold and Silver Market traders continue to monitor on going developments regarding the potential for the so called Currency Wars which is bound have bullish impacts on the Bullion Prices Currency Wars occurring would mean that major industrialized nations begin actively seeking to devalue their currencies in order to stimulate their export sectors and boost economic growth Japan s new administration has been jaw boning its currency down and the yen has seen substantial weakness in recent months diving about 11 since early November versus the US Dollar Selling the yen has been mostly a one way bet since mid November based on expectations that Japanese Prime Minister Shinzo Abe would push the Bank of Japan into more aggressive monetary easing to beat deflation G 20 Finance ministers are set to meet in Moscow on February 15 16 and Japan s currency policies will no doubt be a topic of discussion Push back will be seen by the Group of Seven G 7 nations as the stated policy is that currency intervention is not an acceptable policy tool except in cases of excessive volatility Full blown Currency Wars would be highly supportive for Gold but even more so for Silver Prices The policies in major economies of Monetary Easing and low interest rates will boost global liquidity increase risk preferences in the markets and drive speculative funds into Silver Base Metals Equities of Emerging Nations like China or India as well as other risk assets rather than Gold now though some size able chunk will also be driven to Gold Investment The so called loose monetary policies and rising industrial consumption will support Silver Demand according to Morgan Stanley which described the metal as a cheap Gold Proxy in a Jan 24 report Prices have more than doubled since 2008 as the US Federal Reserve which concludes a two day policy meeting today boosts stimulus to spur a recovery The FOMC has already delivered an extraordinary open ended Limitless QE 85bn month promise to provide as much monetary policy stimulus as it takes to get labor markets and therefore the economy to accelerate convincingly It is likely that the next several FOMC meetings will prove to be comparatively uneventful except in the case that the QE programs are withdrawn which again is very unlikely The punch will thereby be only in the Fed s statement of thoughts for the future The Gold and Silver Market Yesterday Silver for March delivery advanced for a second day gaining as much as 1 to 31 50 an ounce on the Comex in New York Comex Gold Prices yesterday saw some short covering and bargain hunting buying interest ahead of the FOMC policy announcement Gold and Silver also got support from a weaker US Dollar and higher Crude Oil Prices which hit a 5 month high Crude Oil Prices could push above the important psychological level of 100 00 in the coming weeks and in that case it would likely be a bullish development for the Gold and Silver Markets as well as most other commodity markets Open interest in Comex Gold which is the number of open positions at the end of a business day posted one of the largest declines in the past year on Monday after Option expiry amid rollovers CME Group reports that the number of open positions at the end of business Monday stood at 438 918 contacts which was a decline of 19 020 February gold settled Tuesday with a gain of 7 90 to 1 660 80 an ounce April contract which now has the most open interest added 7 70 to 1 662 70 The rise so far has squarely been due to large short covering close to a major support level The short covering in Gold Futures has also been triggered due to uncertainty surrounding the FOMC announcement due today Traders are probably going to have a wait and see approach until they see what the Fed has to say The US consumer confidence declined by more than expected in January while home prices declined slightly in November The slightly downbeat US Economic data added pressure to the US Dollar index and in turn helped Gold and Silver gain The Federal Reserve ends a two day policy meeting on Wednesday and few market watchers expect any near term shift in its current very accommodative stance The Fed is widely expected to reaffirm its commitment to super easy policy until unemployment falls sharply which could ease concerns about an early end to bond buying Gold and Silver Investors will focus more on the statement for any clues to the Fed s thinking on if and when it might pull back from its aggressive easing stimulus Gold and Silver Market traders will also be looking out for the first estimate of U S fourth quarter GDP due later on Wednesday a couple of days before the January jobs report Median forecasts are for annualized growth of just 1 1 down from 3 1 in the third quarter Such a lackluster result would likely support the doves at the Fed particularly as tax hikes enacted this month could hamper growth for the first quarter as well The impact was clear in the Conference Board measure of consumer confidence out on Tuesday which showed an unexpected slide to 58 6 for January it s lowest in over a year We see a prospect for sustained asset price reflation in coming months the result of G3 stimulus efforts and structural reallocation flows said Morgan Stanley said in a research note This has three implications Reflation would lend support to higher yielding emerging markets assets safe haven assets would continue to weaken and expectations about emerging markets policy would likely shift The yen remained under pressure with the Bank of Japan set to pursue strong monetary easing as the Abe administration pushes for radical reflationary policies to end stubborn deflation With theUS unemployment rate currently hovering at 7 8 the FOMC may leave the QE measures untouched but this time around the dissent amongst members could be acute Last time James Bullard a member of the Committee said that aggressive QE measures are making him a bit nervous and Esther George another member warned of risks of future financial imbalances and upside risks to Inflation when it comes to maintaining near zero interest rates Base Metals prices may witness robust growth soon as domestic demand inChina the world s largest consumer of metals holds key this year Beijing s drive to urbanize inner China will boost infrastructure spending whileSoutheast Asia will also likely see expansion in domestic demand accelerating Silver Coins sales A barometer of long term investor demand and Price direction Silver Investment holdings reached an all time high this month A mind boggling 7 4 million American Eagle Silver Coins were purchased from the U S Mint in January considerably higher than the previous record from early 2011 This has been the biggest monthly total since 1986 when the Washington based Mint began the Silver Coins sale transactions Sales of American Eagle Silver Coins by the US Mint jumped to a record this month on increased demand for an alternative to currencies as the US central bank presses on with unprecedented stimulus After halting Silver coin production sales for over a week the Mint re opened yesterday and demand once again surged Having almost doubled from the first week in January there remains two more days before the book is closed on January s sales At 140 000 ounces the Mint has also sold the most ounces of Gold Coins in January in almost three years suggesting the rising Currency Wars are stoking people s ongoing rotation from paper to physical assets as their wealth slowing loses its value Historically during the last two years sales of Gold and Silver coins have been the strongest during the month of January accounting for 15 and 17 of total annual sales respectively I have always maintained that Physical Gold and Silver coin sales are a barometer of longer term investor demand for quality hard assets and also an accurate price direction indicator |
MS | Weekend Update USD Breaks Trendline Support | The VIX remained above its Bullish Wedge trendline for a second week The trendline now acts as a base of support for a move higher What is noteworthy is the net non commercial spec position in VIX futures just plunged by 16 222 contracts to 104 284 This was just shy of the all time low net VIX spec position hit in early December The inference is that the VIX may go lower but non commercial speculators are often quite wrong at market tops and bottoms SPX bumps its Bearish Wedge trendline SPX collided with the upper trendline of its bearish Ending Diagonal 100 of the Fibonacci time and wave relationships will be complete as of Monday February 4 This may be the largest Ending Diagonal Bearish Wedge in history spanning 13 5 months a number divisible by pi and the Cycle Divisor The Broadening Top Megaphone formation both in the hourly and daily charts warn of an imminent sharp and potentially severe reversal Monday is the next cycle turn date for SPX We previously explained the obvious similarities with stocks bonds and leveraged positions with the current period in the market and the end of 2010 and start of 2011 period Much is once again being made of the flows as 18 8bn the 3rd largest on record since 1992 pushed into equities Retail also bought long only equities for the fourth straight week 2 7bn and 12 2bn was added via ETFs but the significance of the flows has triggered a sell signal for the traders at BofAML NDX diverges from other indexes The NDX remained divergent from the other indices by not making a new weekly high Its Ending Diagonal pattern was complete on September 21 The decline into November 16 was the beginning of a new downtrend As a result NDX warns of an imminent and nasty decline Over one half of the companies have reported their fourth quarter earnings so far The results are dismal with a 1 decline in year over year earnings from Q4 2011 The Euro leaps above Mid Cycle Resistance This week the Euro surged above its mid Cycle resistance at 133 92 In doing so it has made a 57 6 retracement of its Cycle Wave I decline ending last June The uptrend is very long in the tooth Monday may be a candidate for a Primary Cycle high and or reversal Today however the second the EUR USD touched above 1 3700 the Goldman strategist decided to get the hell out of dodge and has picked up his 400 pips since putting on the long EUR USD recommendation several weeks ago With that last recommendation Stolper has modestly redeemed himself and all those who had listened to his previous recommendations have made some 400 pips which hopefully should compensate for some 5000 pips in cumulative downside to date Morgan Stanley s Laurence Mutkin is getting worried that investors expect the second half of this year to be different and consistently bullish Much of the current risk on rally around the world was sparked by Draghi s whatever it takes moment theoretically reducing the downside tail risk in Europe Well systemic risk in Europe is now at recent lows Time for a change The US Dollar breaks trendline support USD has declined beneath the massive Triangle trendline near 79 25 While trendlines are potent indicators of support the Triangle formation itself is finished and a new formation has begun lessening the importance of the Triangle trendline There are alternate views of this event The first is to look at the September 14 low at 78 60 for support Should it hold then a new rally should follow since it represents a 48 25 retracement of the prior year long rally The second is a decline below that level to a minimum of 76 50 as indicated by a small Head Shoulders pattern in the daily chart This represents a 66 7 retracement that may be required by this cycle before the dollar proceeds higher Gold remains below 10 week resistance Gold closed modestly above its 40 week moving average at 1666 64 and below its 40 week resistance at 1676 93 It may be ready to challenge its mid Cycle and trendline support at 1619 38 A drop beneath that level may also activate the Cup with Handle formation with very bearish consequences So far the decline has been modest The next step could be very painful for owners of gold Assume that there is already a large ownership of physical gold by the dirty money crowd There is Assume further that this ownership trend is increasing as global banks get squeezed by money laundering investigations and fines think HSBC Do the deciders in the globe want to enrich those that are now parking hot money in gold No is the answer This set up is another reason why suppressing the price of gold would be helpful It certainly argues against gold backed money That would make the bad guys rich Treasuries continue their decline USB is now without any support until it reaches its mid Cycle at 137 80 The decline may start accelerating here but an alternate view is that USB is due for a bounce The primary pattern is the Ending Diagonals which is usually completely retraced suggesting a decline below its 31 year trendline and a target beneath Cycle Bottom support at 116 28 Caution The crowd is very bearish here David Kemper CEO of Commerce Bankshare and more importantly a former president of the Federal Advisory Council of the Federal Reserve made this statement in Why not expand the Fed balance sheet exponentially from its current 3 trillion to 33 trillion Would 30 trillion in extra buying power be inflationary when our entire current GDP is only about 15 trillion Maybe maybe not but we need a game changer here For some color on this opinion you may wish to read the commentary in ZeroHedge Crude still above mid Cycle resistance West Texas Intermediate Crude appears to be completing a 98 retracement of ita April to June decline made last year The retracement appears to be driven by excess liquidity thanks to the regular WTIC is in overbought territory again and is due for a Primary Cycle High on Monday Between Hess plant closing and scheduled maintenance the squeeze appears to be on the refining space and wholesale gasoline prices are smashing higher Along with flares in geopolitical risk Ankara today and Israel Syria earlier in the week driving underlying crude prices Gas prices at the pump are surging to record highs for the first week of February as per AAA and just surpassing last year s price of 3 455 and based on where wholesale prices are given the lag we could be seeing 4 00 gas at the pump in the next few weeks Maybe Maybe not China stocks are approaching resistance Tthe Shanghai index appears to approaching mid Cycle resistance at 2465 52 and possibly even the 50 Fib retracement at 2505 00 I had suggested that a realistic target for this rally may be weekly mid Cycle resistance but retracement rallies can run out of steam quite unexpectedly The Cycle Model suggests that rally may fulfill its time component early next week Analysts who ve only started paying attention to the country in the last decade often seem convinced that China has no real business cycle or a very mild one that because its economy is centrally planned it s free from the fluctuations in investment that cause booms and recessions in countries that lack the scientific guidance of a Leninist single party state This convenient belief however is mostly an artifact of the period over which they ve been observing its economy The India Nifty challenges 10 week support The India Nifty has made enough of a decline to challenge 10 week support at 5952 83 This is the first step in a bona fide reversal Not far away is mid Cycle support at 5813 94 The most prominent formation is the Cup with Handle formation which is now evident A decline beneath the Cup with Handle formation would be castrophic since there is virtually no support until it reaches its March 2009 low The Bank Index reaches the top of a diagonal formation BKX made a throw over above its Ending Diagonal formation on Friday It is probable that the rally has ended on Friday since the Liquidity Cycle has made an early Primary Cycle high and a major turn date comes on Monday This formation calls for a rapid decline to its October 2011 low at 32 56 This rally has been pushed to its outer limits due to the QE feeding frenzy by the banks However the internals haven t been cleaned up so the slightest push could topple this formation The extended correction now puts an even more bearish Cup with Handle in play The uptrend appears to be over in BKX Now for a nosedive below supports and a downward acceleration into a full fledged panic The Linchpin Lie How Global Collapse Will Be Sold To The Masses The globalists have stretched the whole of the world thin They have removed almost every pillar of support from the edifice around us and like a giant game of Jenga are waiting for the final piece to be removed causing the teetering structure to crumble Once this calamity occurs they will call it a random act of fate or a mathematical inevitability of an overly complex system They will say that they are not to blame That we were in the midst of recovery That they could not have seen it coming Their solution will be predictable They will state that in order to avoid such future destruction the global framework must be simplified and what better way to simplify the world than to end national sovereignty dissolve all borders and centralize nation states under a single economic and political ideal |
MS | Draghi s Pending Press Conference Ripples Through FX Markets | EUR USDThe EUR underperformed its peers as focus turned to this week s Draghi press conference which could see the President of the central bank hint at a potential rate cut in March Consequently expectations of lower rates saw the EONIA curve bull flatten this morning aided by the latest 3m Euribor fix 0 233 vs Prev 0 234 Exp 0 235 The selling pressure was also driven by press reports which suggested that political tensions in Italy and Spain may undermine investor demand for government issued paper Of note analysts at Morgan Stanley said that a 10 appreciation in the EUR reduces Euro area GDP by approximately 0 5 in the first year In terms of technical levels supports are seen at the 10 DMA line at 1 3482 1 3415 and then at the psychologically important 1 3400 level On the other hand resistance levels are seen at 1 3815 the 61 8 retracement of the 2011 2012 bear trade at 1 3833 and then at 1 3900 GBP USDThe pair settled the session higher benefiting from safe haven related flows and a weaker EUR which posted broad based losses as market participants speculated of a potential dovish statement from Draghi later in the week In terms of UK related commentary the Shadow MPC voted 6 3 for a surprise rate hike this Thursday One reason was because fiscal policy seemed even further off course than was previously believed and risked damaging the credibility of all UK policy making In terms of technical levels supports are seen at 1 5636 1 5612 which is the 21 DMA lower Bollinger level and then at 1 5578 On the other hand resistance levels are seen at the 10 DMA line at 1 5780 the 200 DMA line at 1 5891 and then at 1 5900 USD JPYThe pair edged higher on Monday and in the process erased 93 00 barriers but failed to make a significant test on barriers at 93 25 50 Even though spot rate settled higher implied vols remained under pressure given the number of barriers that are in close proximity Of note overnight Japanese Finance Minister Aso said it was not Tokyo s goal to weaken JPY and its policies were purely aimed at beating deflation In terms of technical levels supports are seen at the 10 DMA line at 90 85 90 76 and then at 90 50 On the other hand resistance levels are seen at the 38 2 retracement of the 2007 2011 bear trade at 93 96 and then at the 100 WMA at 94 93 |
MS | Correction Coming Watch The Cyclicals | Regular readers know that I have been cautious on stocks lately The market action last week is best characterized as volatile and sloppy The new high achieved on SPY on Friday was accomplished on low volume and a non confirmation on OBV or At this point any call for a correction is at best conjecture I am watching the relative action of the cyclical stocks to see if a correction has truly begun The chart below of the relative return of the Morgan Stanley Cyclical Index CYC against the market illustrates my point CYC remains in a relative uptrend and it has pulled back to test the relative uptrend line but I cannot call it a technical breakdown Similarly the relative performance of the Consumer Discretionary stocks against the market as a measure of the risk on trade shows that this sector remains in a solid relative uptrend Should the market correct the relative uptrend line is likely to be broken Globally the South Korean economy is known to be highly cyclical and the KOSPI is used as a measure of cyclicality Currently KOSPI is showing a pattern similar to the relative return of CYC to SPX a pullback to test the uptrend line It could be said however that since South Korea is a competitor to Japan in exporting capital goods to China the recent JPY devaluation is creating headwinds for Korean stocks and the pullback may be reflective of those circumstances In conclusion while I remain cautious on stocks and the risk trade the technical picture shows the uptrend to be intact and the bulls should still be given the benefit of the doubt for now Nevertheless my inner trader is closely watching these cyclical indicators and staying long with very tight stops Disclosure Cam Hui is a portfolio manager at Qwest This article is prepared by Mr Hui as an outside business activity As such Qwest does not review or approve materials presented herein The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives financial situation or particular needs of any specific recipient Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions Past performance is not indicative of future results Either Qwest or Mr Hui may hold or control long or short positions in the securities or instruments mentioned |
C | Mexico pushes mobile payments to help unbanked consumers ditch cash | By Stefanie Eschenbacher and Anna Irrera
MEXICO CITY NEW YORK Reuters Mexico s new leftist government is betting on financial technology to help lift people out of poverty
The administration of President Andres Manuel Lopez Obrador recently announced measures aimed at making financial services more affordable in a nation where more than half the population is unbanked
It is planning a digital payments system run and built by the central bank that will allow Mexicans to make and receive payments through their smartphones free of charge A pilot roll out for the platform known as CoDi is expected by March
In the future it will no longer be necessary to have a bank in the sense of a traditional established bank said Arturo Herrera Mexico s deputy finance minister Mobile phones will become banks
Phone based banking has proven a hit among the poor in other emerging markets such as China India and Kenya Those efforts have been driven by private sector companies that offer user friendly affordable apps
Whether Mexico s state system will prove as nimble and easy to use remains to be seen And it will initially require help from the very same banks that for decades have shut out low income Mexicans with pricey fees
Other hurdles include Mexico s spotty telecoms While cell phone and internet coverage have improved in recent years basic infrastructure is still missing in many remote areas
Mexico has a lot of the key ingredients to succeed but it s not plug and play said Monica Brand Engel a partner at Quona Capital a global venture capital firm that invests in fintechs focused on the unbanked in emerging markets
CATCH 22
An estimated 42 million Mexicans lack bank accounts Steep fees and past scandals have put many off the country s mainstream banks Many shun accounts to stay off the radar of tax collectors
That hobbles Mexico s growth Coffee farmer Martin Romero is a prime example of why
His small town in the state of Oaxaca one of Mexico s poorest has no bank branch Romero is paid in cash He travels hours to pay bills and is unable to save or borrow for larger expenses
Of course I would like a bank account Romero said That way we could save at least a little of what we earn
For a graphic on financial inclusion in Mexico see
While many Mexicans applaud Lopez Obrador s push some fintech executives are grumbling about getting shut out of the loop
To use CoDi consumers must have an account with an institution participating in Mexico s existing interbank payments system which will power the new platform
Jaime Cortina director of operations and payments at the central bank said the goal was to develop a payment method that Mexicans could use to make payments between each other in shops and online
Current members of the system include established institutions such as BBVA s Bancomer Banco Santander MC SAN and Citigroup NYSE C Inc s Citibanamex Fintechs that want to join need an electronic payment institution license a process that new players fear could take up to a year
That presents unbanked Mexicans with a bizarre Catch 22 To access the government s free mobile payments system at least initially they would have to open accounts with banks that many do not want to join or cannot afford in the first place
Adolfo Babatz CEO of payments startup Clip said Mexico s government should be looking to fintech entrepreneurs to bring true innovation to the financial system not banks that have benefited from high barriers to entry His Mexico City based company has created a low cost mobile credit card reader that fits on smartphones
Mexico should look at the examples from the rest of the world Babatz said
In Kenya for example mobile payment system M Pesa was launched in 2007 by a private company mobile network operator Safaricom M Pesa is now a surrogate bank account for millions of users In China hundreds of millions of previously unbanked consumers have flocked to Alipay the payment app owned by Alibaba NYSE BABA affiliate Ant Financial
GRAY ECONOMY
Low cost banking alone may do little to lure Mexicans out of the shadows Nearly 57 percent work off the books according to government data An estimated 90 percent of transactions are done in cash
People who work and live in the informal economy do not want to be taxed said Carlos Lopez director for retail strategy and new digital business at Mexico s largest bank BBVA MC BBVA Bancomer
Herrera the deputy finance minister told Reuters the government is making efforts to reduce cash in circulation to cut down on money laundering and corruption and to draw more people into the formal economy
He said the administration plans to transition to direct deposit or digital wallets to dispense welfare benefits over the next 18 months At present many Mexicans rely on government issued cards that can be used at ATMs to withdraw their benefits in cash
He also expressed optimism that fintechs would bring needed competition to the money transfer business reducing the cost of remittances sent home by Mexicans abroad
But even in cosmopolitan Mexico City a future of cashless payments seems far off for people such as Paula Martinez She sells traditional sweets chewing gum and single cigarettes from a wooden basket in the fashionable Roma neighborhood
The mother of three does not have a bank account and says she and her husband have never considered it
We don t earn enough Martinez said |
C | Palladium Bursts Above 1 500 as Shortages Ignite Record Rally | Bloomberg Palladium powered above 1 500 to hit a record extending a powerful rally driven by an acute shortage of supply as car manufacturers scramble to get hold of the material to meet stringent emissions controls
Spot palladium rose as much as 1 7 percent to 1 505 46 an ounce and was at 1 501 89 at 11 38 a m in Singapore with prices set for a seventh monthly gain In other precious metals gold rallied to a 10 month high
The silvery white metal has more than tripled since January 2016 and Citigroup Inc NYSE C said this month that further gains may be in store warning the market will only balance with a shock to demand and prices may hit 1 600 The global deficit looks set to widen dramatically this year according to Johnson Matthey LON JMAT Plc a leading maker of autocatalysts and BlackRock Inc NYSE BLK s Evy Hambro told Bloomberg TV this week that a massive shortage has built up as the auto market moves away from diesel powered vehicles
Tighter supplies of the metal used mainly to curb emissions in gasoline vehicles have prompted users to lease material from exchange traded fund holders to meet their needs Heraeus a refiner said physical palladium ETF holdings fell to 700 000 ounces at the end of 2018 down from a peak of 2 9 million in 2014 It s hard to gauge the exact level of global stockpiles but various sources have estimated a range between 10 million and 18 million ounces which equates to roughly one to two years of demand Heraeus said
China Questions
Still some analysts are questioning the durability of the rally Car sales in China continued to drop in January after their first full year slump in more than two decades Plus markets in Europe and North America are shrinking as ride hailing and car sharing services make it less necessary to own a vehicle
Tighter emissions rules are outweighing the weakness in global auto sales and the growing threat from EVs said Matthew Turner at Macquarie Group Ltd So while we ve known about deficits and projected deficits for years the market s ability to adjust to them is unusually constrained
Palladium is a rare metal produced mostly in two countries so it may not be possible to boost output immediately More than 80 percent comes as a byproduct from nickel mining in Russia and platinum mining in South Africa so supplies depend on the extraction level and investment in other minerals
Still the metal s stunning rally could be due for a pullback
While we share the view of undersupply and likewise see little substitution potential we believe this is already priced into palladium Carsten Menke an analyst at Julius Baer Group Ltd said in a report Due to the prevailing positive sentiment short term price risks still seem skewed to the upside but these levels are not sustainable in the longer term he said adding that the bank s 12 month target is unchanged at 1 000 an ounce
In other metals spot gold rose as much as 0 4 percent to 1 346 80 an ounce the highest since April as silver and platinum gained The moves came before the release of minutes from the Federal Reserve s January meeting at which policy makers signaled rates won t be raised again until inflation accelerates |
C | Samsung s 2 000 Galaxy Fold Sparks Mixed Comments | Bloomberg This year s rally in shares of Samsung Electronics KS 005930 Co paused following the highly anticipated debut of its 1 980 foldable Galaxy handset
The world s largest smartphone maker s stock was little changed Thursday amid mixed comments from analysts and Twitter observers regarding the Galaxy Fold s high price tag functionality and sales prospects Samsung is still up more than 20 percent in 2019 rebounding from a drop of over 20 percent last year
The phone seems to be pretty good in terms of price and design as I thought it would be 3 000 said Park Sung shin fund manager at KTB Asset Management Shares of Samsung and its suppliers are falling just for profit taking after the event
Suppliers shares were mixed with Samsung Electro Mechanics Co and Partron Co declining as much as about 3 percent while Power Logics Co and Elk Corp each surged at least 5 percent The standout was Finetek Co which jumped more than 20 percent for a second straight day in Seoul Finetek was the first South Korean company to develop equipment for bonding components in flexible screens according to a spokesman
The Fold s technology is impressive enough that Samsung Display targets sales of flexible screen panels to clients in China though it may wait about a year or so in order to prevent rival smartphones from catching up with its parent s flagship product too quickly Samsung Securities said in a report
While shipment volume in absolute terms is not significant we believe that its role as a pioneer in changing smartphone form factors is noteworthy Peter Lee an analyst at Citigroup NYSE C Global Markets Inc wrote in a note Citi estimates Samsung will ship 1 million foldable phones this year with total shipments for its new GS10 line of devices reaching 37 million compared with about 40 million historically for a smartphone series
It s an important step in opening the market of foldable phones Lee Dongju an analyst at KTB Investment wrote in a note The debut is meaningful in itself |
JPM | 4 Key Predictions For JPMorgan Chase s Q3 Earnings Report | Monday marked the beginning of the first noticeably busy stretch of Q3 earnings season and investors are eagerly anticipating several reports from big financial firms later this week Of these banking behemoth JPMorgan Chase NYSE JPM is set to deliver one of the most highly anticipated reports before the market opens on October 12
Q2 earnings season wasn t too friendly to the major banks but excitement over the GOP s proposed tax cuts and anticipation for another rate hike in December has sparked positive momentum as of late Still it will be vitally important for the likes of JPMorgan to deliver solid reports if investors want this momentum to continue
For more on the banking industry as a whole check out our expanded earning preview
Today we ll be taking a closer look at JPMorgan and what investors should expect from the company s core business segments this quarter By using our exclusive non financial metrics file which contains stock driving estimates and is based on based on the independent research of expert stock analysts we ve found four key estimates for JPM s report
Check them out
Corporate Investment Banking
This was one of JPMorgan s weaker units in its most recent quarter and the challenges are expected to continue According to our consensus estimates this unit is expected to report net revenues of 8 55 billion down about 9 5 from 9 45 billion in the prior year quarter Last quarter JPMorgan reported a 3 slump in this unit
Consumer Community Banking
Luckily JPMorgan should make up for its weaknesses with growth in other divisions For example according to our consensus estimates the Consumer Community Banking unit is expected to report net revenues of 11 69 billion This result would represent growth of 3 2 year over year which is an improvement over the flat growth witnessed in the most recent quarter
Asset Management and Commercial Banking
Our consensus estimates are currently calling for JPMorgan to report net revenues of 3 23 billion in its Asset Management division up roughly 6 from 3 05 billion in the year ago period Similarly the company is projected to report net revenues of 2 14 billion in its Commercial Banking division which would represent year over year growth of about 14 7
These have been JPMorgan s biggest success stories so far this year In the previous quarter the company notched year over year growth rates of 9 and 15 respectively in these divisions
As a reminder these consensus estimates are pulled from our exclusive non financial metrics consensus estimate file These estimates are updated daily and are based on the independent research of expert stock analysts
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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 | JPMorgan And Citigroup Are Part Of Zacks Earnings Preview | For Immediate ReleaseChicago IL October 9 2017 Zacks com releases the list of companies likely to issue earnings surprises This week s list includes JPMorgan NYSE NYSE JPM and Citigroup NYSE NYSE C To see more earnings analysis visit Every day Zacks com makes their Bull Stock of the Day available free of charge Are Bank Stock Gains Sustainable It has been a tough ride for bank stocks this year with the industry unable to sustain the post election momentum after mid February 2017 As a group bank stocks didn t do much from mid February through early September But they have experienced dramatic gains since September 8th with a number of major bank stocks trading at or near their highs for the year This lack of sustained performance notwithstanding the industry remains an integral part of the Trump Trade with the industry handily outperforming the broader market since November 7th The chart below plots the performance of the Zacks Major Banks industry relative to the S P 500 Index since the elections Please note that the Zacks Major Banks industry includes all the money center banks and big regionals that kick off the Q3 earnings season for the industry on Thursday October 12th with the JPMorgan NYSE and Citigroup NYSE results What this shows is that stocks in the Zacks Major Banks industry are up 28 5 since November 7th outperforming the S P 500 index s 19 2 gain in that same time period The broader Finance sector of which the Major Banks industry is big part accounting for roughly 40 of the sector s total earnings is up 24 since November 7th Bank stocks are up more than 8 over the past month roughly double the S P 500 s performance in that time period Optimism about tax policy changes appears to be a contributing factor to the group s recent momentum It s hard to be overly optimistic about substance and timing of a policy legislation given the healthcare experience but lower corporate taxes will be highly beneficial to the banking industry As large as many of these big industry players are they are still primarily domestic oriented businesses that stand to benefit from lower corporate tax rates just as small cap stocks do Trends in treasury yields have an outsized bearing on bank stocks since they are a big driver of bank margins You can see this correlation in the year to date stock market performance of the industry relative to the 10 year treasury yield with the industry s bounce since September 8th coinciding with the most recent bottoming in the treasury yields Whether the group s recent outperformance over the past month is a function of treasury yields or hopes of tax law changes or both it s foundations appear shaky Tax cuts would be good for banks but who knows when or whether they will arrive Treasury yields have been unable to cross the 2 4 level at the high end though they reached that level three times since March this year They are heading to that level again with the 10 year yield getting a modest bump from the stronger looking wage growth numbers in the otherwise noisy September jobs report But if recent history has to repeat itself then we should look for yields to start moving down after getting close to the 2 4 level With these two supports for the group less than credible let s take a look at the group s earnings potential to see if we can find support there What Are Banks Expected to Report in Q3 Bank earnings failed to impress in the Q2 earnings season and all of the factors that weighed on Q2 results remained in place in Q3 as well keeping expectations in check Net interest margin benefited from the June Fed rate hike but that incremental gain likely got offset by persistent deceleration in loan growth and soft trading revenues The September quarter is traditionally a seasonally weak period on the capital markets front This year s Q3 was mixed with stable fixed income trading flows and positive fixed income underwriting trends offset by weak equity trading volumes and issuance What all of this means is that bank stocks could benefit from low and relatively easy to beat expectations Total Q3 earnings for the Zacks Major Banks industry are expected to be down 5 1 from the same period last year on 2 2 higher revenues This would follow 10 earnings growth in Q2 and 19 4 growth in 2017 Q2 JP Morgan and Citigroup on deck to release Q3 results on Thursday are expected to report 6 6 and 8 2 lower earnings from the year earlier level respectively The table below shows the sector s Q3 earnings growth expectations at the medium industry level contrasted with estimates for the following four quarters and actual results for the preceding three periods Please note that the Major Banks industry of which JPMorgan Citigroup and others are part accounts for roughly 45 of the sector s total earnings insurance is the second biggest earnings contributor accounting for about 25 of the total The insurance industry has been hard hit by this year s very active and impactful hurricane season with estimates for insurers taking a big hit since the quarter got underway We discussed the hurricane impact in our weekly Earnings Trends report here Expectations for Q3Total Q3 earnings are expected to be up 2 2 from the same period last year on 5 higher revenues This would follow 11 1 earnings growth in 2017 Q2 on 5 5 the second quarter in a row of double digit earnings growth Estimates for Q3 came down as the quarter unfolded with the current 2 2 growth down from 6 3 at the end of June Please note that while Q3 estimates have followed the well traversed path that we have been seeing consistently over the last few years the magnitude of negative revisions nevertheless compares favorably to other periods In other words Q3 estimates have come down but they haven t come down by as much In terms of sector focus the strongest growth in Q3 is coming from the Energy sector which benefits from easy comparisons Excluding the Energy sector the aggregate growth pace drops to 0 4 from 2 2 The Conglomerate sector is the only other sectors with double digit growth rates Earnings growth is also strong for the Technology sector with total earnings for the sector expected to be up 9 7 on 6 7 higher revenues On the negative side Q3 earnings are expected to be below the year earlier level for 8 of the 16 Zacks sectors with double digit declines for the Transportation Aerospace Basic Materials and Autos sectors About ZacksZacks com is a property of Zacks Investment Research Inc which was formed in 1978 The later formation of the Zacks Rank a proprietary stock picking system continues to outperform the market by nearly a 3 to 1 margin The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros In short it s your steady flow of Profitable ideas GUARANTEED to be worth your time Follow us on Twitter Join us on Facebook 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investments in securities companies sectors or markets identified and described were or will be profitable All information is current as of the date of herein and is subject to change without notice Any views or opinions expressed may not reflect those of the firm as a whole Zacks Investment Research does not engage in investment banking market making or asset management activities of any securities These returns are from hypothetical portfolios consisting of stocks with Zacks Rank 1 that were rebalanced monthly with zero transaction costs These are not the returns of actual portfolios of stocks The S P 500 is an unmanaged index Visit for information about the performance numbers displayed in this press release |
MS | Euro zone core inflation unexpectedly picks up in July | By Francesco Guarascio and Francesco Canepa BRUSSELS FRANKFURT Reuters A key measure of euro zone inflation accelerated to a four year high this month and euro zone unemployment fell to its lowest since 2009 in June data showed on Monday in two encouraging signs for the European Central Bank as it considers reducing its monetary stimulus The ECB is due to decide by the autumn whether and how to extend its 2 3 trillion euros 2 70 trillion quantitative easing program into 2018 and President Mario Draghi has cited sluggish core inflation and wage growth as reasons to be cautious Likely giving heart to ECB policymakers core inflation which excludes volatile food and energy prices accelerated to 1 3 percent from 1 2 percent in June Eurostat s flash estimate showed It was its highest level since August 2013 and confounded market expectations for a slowdown Today s upside surprise in core inflation is likely to give the ECB some comfort even though its level remains low Morgan Stanley NYSE MS economist Daniele Antonucci said We expect a QE tapering announcement this autumn The European Union s statistics office estimated that headline growth in consumer prices in the euro zone was stable at 1 3 percent year on year in July still far from the ECB s objective of just under 2 percent In a separate release Eurostat said unemployment in the 19 country currency bloc dropped to its lowest level since 2009 at 9 1 percent confirming a robust recovery in the currency bloc The jobless rate also went down in Italy and Spain the two eurozone countries with the highest rates excluding Greece for which fresh data were not available In Italy unemployment dropped to 11 1 percent in June from 11 3 percent in May meaning that nearly 60 000 were added to the Italian workforce In Spain the rate fell to 17 1 percent from 17 3 percent One of the ECB s dilemmas is that a steady decline in unemployment is not translating into higher wages a key driver of inflation In Germany the largest economy of the bloc unemployment fell to 3 8 percent in June from 3 9 percent the previous month raising expectations of bigger wage rises that could strengthen growth in the euro zone a whole |
MS | Global growth boosts stocks dollar mired near multi month lows | By Vikram Subhedar LONDON Reuters World stocks on their longest streak of monthly gains in more than a decade rose on Tuesday amid further signs that the global economy is in fine fettle while the beaten down dollar edged up slightly from 14 month lows Softening U S inflation and incessant political turmoil has hit prospects of another Federal Reserve rate hike in coming months and sent the dollar down 10 percent from its January peaks The dollar s decline low inflation and robust global growth has stoked appetite for stocks however with the MSCI ACWI MIWD00000PUS extending its run after the index logged its longest streak of monthly gains since 2003 04 in July Data and market behaviour are consistent with our global reflation theme strategists at Morgan Stanley NYSE MS led by Hans Redeker said in a note pointing to strong Chinese factory data corporate earnings and surging South Korean exports The combination of USD weakness with decent but not too strong US economic growth works in favour of risk appetite pushing financial conditions globally and especially in the US higher said the strategists The dollar edged up slightly against major currencies although the outlook remained downbeat following the ouster of recently hired White House communications chief Anthony Scaramucci overnight I think the short dollar trade is still the broad consensus trade in the financial markets said Esther Maria Reichelt an FX analyst at Commerzbank DE CBKG in Frankfurt But we are approaching important levels against other currencies such as 1 20 on the euro which may prompt some concerns from other central banks The euro is widely seen benefiting the most from the greenback s slide It has risen 12 percent against the dollar this year with most of the gains coming in the last three months and is trading at its highest in more than two years Bets on another quarter point U S rate increase have whittled down to around 47 percent compared to a 50 percent probability a month ago according to CME s Fedwatch tool The index DXY measuring the greenback s value against a basket of six major currencies fell to its lowest levels since May 2016 on Monday and was trading a shade above that at 92 92 on Tuesday U S stock futures ESc1 were up 0 3 percent
In commodities oil prices made further gains as falling U S inventories eased some concerns about oversupply Futures on Brent crude LCOc1 and U S crude oil CLc1 rose 0 2 percent and held comfortably above 50 a barrel for the first time since May |
MS | Oil financials get European shares off to firm start in August | By Kit Rees and Helen Reid LONDON Reuters European shares rose on Tuesday looking to recover after two straight months of losses with corporate earnings reports spurring brisk trading ahead of a what is typically a sleepy summer period for markets The pan European STOXX 600 STOXX index nursing two straight months of losses rose 0 6 percent Blue chips STOXX50E closed 0 9 percent higher their best one day gains in three weeks Germany s DAX GDAXI advanced 1 1 percent while Britain s commodities heavy FTSE 100 FTSE gained 0 7 percent as oil stocks rose Earnings updates dominated the action with oil heavyweight BP L BP rising 2 8 percent and boosting the oil gas SXEP sector after beating forecasts as new projects supported production BP has covered the cash component of the dividend with free cash flow for the second straight quarter and the Upstream business is performing well analysts at Jefferies said in a note Valuation is not challenging but the company s ability to de lever the balance sheet remains a concern The European second quarter earnings season is nearing the halfway mark and so far 60 percent of MSCI Europe firms have met or beaten analysts expectations according to Thomson Reuters data Earnings per share growth in Europe was tracking at about 13 percent including a significant boost from energy firms according to the latest data from JPMorgan NYSE JPM You have seen some signs of the green shoots of recovery within the European economy and that of course is good for companies Laith Khalaf senior analyst at Hargreaves Lansdown LON HRGV said Morgan Stanley NYSE MS analysts said the euro s surge this year could weigh on European corporate profits however joining the chorus of big brokers warning the currency could dent earnings growth British companies were the top gainers with aerospace and defense firm Rolls Royce L RR shooting up 11 6 percent its best day in a year after beating expectations with a rise in first half profit thanks to a step up in production It was joined by testing firm Intertek Group L ITRK insurer Direct Line L DLGD and Dutch chemicals company DSM AS DSMN which all gained between 5 8 percent to 9 percent on the back of well received results Lender CYBG L CYBGC was the top gaining bank rocketing 9 3 percent on strong third quarter results Financials were the biggest contributors to gains on the STOXX Morgan Stanley had pointed to the sector as one of the least vulnerable to the stronger euro due to its low overseas exposure A late faller was motor insurance company AA L AAAA which plummeted 12 8 percent after the firm fired its executive chairman and lowered its full year forecasts
While moves among fallers were otherwise fairly muted precious metals miner Fresnillo L FRES was the worst performing in the basic resources SXPP sector dropping 2 3 percent after its first half update |
JPM | Citigroup profit beats on higher bond trading lower costs | By Siddharth Cavale and David Henry Reuters Citigroup Inc NYSE C reported a better than expected quarterly profit on Friday helped by lower expenses higher bond trading revenue and strength in its consumer banking business in Mexico Operating expenses declined 1 percent surprising analysts and indicating that the company was on the way to meeting financial targets for this year The company also showed an improvement in the yield from its North America Citi branded card business which analysts were watching closely adding another argument for its profit outlook Citigroup s shares rose 1 6 percent to 69 48 Investors have been waiting to see how trading revenue fared at the five big Wall Street banks due to an escalating U S China trade war and executives warning that the business s growth would be muted Citigroup reported a 9 percent jump in bond trading revenue outperforming bigger rival JPMorgan Chase Co NYSE JPM which reported a 10 percent drop in fixed income trading revenue Chief Financial Officer John Gerspach had previously said Citigroup expected total fixed income and equity trading revenue to be flat to slightly higher in the third quarter In a conference call with reporters Gerspach said that the expense savings showed that the company is improving its efficiency as executives had projected Citigroup is in the midst of a drive to save 2 8 billion in costs by 2020 as it spends 1 5 billion on technology and other productivity improvements Citigroup reported a 2 percent rise in global consumer banking revenue The bank recently restructured its U S consumer business to operate more like those in Asia and Mexico where it has been seeing better results Consumer banking revenue in Latin America rose 8 percent excluding a one time gain and on a constant currency basis Yields from the North America branded card business turned up as more promotional credit card loans which charge no interest for as long as 21 months converted to interest earning Gerspach said the promotional strategy was paying off as interest earning balances grew 7 percent and net interest revenue as a percent of loans in a core portfolio rose to was 8 51 percent from 8 28 percent in the second quarter That is a good indicator of the future for this business Gerspach said Net income for the third largest U S bank by assets rose to 4 62 billion in the third quarter ended Sept 30 from 4 13 billion a year earlier Earnings per share rose to 1 73 from 1 42 helped by buybacks that reduced shares outstanding by 8 percent from a year earlier Analysts on average had expected earnings per share of 1 69 according to I B E S data from Refinitiv Total revenue was slightly lower at 18 39 billion from 18 42 billion a year earlier Citigroup s provision for income taxes fell by 395 million following changes in the U S tax code which reduced the bank s tax rate to 24 percent in the quarter from 31 percent a year earlier The bank s return on tangible common equity was 11 3 percent in the quarter inching closer to Chief Executive Officer Mike Corbat s goal of 13 5 percent in 2020
Up to Thursday s close Citi shares have lost 8 percent of their value for the year compared with a 5 percent drop in the broader KBW Bank Index |
JPM | MarketPulse Financials Flag After Early Earnings Enthusiasm | Investing com Financials were under pressure Friday heading into the close despite mixed results from major Wall Street banks that investors were very bullish on in early trading
Financials fell 0 88 extending the sector s decline into correction territory defined as 10 drop from its most recent high
JPMorgan Chase NYSE JPM fell 1 8 despite delivering quarterly earnings and revenue that topped Wall Street expectations
Ahead of JPMorgan s earnings report Portales Partners said that JPMorgan shares were overvalued and warned of at least 10 downside saying the bank had reached peak profitability for the current cycle
JPMorgan reported earnings of 2 34 a share on revenue of 27 8 billion beating analysts expectations of 2 2 a s7hare on revenue of 27 5 billion
Citigroup NYSE C eased from session highs as investors digested mixed results Earnings topped expectations but revenue fell short
Citigroup said third quarter profit rose 12 from a year ago helped by a 3 rise in loans and a 4 climb in deposits
Wells Fargo NYSE WFC rose 0 80 shrugging off a miss on third quarter profit
The scandal hit bank reported earnings of 1 13 a share or an adjusted profit of 1 16 per share missing analysts expectations of 1 19 a share while revenue topped expectations coming in 21 9 billion for the quarter |
JPM | Wells Fargo profit rises cost cuts paying off | By Imani Moise and Aparajita Saxena Reuters Wells Fargo Co N WFC posted a 32 percent jump in quarterly profit on Friday as the bank made headway in its cost cutting plan and worked to put past misdeeds behind it Non interest expenses in the third quarter fell 4 1 percent to 13 8 billion in the first year over year decline this year Wells Fargo the fourth largest U S lender by assets has vowed to chop billions of costs over the next several years But costs for repaying customers it had previously overcharged and marketing costs to re brand the company after a string of scandals have kept costs stubbornly high Wells has promised to reduce about 3 billion in expenses by 2020 It is closing roughly 800 branches and cutting up to 10 percent of its workforce over the next three years Chief Financial Officer John Shrewsberry told reporters on a conference call that other opportunities to reduce costs include scaling back call center operations and non customer facing office space But even as profits soared due to the cost cuts and a lower tax rate analysts raised concerns about the company s sluggish revenue and shrinking loan book Total loans fell 1 percent to 942 3 billion and revenue inched 0 4 percent higher during the quarter By comparison JPMorgan Chase Co N JPM reported a 5 2 percent increase in revenue and a 6 percent jump in average loan balances on Friday Loan and revenue growth remains challenged said Kyle Sanders an Edward Jones analyst in a research note This trend could linger in the near term as Wells works to emerge from the Fed s asset growth cap and repair its reputation with consumers The Federal Reserve in February ordered Wells to keep its assets below 1 95 million until it had improved its governance and risk controls following a wave of sales practice scandals Chief Executive Tim Sloan said on a call with analysts he was hopeful that the bank would not have any new issues Analysts said the quarter s results show that Wells is making progress on cleaning up its previous scandals though worries linger While these results were less noisy than previous quarters more fallout from prior misdeeds cannot be ruled out Allen Tischler senior vice president with Moody s Investors Service said Wells Fargo ended the quarter with 1 88 trillion in assets Its average total deposits declined 3 percent to 1 27 trillion well under the Fed s 1 95 trillion asset cap The bank s executives expect the cap to be lifted in the first half of next year Net income applicable to common stockholders rose to 5 45 billion or 1 13 per share in the quarter ended Sept 30 from 4 13 billion or 83 cents per share a year ago
On an adjusted basis the company narrowly missed analysts estimates earning 1 16 per share compared to estimates of 1 17 according to I B E S data from Refinitiv |
JPM | Graphic U S banks enjoy benefits of a growing economy lower taxes | By Diptendu Lahiri Reuters The U S banking industry is enjoying the benefits of a growing economy and lower taxes if the double digit profit growth posted by three major lenders on Friday is any indication JPMorgan Chase Co NYSE JPM the biggest U S bank said its third quarter profit jumped nearly 25 percent with each of its four business units generating higher revenues Citigroup Inc NYSE C the No 3 U S bank by assets reported a 12 percent rise in profit driven mostly by lower taxes and cost savings Wells Fargo NYSE WFC Co the fourth largest in the sector reported a 32 percent surge in profit following strong demand for auto small business and personal loans as well as cost cutting Following is a snapshot of bank earnings so far Graphic U S big banks third quarter earnings per share png Graphic U S banks Q3 Investment banking revenue png Graphic U S big banks third quarter trading revenue
Graphic U S big banks third quarter loans |
JPM | U S banks profit from higher rates more loans and lower costs | By David Henry and Imani Moise NEW YORK Reuters Three of the largest U S lenders reported double digit profit increases on Friday helped by an expanding economy and lower taxes and forecast more growth ahead as long as current trends continue Banks benefited from strong loan demand in the latest quarter with lending rates rising faster than funding costs stock market activity boomed and the Trump administration provided a business friendly environment in Washington As a result banks net interest margins the difference between what they pay for deposits and what they charge for loans widened Other key businesses like managing customers wealth or providing treasury services for corporations generated consistent fees that padded the bottom line Banks also got a lift from cost cutting programs they implemented after the 2007 2009 financial crisis as well as tax cuts signed into law by President Donald Trump last year Combined those factors are saving the industry billions of dollars each quarter Wages are going up Participation is going up Credit that s been written is pristine Housing is in short supply Confidence both small business consumers is extraordinarily high and that could drive a lot of growth for a while despite some of the headwinds out there JPMorgan Chase Co NYSE JPM Chief Executive Officer Jamie Dimon told analysts on a conference call While the rising economic tide is lifting all banking boats some benefited more than others in the latest quarter according to results released on Friday GOOD TIME FOR BANKS JPMorgan the biggest U S bank said its third quarter profit jumped nearly 25 percent with each of its four business units generating higher revenue Citigroup Inc NYSE C the No 3 U S bank by assets reported a 12 percent rise in profit driven mostly by lower taxes and cost savings Wells Fargo NYSE WFC Co the fourth largest in the sector reported a 32 percent gain in profit The bank cited strong demand for auto small business and personal loans as well as cost cutting It is a good time for the banks said Allen Tischler a bank analyst at Moody s Investors Service Loans are performing well and banks do not seem to be stretching to make riskier ones to generate growth he said Credit conditions are strong enough to allow banks to trim capital cushions to increase shareholder payouts something investors have enjoyed he added DIMON SEES SOME RISKS Although the industry is prospering third quarter results did not uniformly impress analysts and investors Wells Fargo for instance is still struggling with the effects of a wide ranging sales scandal that erupted more than two years ago and its mortgage business is suffering from a sharp downturn in refinancing Even as it reported a substantial rise in profits its earnings per share missed estimates by a penny JPMorgan s bond trading business suffered a 10 percent decline in revenue compared with the year ago period The business has been challenged across Wall Street for several years due to new regulations and changing customer preferences JPMorgan s finance chief Marianne Lake said increased competition has made it harder to hold onto market share at a time when margins are thinning Dimon discussed several issues that could dent the industry s profitability ranging from geopolitical tensions to Brexit and inflation Short term interest rates could go up to 4 percent as central bankers try to prevent higher inflation and investors may not be ready for that Dimon said This week the Dow Jones Industrial Average fell 800 points with analysts citing concerns about U S Federal Reserve policy The market may not take it that well if rates go up Dimon said
Wells Fargo shares closed up 1 3 percent at 52 11 Citigroup shares closed up 2 1 percent at 69 84 while JPMorgan shares fell 1 percent to 106 95 |
MS | When Rare Events Aren t All That Rare | It s Myth Busting Monday And that means it s time to tackle a topic that s potentially contentious Today I m taking on the idea of rarity in the financial markets Specifically whether or not rare events truly end up being a rare occurrence While the findings might not surprise you the implications for our investing strategies certainly will So let s get to it Unlikely Doesn t Mean Never By definition rare events should seldom occur Applying that understanding to financial markets however assumes that all market events follow a normal distribution Or in layman s terms a bell shaped curve If you re still clueless fetch your Statistics 101 textbook from the attic to achieve enlightenment More specifically the statistics say that 99 7 of all daily movements should fall within three standard deviations of the mean no more Well guess what New research suggests that they clearly don t follow such a pattern Deutsche Bank recently measured the occurrence of rare events defined as daily movements of three standard deviations or more from the mean for various markets Like stocks 10 year Treasuries the U S dollar Japanese yen exchange rate the list goes on As you can see the proportion of three standard deviation movements hardly ranks as rare In some instances including the financial collapse in 2008 it happens over 25 of the time Long story short outliers happen Way too frequently So clearly financial markets don t follow a normal distribution Or if you prefer a more eloquent explanation here s how Deutsche Bank puts it When thinking about the year ahead it is tempting to extrapolate the recent past whether looking at risks or one s base case Moreover there is a tendency not to deviate too far from consensus perhaps seeing safety in being part of the herd From a statistical perspective this is very similar to assuming markets follow a normal or Gaussian distribution That is markets are well behaved and extreme outcomes are rare The financial crisis of 2008 taught us otherwise yet it is very difficult to shrug off the bias to assume normality in markets Either way the implications couldn t be more straightforward We should prepare for outliers Such advice is particularly timely considering that we re still in the middle of the season when pundits dole out predictions like breath mints We should be seeking out the wildest and boldest predictions Because they could actually happen and in turn we could score some serious contrarian profits Discarding the obvious in favor of the outrageous is easier said than done of course We naturally gravitate toward predictions that jive with our own personal convictions Psychologically speaking it s called confirmatory bias We seek out information congruent with our own beliefs with much more fervor than contradictory data But based on what we ve learned so far it s imperative to think outside the box if we want to identify new profit opportunities before anyone else Six Outrageous Predictions for 2013 Since I m supposed to be here to help let me share six outrageous predictions with you for 2013 Some are mine and some came from elsewhere Prediction 1 The burgeoning rally in Japanese stocks endures I know that s crazy talk But I m no longer the only one guilty of it So is Blackstone Advisory Partners Vice Chairman Byron Wien In his annual Surprises list he pegged the Nikkei 225 trading above 12 000 as exports improve and investors return to the stocks of the world s third largest economy as a possibility Go long Japanese stocks but beware of a falling yen sapping your profits Prediction 2 Congress actually passes a budget It hasn t happened since April 29 2009 But it s hard to curb spending when you don t know how much you re allowed to spend Just saying From an investment perspective such an occurrence could help ward off a sovereign debt downgrade and help Treasury prices continue to defy gravity Prediction 3 Stocks soar by more than 15 Bull markets aren t supposed to last this long until they do I selfishly hope that nobody buys into this one because it ll serve as a strong contrarian indicator that the bull market will indeed charge higher And that means more profits for the few the proud the bulls Prediction 4 Ben Bernanke gets tired of buying bonds and opts for stocks instead All credit goes to the boys at Deutsche Bank for this one As they said With the U S housing sector apparently turning the corner stronger equities may be the necessary tonic to further increase household wealth and also to boost investment While the Fed does have restrictions on what assets it can buy it can invoke Section 13 3 of the Federal Reserve Act that allows more extreme actions in unusual and exigent circumstances Who knew such a monetary policy measure was even legal I m suddenly getting more bullish about stocks As the saying goes we never want to fight the Fed Prediction 5 Inflation returns with a vengeance The Nostradamuses over at Morgan Stanley MS say Inflation could be triggered by a combination of another drought which limits agricultural production stronger than expected recoveries from the world s economic powerhouses China and the U S and ballooning central bank balance sheets That actually doesn t sound so outrageous now does it Hurry up and stuff your portfolio with gold silver timberland real estate and yes stocks They re the most unloved but best inflation hedge of the bunch Prediction 6 Greece discovers gas reserves worth more than all of the debt it owes I know what you re thinking There s also a bottomless pot of gold at the end of a rainbow in Ireland right This prediction from Deutsche Bank might not be so far fetched though As they note Greece has sizeable undersea terrain in the Mediterranean and several Mediterranean countries have already discovered and are exploiting undersea natural resources If you ve got moxie you can prove it by pushing a few chips in on the Global X FTSE Greece 20 GREK It s in full on rally mode up 60 over the last six months So it s not really that outrageous of a bet It s a momentum play Bonus Prediction Lindsay Lohan avoids any run ins with the police This is one prediction I won t even consider betting a single dollar on I may be a dyed in the wool contrarian But I m not a sucker However if you ve got a friend willing to bet that she avoids the law in 2013 bet the house And make him pay up Bottom line Just because something is unlikely doesn t mean it won t happen Especially in the financial markets So be a contrarian and bet on the unexpected happening much more frequently than everyone else You ll have a bigger net worth to show for your courage Just ask John Templeton It is impossible to produce superior performance unless you do something that is different from the majority And he practiced what he preached |
MS | Taibbi More Dirt On Mack Samberg And White | While most pundits in New York Washington and across America are singing the praises of prospective SEC chair Mary Jo White more dirt on her intervention on behalf of Morgan Stanley and John Mack is filtering into the marketplace Who writes on this topic today Rolling Stone s Matt Taibbi undresses Mack and his sidekick Art Samberg in truly unceremonious fashion in writing Now Mack had been on Samberg s case to cut him in on a deal involving a spinoff of Lucent Mack is busting my chops to let him in on the Lucent deal Samberg told a co worker So when Mack returned from Switzerland he called Samberg Samberg having done no other research on Heller Financial suddenly decided to buy every Heller share in sight Then he cut Mack into the Lucent deal a favor that was worth 10 million to Mack These dealings with Samberg generated a fair bit of attention within the SEC When Mr Mack and Morgan Stanley needed cover on that front who did they call We are now well aware that our prospective SEC chair Mary Jo White worked her magic in getting the SEC wolf that is Gary Aguirre off the Mack MS scent You will want to read this column by the pulls no punches Matt Taibbi I put this in the Strongly Recommended file Choice of Mary Jo White to Head SEC Puts Fox In Charge of Hen House Nice to have friends with this kind of clout |
C | Venezuela s Guaido asks Citibank to freeze gold swap with Maduro lawmaker | By Mayela Armas CARACAS Reuters Advisers to Venezuelan opposition leader Juan Guaido are asking Citibank not to claim gold put up as collateral for a loan to the government of President Nicolas Maduro if his administration does not make payments on time a lawmaker said on Friday Citi would be entitled to keep the gold if cash strapped Venezuela does not pay the loan when it expires in March lawmaker Angel Alvarado said without specifying the value of the gold in question Allies of Guaido who has been recognized by the United States and more than 40 countries across the world as Venezuela s legitimate leader is asking the bank not to invoke the guarantee Citibank has been asked to stand by and not invoke the guarantee until the end of the usurpation Alvarado said in an interview We don t want to lose the gold The gold is worth 1 1 billion according to a finance industry source with knowledge of the situation Opposition leaders say Maduro usurped power last month when he was sworn in to a second term after a disputed election widely described as a sham Investment bank and financial services company Citigroup NYSE C which owns Citibank declined to comment Abu Dhabi investment firm Noor Capital said in February that it bought 3 tons of gold from Venezuela s central bank but would halt further transactions until the country s situation stabilizes Guaido has also asked British authorities to prevent Maduro from gaining access to gold reserves held in the Bank of England which holds around 1 2 billion in bullion for Maduro s government
The Bank of England has said it does not comment on client operations |
C | Citi in talks to buy Canary Wharf office building source | LONDON Reuters Citigroup NYSE C is in talks to buy the tower housing its European headquarters in London s Canary Wharf district which is on the market with a price tag of around 1 2 billion pounds 1 55 billion a source familiar with the matter said The tower at 25 Canada Square NYSE SQ which already houses many of the bank s 6 000 London based staff was put up for sale in October by AGC Equity Partners The source said a deal had yet to be agreed with Citi unlikely to offer the full asking price Should Citi agree the purchase with a decision likely in the next couple of months the bank would look to move staff currently based in a second building in the area 33 Canada Square to the larger tower the source said News of the talks was earlier reported by the Financial Times Such a move would be in line with Citi s strategy of buying buildings in locations where it has and intends to retain a presence and follows a deal in 2016 to buy the group s New York office the source said
The deal would be a boost for London s commercial property market ahead of Brexit Around 60 percent of Citi s Europe based staff already work outside of Britain which has meant very few around 60 were expected to be moved as part of preparations for Britain s exit from the European Union the source said |
C | Citi expects privatization to bolster revenue in Brazil | By Carolina Mandl and Tatiana Bautzer SAO PAULO Reuters Citigroup Inc NYSE C expects to boost annual revenue in Brazil over the next years by advising potential public asset sales and through a revival in capital markets its chief executive officer in Brazil told journalists on Monday Marcelo Marangon said Citi expects its annual revenue in Brazil to grow to 1 5 billion from 1 1 billion over the next years He did not specify a timeframe for the goal Bankers of Citi s Brazilian investment banking division are already targeting the largest asset sales and planning to vie for mandates in the transactions The fastest government asset sales should be of stakes held by state owned banks such as development bank BNDES and Caixa Economica Federal in publicly listed companies BNDESPar the holding company owned by BNDES owns stakes in power companies such as Centrais Eletricas Brasileiras SA AES Tiete Energia SA and Companhia Energetica de Minas Gerais CEMIG as well as in meatpacker JBS SA A government controlled fund hired banks last week to sell its stake in reinsurer IRB Brasil Resseguros SA Citi is also planning an expansion in its commercial banking division which supplies services to mid sized companies Department head Antonio Rubens said Citi plans to double its Brazilian commercial banking unit s assets by 2020 The bank s commercial unit has roughly 5 billion reais 1 34 billion in assets out of 75 billion reais for Citi s Brazilian operation as a whole most of it dedicated to larger corporations Rubens said those assets jumped by 27 percent in 2018 as an economic recovery increased demand Deposits grew 10 percent to 3 billion reais Citi is targeting firms with between 200 million and 1 8 billion reais in revenues he said This move underscores a shift in Citi s strategy in Brazil toward wholesale activities after the sale of its retail activities there to Ita Unibanco Holding SA for 710 million reais
1 3 7294 reais |
C | A China Interest Rate Cut May Be on its Way But Which Rate | Bloomberg China s slowing economy and muted inflation are spurring predictions the central bank will act to lower borrowing costs Problem is analysts can t agree on which rate is the one most likely to be cut
The People s Bank of China controls a wide array of monetary tools The most aggressive step would be to lower the benchmark interest rate for the first time since 2015 reducing the cost of borrowing across the economy but raising the risk of yuan weakness and asset bubbles
A more consensus view is a reduction in costs for short and medium term funds for banks steering borrowing costs lower by proxy Others argue a lesser known loan rate set by lenders themselves may be guided lower
Whichever tool is preferred a rare window is opening up for China to cut should it be deemed necessary as a more cautious Federal Reserve eases the depreciation pressure on emerging market currencies including the yuan
An interest rate cut is quite likely said Nathan Chow a senior economist at DBS Bank Hong Kong Ltd The PBOC may reduce the benchmark rate by 25 basis points by the end of the second quarter he added Such a move will encourage banks to lend more as it makes costs of funding much cheaper
Here are the rates the PBOC may cut and their impact
Benchmark Interest Rate
A reduction of the benchmark one year lending rate which stands at 4 35 percent is neither widely expected nor straightforward
The move has power as it cuts the cost of funding for everyone including mortgage borrowers But it could pressure the yuan via a plunge in sovereign yields that would make Chinese assets less appealing compared with those denominated in the dollar It also runs counter to the tone of the long running financial cleanup campaign as it encourages investors to pile into already inflated assets like property
For those reasons expectations of a cut to the benchmark have been muted until relatively recently Indeed the median economist estimate in a Bloomberg survey sees no change in the one year lending rate this year or next The number of analysts forecasting a cut in the benchmark in the second quarter has however risen to six from four in December including Jian Chang at Barclays LON BARC Plc
Interbank Rates
A more consensus view is that the PBOC may cut the rates it charges on reverse repurchase agreements via open market operations and on funds via the Medium term Lending Facility Such steps make it cheaper for banks to borrow a benefit they may pass on to the public Also there could be a reduction on rates of the Standing Lending Facility which is the Chinese equivalent of the Fed s Discount Window from as early as February Citigroup Inc NYSE C economists led by Liu Li gang wrote in a note
The PBOC seems to favor this route for now The central bank has been gently guiding interbank borrowing costs down without actually cutting the official rates largely by replacing funding accessed by banks via more expensive routes such as the medium term lending facility for cheaper shorter term cash In the case though that the slowdown in the economy worsens this method is unlikely to be enough to restore confidence and maintain lending
Loan Prime Rate
The loan prime rate which is now at 4 31 percent is a weighted average rate that an arm of the PBOC publishes daily based on the costs on loans that major lenders charge to their best clients
The authorities can push the LPR down by giving banks window guidance or cutting the money market rates which then leads to drops in the LPR Citic Securities Co analyst Ming Ming wrote in a recent note While lowering this rate sends a milder signal than reducing the benchmark the move can be effective as the amount of credit priced with the LPR is rising they wrote Mizuho Securities Asia Ltd says a LPR cut could be around the corner
No Rate Cut at All
Incoming economic data at the beginning of the year is notoriously hard to read given the distortions caused by the Lunar New Year shutdown The underlying momentum of the economy may be very uncertain until well into the second quarter
Some economists see a pickup on the back of last year s stimulus policies arriving by then Credit data are already signaling stronger demand signaling that indirect efforts to spur activity may be working By the time a rate cut becomes feasible the moment may have passed |
MS | Exclusive Saudi Aramco advisers favor London for historic IPO sources | By Saeed Azhar Hadeel Al Sayegh and Pamela Barbaglia DUBAI LONDON Reuters Saudi Aramco s advisers have recommended London for the historic listing of the oil company with U S disclosure rules a concern for Saudi authorities sources familiar with the matter told Reuters A final decision on the venue for what is expected to be the world s biggest IPO and is targeted to raise 100 billion will be taken by Crown Prince Mohammad bin Salman who is overseeing Saudi Arabia s radical economic reforms they said Listing five percent of Aramco is a centerpiece of Saudi Arabia s Vision 2030 plan to diversify beyond oil and financial considerations will not be the only factor in its decision with Saudi authorities also taking the interests of shareholders and the company into account the sources added The advisers views on the relative merits of London and New York for the listing are being considered by Aramco and a final proposal could be presented to the government in the fourth quarter the sources said London s chances of winning the multi billion deal were improved by a Financial Conduct Authority plan to create a new listing category for companies controlled by sovereign states This was a clear sign that London is ready to welcome Aramco and needs its IPO to attract more sovereign held entities and prove that London remains a good place to do business after the country leaves the European Union one of the sources said Changes proposed by the regulator which declined to comment are seen as making London more attractive to state controlled firms such as Aramco as well as other Gulf countries including Oman and Abu Dhabi considering listing oil assets The FCA proposal will be reviewed until Oct 13 and the regulator will publish new rules towards the end of the year Aramco is less enthusiastic about listing on a third exchange possibly one in Asia and may prefer to stick to a dual listing process that involves Riyadh s Tadawul and London Stock Exchange L LSE one of the sources said Aramco London Stock Exchange and New York Stock Exchange all declined to comment while there was no immediate comment from Saudi officials contacted by Reuters Bankers expect to get more clarity on Aramco s listing plans at a conference organized by Saudi Arabia s Public Investment Fund PIF on Oct 24 to 26 in Riyadh one source said Senior Saudi Aramco executives including its chief executive are scheduled to meet on Aug 3 in London for a regular review of ongoing business activities others said CHINA FACTOR A dual listing in London and Riyadh would be easier and faster to pursue the sources said adding that Aramco might miss its IPO window next year if it attempts to include a third stock market which would add another layer of complexity But even if Saudi Aramco is not listed in Asia Chinese investors and companies will still be offered a sizeable stake in a bid to satisfy key buyers of Saudi crude one source said Reuters reported in April that China is creating a consortium including state owned oil giants and banks and its sovereign wealth fund to act as a cornerstone IPO investor As well as New York and London Hong Kong Singapore Tokyo Hong Kong and Toronto are all seeking to have Saudi Aramco list on their respective markets But experts have long pointed to the amount of information public companies listed in the United States are required to disclose as a reason for a decline in IPOs in New York and Saudi Arabia will be cautious that it may be forced to reveal sensitive information relating to Aramco which will still be largely government owned after the IPO This includes details on how the kingdom controls its energy sector and manages money from the company s earnings The Saudis want to disclose as little as possible and this makes a New York listing very unattractive one source said But the U S Securities and Exchange Commission is also working on proposals to potentially scale back the scope and breadth of disclosure rules to get more companies to go public its new chairman Jay Clayton said this month And although Aramco s banks believe a London listing is financially the best solution there are other factors that the Saudis will take into account and the final outcome is far from decided one of the sources said JPMorgan Chase Co N JPM Morgan Stanley N MS and HSBC L HSBA have been hired as international financial advisers for its initial public offering Reuters reported in March The trio joined Moelis Co N MC and Evercore N EVR who had already been appointed as independent financial advisers
HSBC JPMorgan and Moelis declined to comment while Morgan Stanley and Evercore were not immediately available for comment |
MS | Booming stocks and credit falling U S dollar seen giving Fed cover to hike | By Richard Leong NEW YORK Reuters Despite analysts chatter that sluggish inflation may prevent the Federal Reserve from raising interest rates further soon the rosy scene in financial markets might allow U S policy makers to squeeze in another rate hike this year after all Wall Street stocks have been on a record tear the U S dollar is tumbling at a pace not seen in 15 years and long term U S Treasury bond yields have fallen even though the central bank has raised its overnight borrowing costs four times in the past 19 months The Fed has hiked two times this year and financial conditions have remained easy said Jim Caron portfolio manager at Morgan Stanley NYSE MS Investment Management in New York In fact financial conditions have rarely been looser Since the Fed first raised interest rates in December 2015 yields on bonds issued by the worst rated U S companies have plunged from nearly 22 percent to 10 6 percent Bank of America Merrill Lynch fixed income index data shows Those yields a proxy for the borrowing costs of less creditworthy companies are typically much higher averaging 14 7 percent over the last 20 years Meanwhile another measure of financial market stress compiled by the Federal Reserve Bank of St Louis is around a three year low hovering near its lowest level ever These indicators suggest the Fed s rate hikes and its stated intention to soon start winding down its 4 2 trillion bond portfolio have hardly restricted access to cheap money In other words financial conditions have eased even as the Fed has been trying to tighten them suggesting policy makers have plenty of leeway to raise interest rates again even in the face of an inflation rate that remains stubbornly below the Fed s 2 0 percent target The relentless easing of financial conditions especially tighter credit spreads 18 months after rate liftoff could be the Fed s new conundrum said Shehriyar Antia founder of New York based Macro Insight Group This certainly weighs on the minds of prominent Federal Open Market Committee members and offsets at least somewhat the recent decline in inflation said Antia a former senior policy analyst at the Federal Reserve Bank of New York familiar with the thinking of that bank s influential president William Dudley a permanent voter on the FOMC ON THE RADAR Episodes of market volatility have delayed policy actions in the past In both 2013 and 2015 the Fed held off on earlier attempts to normalize monetary policy because market volatility had tightened financial conditions to an uncomfortable degree Looser financial conditions on the other hand gives Fed policymakers more room to move The Dow Jones Industrial Average DJI S P 500 benchmark stock index SPX and the Nasdaq Composite IXIC have hit repeated all time highs in recent weeks A key index that tracks the U S dollar against a basket of major currencies DXY has fallen more than 8 0 percent so far this year its worst showing through the first seven months in a year since 2002 That s a benefit for U S multinational corporations that generate significant overseas income in currencies gaining against the dollar Benchmark 10 year Treasury yields US10YT RR are fractionally lower so far in 2017 and are effectively unchanged from December 2015 when the Fed first raised rates Credit spreads for corporate bonds a measure of the premium investors demand for buying them instead of safer Treasuries are less than half what they were 18 months ago and have narrowed most for bonds of the weakest borrowers As a result U S companies can borrow cheaply and are competitive abroad while consumers are seeing their wealth grow and can finance their purchases There is a ton of room for the Fed to continue on a gradual path to normalize interest rates said Jim Paulsen chief investment strategist at The Leuthold Group in Minneapolis SLUGGISH INFLATION To be sure Fed Chair Janet Yellen and others have expressed caution about the recent softening in inflation pushing it further below from the Fed s 2 0 percent goal Some inside the Fed would like to see inflation rise further before raising rates again and the Fed s FOMC in its statement on Wednesday appeared to flag a growing unease with the weak pricing trend The Consumer Price Index rose 1 6 percent on a year over year basis in June for its smallest rise since October 2016 It has missed analysts forecast for four straight months Still other key Fed voices Dudley s among them worry that not taking the chance now to push rates higher risks letting financial conditions get too easy and risks asset price bubbles forming Fed officials also see higher rates as giving them greater ammunition to fight the next economic downturn The tension between these camps is playing out in markets too Interest rate futures imply a third rate hike in 2017 is seen as a coin toss but Wall Street economists expect the Fed to start shrinking its 4 2 trillion bond portfolio later this year FED R a move which could finally see financial conditions tighten without impeding economic growth
In shrinking the balance sheet by allowing Treasuries and MBS to roll off the Fed will be taking a step that directly affects financial conditions arguably without making a substantial difference for the economy said Stephen Stanley chief economist at Amherst Pierpont in Stamford Connecticut |
MS | Morgan Stanley names board member Glocer as new independent lead director | NEW YORK Reuters Morgan Stanley NYSE MS board member Thomas Glocer will take over the role of independent lead director starting in September the bank said on Thursday Glocer replaces Erskine Bowles who had been independent lead director since 2014 and will remain on the board The change is part of a governance policy to rotate directors periodically Although a chairman is in charge of a board the role of lead independent director has become more important in recent years as a check and balance at companies like Morgan Stanley that have the same person in place as chairman and chief executive officer In a press release the bank s Chairman and Chief Executive Officer James Gorman cited Glocer s experience in fin tech the mixture of finance and technology a popular concept on Wall Street as banks try to become more digitally savvy Glocer had been CEO of Thomson Reuters Corp which owns Reuters news service from 2008 through 2011 and CEO of Reuters Group PLC before it merged with Thomson He joined Morgan Stanley s board in 2013
Morgan Stanley director Jami Miscik will take over Glocer s role as chair of the board s operations and technology committee the bank said Director Rayford Wilkins will chair the nominating and governance committee Both positions also take effect Sept 1 |
MS | Swiss franc set for biggest weekly drop in nearly two years | By Saikat Chatterjee LONDON Reuters The Swiss franc fell on Friday and is on track to post its biggest weekly drop against the dollar for more than 22 months after breaking through some major technical levels Its weakness against the euro was even more pronounced as investors grew more optimistic about euro denominated assets after recent upbeat comments from policymakers There is some rebalancing flows going through from some model driven funds after euro franc cracked through the 1 10 level and with very little option barriers at these levels this can go higher Scotiabank s head of Asian FX sales and trading Gerrard Katz said The franc was trading 0 3 percent weaker against the dollar at 96 77 cents It has fallen more than 2 percent this week its biggest weekly drop since October 2015 The currency was down half a percent at 1 1328 against the euro and traded below a 200 week moving average for the first time since September 2008 according to Reuters data Morgan Stanley NYSE MS strategists expect more losses on the view that the franc remains the most overvalued currency in the G10 universe despite this week s fall The bearish franc trade is an alternative approach to trading better prospects for European Monetary Union economic and political stability they wrote in a morning note The dollar dipped against its major peers on Friday with a modest early bounce petering out ahead of the second quarter U S economic growth data due later in the session The dollar index against a basket of six major currencies was a shade lower at 93 755 after edging up 0 2 percent the previous day The market s focus was now on second quarter U S gross domestic product data due at 1230 GMT Economists expect the world s largest economy to have grown about 2 6 percent in the second quarter from 1 4 percent in the first quarter A solid outcome will no doubt give the beleaguered dollar some respite from the recent sell off |
MS | Value of U S deals in China sinks on rising trade tensions | By Sumeet Chatterjee and Kane Wu HONG KONG Reuters U S corporate acquisitions in China collapsed to their lowest level for 14 years in the first half of this year as trade tensions between the two countries and uncertainty about Chinese government regulations took a toll on deal making The value of mergers and acquisitions involving American companies in China dropped 32 percent to just 523 million in the six months to June 30 from 771 million in the same period last year and were down 87 percent from 4 billion in the first six months of 2015 according to Thomson Reuters data Bankers and lawyers involved in deal making say that increasing signs of trade friction between Washington and Beijing are acting as a deterrent The tensions were reflected at a meeting earlier this month when officials from the two countries failed to agree on major new steps to reduce the U S trade deficit with China American companies do not want to make acquisitions in an environment where they could get caught in crossfire between the two governments these sources said That could happen if for example U S President Donald Trump s administration imposed punitive tariffs on Chinese steel and other products and Beijing retaliated with its own action against American goods or entities For a graphic on U S M A in China click That in turn leads to the danger that American companies won t be able to take full advantage of China s still buoyant economic growth of just under 7 percent a year adding further to the stresses in the trade and investment relationship between the two countries The new norm for China and the U S is to be at odds on trade issues As of now they are having huge differences with regards to the steel industry huge differences with regards to trade imbalance said Roy Zou a Beijing partner at law firm Hogan Lovells I don t see a big increase in U S investments in China China s Ministry of Commerce MOFCOM did not respond to Reuters faxed request for comment on the drop in U S acquisitions The decline is happening at a time when Chinese deals in the U S are still rising though opposition in Washington to certain kinds of Chinese purchases on national security grounds is also increasing and could add to tensions FOREIGN FIRMS COMPLAIN European companies deal making has also been declining but at a slower pace Their acquisitions in China in the first half of this year were worth 223 million against 268 million in the same period last year Foreign firms have complained for some time about not being offered a level playing field in China Among their concerns are restrictions on foreign ownership in key sectors including finance and technology and various regulations that favor domestic firms over foreign rivals And all of this can make them think twice about pulling the trigger on a major acquisition trade experts said Foreign investors face explicit and implicit ownership restrictions in the most attractive sectors and they are also not able to participate in the restructuring and consolidation of ailing industries said Rhodium Group economist Thilo Hanemann who analyses China s international investment position The American Chamber of Commerce in Shanghai said in its annual China Business Report published on July 12 that the Chinese government needed to halt policies and regulations that favor domestic firms over foreign businesses The lobby group complained of long established systemic inequities in the report which was based on responses from 426 AmCham member companies in China While buyers of assets in China have faced many such challenges before they haven t usually had to do so against such a backdrop of trade tensions and wider political uncertainty There is a lot of grandstanding going on between the two countries said a senior M A banker at a U S bank in Hong Kong Not many would like to deploy a couple of billion dollars now when you are not sure of the regulatory landscape and what shape and form it would take This picture is further complicated by the approaching 19th National Congress of the Chinese Communist Party this autumn The gathering is expected to lead to a consolidation of President Xi Jinping s power Many of the organs of the party and government are focused on making sure the Congress which is held every five years goes off without a hitch and that there isn t any kind of economic or political schism in the months leading up to it Chinese economic bureaucracy is now dominated by a desire to manage systemic risk in preparation for the upcoming 19th Party Congress said Brock Silvers managing director of Kaiyuan Capital a Shanghai based investment advisory firm Any policies or reforms to be adopted after the Congress are still unknown he said adding last week his firm advised a U S private equity fund to postpone plans for China investments until regulatory issues are clarified The Chinese authorities increasing scrutiny of some of the most acquisitive Chinese companies of recent years such as the HNA Group Co Ltd which has led to a slowdown in their deal making has added to the uncertainty This is focusing attention on the opaque nature of their ownership and finances and may make them less appealing as deal makers whether as buyers and sellers of assets or as partners in any transactions There have been 17 announced acquisitions of companies in China by U S firms this year compared to 39 in whole of 2016 The average value is down to 43 million this year from 73 million in 2008 when U S acquisitions hit an all time high of 12 billion Some trade experts worry that a more hawkish Washington approach to the national security risks of proposed Chinese investments in the U S could easily trigger retaliation from Beijing The sense we get from talking to our clients is there is concern as to whether anti trust policies in China could now be used to discriminate against foreign enterprises said Mustafa Hadi head of disputes and international arbitration for Greater China and North Asia at advisory and consultancy firm Berkeley Research Group In the financial sector in particular there are concerns that some deals and expectations of reform could get derailed if Sino U S relations deteriorate according to people familiar with the situation JPMorgan Chase Co NYSE JPM is in talks to set up a new joint venture with a local partner in China while Morgan Stanley NYSE MS is looking to further increase its stake in its mainland China investment banking operations after already raising it to 49 percent this year people with direct knowledge of the discussions have said
JPMorgan and Morgan Stanley declined to comment |
MS | High flying euro may run into rough weather | By Saikat Chatterjee LONDON Reuters The euro is the year s best performing major currency against the dollar but a shrinking interest rate advantage and the weight of the bets on the single currency are making a retreat ever more likely The euro reached its highest point since January 2015 on Thursday at 1 1777 with a variety of factors contributing Chief among them were increasing talk the European Central Bank will soon begin to wind down its bond buying stimulus and the dollar s decline to 13 month lows against a basket of other major currencies DXY Political calm after elections in the first half of the year and improving economic data in the euro zone also helped Greece s successful debt sale this week its first in three years was a sign of confidence in the euro European Central Bank chief Mario Draghi provided the single biggest boost in June when he gave a speech in Sintra Portugal that many took to mean the ECB was getting closer to ending its bond buying program The euro rose nearly 5 percent against the dollar It is as if the markets are almost impatient with the ECB to tighten policy as soon as possible without giving a thought to the speed of the underlying euro move said David Kohl chief currency strategist at Julius Baer in Frankfurt They may be in for some disappointment The single currency has gained nearly 11 percent against the dollar so far in 2017 At the same time long euro positions bets it will rise have increased to the largest number in six years according to Commodity Futures Trading Commission data Now some analysts say things have moved too far too fast The currency markets are getting a bit ahead of themselves on the euro premium story said Adam Cole head of G10 FX strategy at RBC Capital Markets in London He recommends selling the currency against the likes of the Australian dollar EURAUD D3 Any sudden weakness will have implications for investment flows in both equity and bond markets where currency gains have boosted returns Unhedged equity flows in the second quarter of the year have been a big factor behind the euro s strength according to Morgan Stanley NYSE MS strategists and any weakness in the currency would trigger outflows at a time when European stocks have been underperforming their U S counterparts Warning noises are the loudest from bond markets The yield premium offered by lower rated euro zone states has shrunk nearing two year lows That reduces the return investors can earn from borrowing in low yielding currencies such as the Swiss franc and buying euro debt Equally worrying spreads between U S and German debt have widened making it more attractive for European institutional investors to buy U S debt if the dollar stabilizes At 203 basis points the two year U S yield premium over German debt is near its highest in more than a month and the 10 year premium of 177 bps is at its widest in two weeks If the premium continues to trend in the U S favor the dollar may get better traction said Marc Chandler global head of currency strategy at Brown Brothers Harriman in New York WARNING SIGNS The euro is also coming up against key resistance levels on charts that can contribute to investment decisions It is holding around 1 17 a 23 6 percent retracement of the 2008 2017 1 6040 1 0340 range on the monthly charts Beyond that is the psychologically important level of 1 20 where the euro last traded in January 2015 Some other indicators say the euro is not yet overbought but amber signals are flashing from the currency derivatives markets Risk reversals for the euro a measure of investor sentiment in the currency options markets over the coming three months and a year are holding at their highest in more than seven years according to Reuters data a sign that positions are becoming stretched And then there is history Ben Bernanke then the Federal Reserve Chairman caused a taper tantrum when he signaled in May 2013 it was time to stop pumping cash into the U S economy The dollar index DXY fell more than 3 percent by September before Bernanke backpedalled on the timing By that metric the euro has already outperformed the dollar Not everyone sees the euro falling It remains somewhat undervalued on a trade weighted basis compared with its longer term averages and economic prospects remain bright For Kevin O Nolan a multi asset fund manager at Fidelity International in London the game changer for the euro this year has been the politics He is looking to play euro strength by buying it particularly against the Korean won Graphic Graphic
Graphic |
JPM | Wells Fargo Co Earnings miss Revenue beats In Q3 | Investing com Wells Fargo Co reported third quarter earnings that missed analyst s expectations on Friday and revenue that topped forecasts
The firm reported earnings per share of 1 16 on revenue of 21 94B Analysts polled by Investing com forecast EPS of 1 19 on revenue of 21 82B That compared to EPS of 1 04 on revenue of 24 51B in the same period a year earlier The company had reported EPS of 0 98 on revenue of 21 55B in the previous quarter
Wells Fargo Co shares gained 2 to trade at 52 00 in pre market trade following the report
For the year Wells Fargo Co shares are down 15 73 under performing the S P 500 which is up 1 66 year to date
Wells Fargo Co follows other major Financial sector earnings this month
On Friday JPMorgan NYSE JPM reported third quarter EPS of 2 34 on revenue of 27 82B compared to forecasts of EPS of 2 27 on revenue of 27 58B
Citigroup NYSE C earnings beat analyst s expectations on Friday with third quarter EPS of 1 73 on revenue of 18 39B Investing com analysts expected EPS of 1 67 on revenue of 18 45B |
JPM | Big Bank Earnings Mixed JPMorgan Beats Citi Revenue Light Wells Profit Shy | Investing com A trio of big banks reported mixed results Friday but shares of JPMorgan Chase Citigroup and Well Fargo were all higher in premarket trading
JPMorgan Chase NYSE JPM reported quarterly profit and revenue that topped analysts expectations Citigroup NYSE C also beat profit forecasts but its revenue was a tad below expectations And Wells Fargo NYSE WFC missed on earnings estimates but its revenue topped the consensus estimate
Bank stocks have been unimpressive over the last three months The shares looked to be on a comeback as bond yields rose helping net interest margins but the bullishness was short lived as financials joined the broader recent selloff
JPMorgan Chase
JPMorgan said it earned 2 34 cents per share in the third quarter On average analysts predicted that JP Morgan would earn 2 27 per share
Shares of the Dow component were up about 1 8 in premarket trading compared with a gain of about 2 5 before the results were released
The bank posted managed revenue of 27 8 billion which was above forecasts Wall Street was looking for revenue of 27 58 billion
Services revenue gained thanks to higher interest rates which helped counter flat investment banking revenue The company also benefitted from lower taxes noting its effective tax rate was 21 6 for the quarter compared to 29 6 in the year ago period
Citigroup
Citi reported earnings per share of 1 73 on revenue of 18 39 billion Analysts polled by Investing com expected a profit of 1 67 a shares on revenue of 18 45 billion
The stock dipped immediately in premarket trading after the numbers came out but recovered strongly climbing around 3
With revenue basically flat from the year ago period Citi s profit beat was driven by a lower tax rate Its effective tax rate fell to 24 in the third quarter from 31 in the same quarter a year ago
Wells Fargo
Wells Fargo reported earnings per share of 1 16 on revenue of 21 94 billion The Street was looking for EPS of 1 19 on revenue of 21 82 billion
That compared to EPS of 1 04 on revenue of 24 51 billion in the same period a year earlier The rise in profit in the year ago period was evidence that the company had made some progress in its efforts to cut costs although a drop in total loans offset some of those gains
The bank which has been hit by scandal recently also noted it is making progress in its commercial banking segment and in customer remediation
Shares of Wells Fargo held up in premarket rising 1 5 |
JPM | JPMorgan s consumer banking strength offsets bond trading weakness | By Sweta Singh and David Henry Reuters JPMorgan Chase Co NYSE JPM reported a better than expected quarterly profit on Friday as gains from higher interest rates and growth in loans helped the bank offset weakness in bond trading revenue The largest U S bank by assets whose results are often seen as a barometer of the economy has benefited from a tax windfall and a strong economy that has led to higher interest rates and kept loan defaults in check All four of JPMorgan s main businesses recorded a rise in revenue with the consumer banking unit notching the biggest jump in revenue due to a healthy appetite for borrowing Trading was the only weak spot in the results Chief Executive Jamie Dimon praised President Donald Trump s tax cuts and deregulatory efforts but cautioned on inflation and geopolitical issues bursting all over the place The U S and the global economy continue to show strength despite increasing economic and geopolitical uncertainties which at some point in the future may have negative effects on the economy Dimon said JPMorgan s shares rose about 1 percent in early trading Worries about lackluster trading and weak loan growth have weighed on bank stocks this year with the S P Financial index falling about 5 percent and underperforming the broader S P 500 index JPMorgan is the best performing stock among the big six U S banks Including losses from the market carnage over the past two days that saw the Dow Jones Industrial Average drop more than 1 300 points the stock is the only one among the big banks to be in positive territory for the year The bank s average core loan book rose 6 percent in the third quarter and outperformed Citigroup s 4 percent growth even as higher rates crimped borrowing in areas such as mortgage loans Trading revenue fell 2 5 percent amid an escalating trade war between Beijing and Washington and worries about slowing global growth Bond trading revenue fell 10 percent in sharp contrast to Citigroup s 9 percent increase while equity trading revenue was up 17 percent JPMorgan s total revenue rose 5 2 percent to 27 82 billion Net income rose 24 5 percent to 8 38 billion or 2 34 per share Analysts had expected earnings of 2 25 per share according to I B E S data from Refinitiv Everything looks nice and steady for JPMorgan Octavio Marenzi CEO of capital markets management consultancy Opimas said This portends well for the rest of the US banking industry Net interest income the difference between what the bank earns on loans and pay on deposits rose 7 percent to 14 1 billion as the U S Federal Reserve raised rates four times since the third quarter of last year bringing it to 2 25 percent JPMorgan s non interest expenses were 15 6 billion up 7 2 percent Analysts had expected about 15 7 billion of expenses in the quarter
Operating costs have risen across the industry as banks are spending more on technology and expanding their business amid a strengthening economy |
MS | European Market Update | UK Retails Sales disappointRampant speculation about what the BoJ will announce on TuesdayNotes ObservationsChina economic data was all largely as expected 2012 GDP at 7 8 was lowest annual pace since 1999Rumors rampant ahead of Tuesday s BOJ rate decision with open ended options on everything BoJ may scrap 0 1 rate paid on excess reserves pledge open ended asset purchasesJapan Gov advisor Hamada Would only worry with USD JPY above the 110 levelNikkei225 Index ends session higher by almost 3 largest percentage gain since March 2011 and produces longest weekly winning streak since 1987 of 10 aid with Japanese currency at a fresh 2 1 2 year lowBank of Spain Nov Bad Loan Ratio rises to fresh record level of 11 4 UK Dec Retail Sales come in negative and well below market expectationsEconomic Data RU Russia Narrow Money Supply w e Jan 14th RUB 7 64T v 7 96T prior ES Spain Nov NSA Industrial Orders Y Y 4 0 v 5 3 prior EU ECB 900M borrowed in overnight loan facility vs 0 0M prior 179 1B parked in deposit facility vs 173 3B prior IT Italy Nov Industrial Orders M M 0 5 v 0 1 prior Y Y 6 7 v 0 1 prior IT Italy Nov Industrial Sales M M 0 2 v 0 2 prior Y Y 5 4 v 4 7 CZ Czech Nov Current Account Monthly CZK 2 0B v 8 0Be ES Bank of Spain Nov Bad Loan Ratio 11 4 v 11 2 prior record UK Dec Retail Sales Ex Auto Fuel M M 0 3 v 0 1 e Y Y 1 1 v 2 0 e UK Dec Retail Sales w Auto Fuel M M 0 1 v 0 2 e Y Y 0 3 v 1 0 eFixed Income IN India sold total INR120B vs INR120B indicated in 2017 2026 and 2030 bonds ZA South Africa sold total ZAR210M in I L 2025 2038 and 2050 BondsSPEAKERS FIXED INCOME FX COMMODITIES ERRATUMEquitiesIndices FTSE 100 0 30 at 6 150DAX 0 20 at 7 721CAC 40 0 10 at 3 746IBEX 35 0 20 at 8 646FTSE MIB 0 30 at 17 536SMI 0 40 at 7 402S P 500 Futures flat at 1 475 50European indices opened the session broadly higher as U S equities on Thursday s session hit highs not seen since late 2007 Resources related firms are gaining amid the release of GDP and industrial production data out of China Currently indices are mixed The Swiss SMI Italian FTSE MIB and German DAX have underperformed while the FTSE 100 hit fresh multi year highs earlier in the session In terms of US corporate earnings for today s session the main companies due to report include GE and Morgan Stanley UK movers Spectris 5 5 Q4 sales update Kentz Corporation 3 5 trading update Evraz 1 5 Q4 production update Meggitt 1 5 broker commentary Home Retail 1 8 profit taking Sainsbury 1 broker commentary Bovis Homes 0 50 trading update Germany movers Praktiker 8 5 broker commentary Commerzbank 1 renewed job cut speculation Metro 1 9 broker commentary ThyssenKrupp 1 AGM comments France movers Renault 3 FY12 sales BNP 1 4 cost cut speculation ArcelorMittal 1 1 broker commentary Saint Gobain 1 5 broker commentary Air France 1 5 broker commentary Italy Movers Mediaset 8 broker commentary Telecom Italia Media 3 ongoing takeover speculation Ansaldo STS 2 5 broker commentary Switzerland movers Credit Suisse 0 50 broker commentary Santhera 22 negative opinion related to RAXONE |
C | Iron Ore Powers to Highest Since 2014 as Vale Crisis Intensifies | Bloomberg Iron ore futures surged more than 5 percent to hit the highest level since 2014 on concern that the increasingly severe crisis at top producer Vale SA will curtail global supplies tightening the seaborne market and offsetting the impact of a slowdown in China the largest importer
Vale invoked force majeure earlier this week after a judge forced it to suspend some operations at its Brucutu mine in Brazil a move that it said would result in an annual production loss of 30 million tons That s on top an earlier reduction of 40 million tons following a deadly dam burst In addition Vale s license to operate a dam at Brucutu was revoked by a state regulator
Iron ore has been supercharged since late January after the dam burst in Brazil which killed at least 150 people and rattled the mining industry The exact extent of the lost production isn t clear as Vale has said it ll be able to offset some of the impact by boosting supply from other sites As the crisis has intensified banks have raised their price forecasts with Citigroup Inc NYSE C boosting its 2019 estimate 40 percent to 88 a ton and raising the possibility that the disruption to Vale s operations may yet worsen and could last for years
A major risk is that the Brucutu operation may be the first of many of Vale s mines to see its production halted and there s also the prospect that tighter regulations may affect supplies from other miners Citi said in a note outlining its bull case which carried a 30 percent probability Vale s production will slump 40 million tons this year the bank estimates
Futures advanced as much as 5 8 percent to 94 a ton in Singapore the highest since August 2014 and traded at 93 50 at 10 51 a m So far this week prices are 11 percent higher after surging 14 percent last week
This week s drama has played out as the most important iron ore user has been offline with Chinese markets closed for Lunar New Year When the country s exchanges resume on Monday it should help set iron ore s direction more decisively after an initial period of yuan based prices catching up |
C | Dovish Bank of England Has Economists Scaling Back on Hike Views | Bloomberg The Bank of England s pessimistic view of the U K has left economists scrambling to rewrite their expectations for future action
In its Inflation Report on Thursday the central bank cut its forecast for growth this year to the weakest in a decade and predicted a dramatic investment slump Officials also said they see a margin of slack in the economy opening up in the near term rather than the excess demand they saw previously
That outlook has been interpreted as a dovish tilt Nomura s George Buckley who has been among the more bullish economists in recent years now expects the BOE to hike in November rather than May this year and also sees a gap of nine months rather than six between moves Meanwhile Citigroup NYSE C and Bloomberg Economics both moved their calls for a hike to August from May
Still by predicting any action this year economists remain more optimistic than markets who aren t fully pricing in any moves until beyond May 2020
The BOE is the latest central bank to take a downbeat turn this year after the U S Federal Reserve and European Central Bank For the U K wider worries about slower global growth are combining with increasing Brexit uncertainty as the nation approaches its March 29 exit date without a withdrawal deal in place |
C | Citigroup sees Saudi UAE as top Mideast markets for deals this year executive | By Hadeel Al Sayegh ABU DHABI Reuters Citigroup NYSE C expects the majority of investment banking opportunities in the Middle East to come from Saudi Arabia and the United Arab Emirates this year said Miguel Azevedo Citigroup s head of investment banking Middle East and Africa The U S lender which is working towards a full banking license in Saudi Arabia ended a five decade presence in the kingdom in 2004 but in 2015 won permission to invest directly in the local stock market and last year gained approval to begin investment banking operations I can see real interest awareness and potential demand for Saudi exposure Azevedo told Reuters on the sidelines of a conference in Abu Dhabi He said a number of companies in Saudi Arabia were working on initial public offerings and that he was optimistic on the level of demand for Saudi stocks Foreign investors dumped Saudi equities at the end of last year amid worries over the blow to Saudi Arabia s relations with the West following the murder of journalist Jamal Khashoggi a critic of the Saudi leadership in Istanbul on Oct 2 But demand for Saudi securities has picked up this year ahead of the kingdom s inclusion in the emerging market indexes of MSCI and FTSE Russell later this year Last month foreigners bought a net 4 36 billion Saudi riyal 1 2 billion of Saudi stocks according to stock exchange data The Saudi index is up nearly 9 5 percent this year Azevedo said market sentiment towards Saudi Arabia was neutral to positive The inclusion in the indexes is expected to attract 15 billion of benchmark linked funds and billions more in active funds Citi expects business in the region to come from the chemical sector as well as real estate retail diversified industrial companies and banking said Azevedo |
C | Funds Short the Dollar After Fed s Dovish Pivot | Bloomberg The Federal Reserve s dovish shift is beginning to diminish the dollar s appeal for currency speculators
A Citigroup Inc NYSE C index has dropped below zero for the first time since March 2018 indicating currency funds are holding net short positions on the U S currency That signals further dollar gains may be hard to come by after the greenback s longest winning streak in three years
The Fed has become much less willing to hike and there s even a chance for a rate cut this year said Toshiya Yamauchi chief manager for foreign exchange margin trading at Ueda Harlow Ltd in Tokyo This has eroded the dollar s yield advantage leading to dollar shorts
The Bloomberg Dollar Spot Index gained 0 1 percent as of 10 09 a m London time having dropped Tuesday after an eight day rally That winning streak followed the Fed s Jan 30 decision when Chairman Jerome Powell said the case for further rate hikes has weakened that took many investors by surprise
Even so economists predict the dollar will weaken against the euro yen and pound throughout 2019 according to Bloomberg surveys And with U S economic growth and inflation forecast to slow this year overnight index swaps have started to price in a possible Fed rate cut Publication of CFTC positioning data for the greenback since Jan 15 has been delayed due to the U S government shutdown
We don t have evidence of strong inflationary pressures and we do have evidence of the growth rate slowing Fed Bank of Cleveland President Loretta Mester told reporters after giving a speech in Cincinnati Tuesday That combination of factors suggests we have this chance to look at how the economy is going to proceed We don t have to do anything preemptively |
JPM | High Yield Corporate Bonds At Top Of Long Term Channel | The largest mass shooting in US history yesterday and naturally equities are at lifetime highs again Incredible
Anyway one chart that remains interesting is that of high yield corporate bonds iShares JPMorgan NYSE JPM USD Emerging Markets Bond NASDAQ EMB which remain mashed up at the top of a very long term channel I recognize that a dividend was issued and that partly explains yesterday s weakness but the downturn from a few weeks ago is more substantial than the dividend
I ve provided a detailed view of recent activity |
MS | BOJ newcomers back 2 percent price goal say too early to debate stimulus exit | By Tetsushi Kajimoto TOKYO Reuters The two new members of the Bank of Japan s policy board said on Tuesday that the central bank should continue efforts to achieve its 2 percent inflation goal and it was premature to debate an exit from its massive monetary stimulus Goushi Kataoka a 44 year old former economist at Mitsubishi UFJ Research and Consulting and an advocate of massive money printing said he wants to see the price goal achieved quickly although he cannot say when that can be The other new board member Hitoshi Suzuki a 63 year old former deputy president of Bank of Tokyo Mitsubishi UFJ who is well versed with financial markets said it was dangerous to markets to debate an exit from the stimulus now There s a considerable distance from the 2 percent target From my own experience of dealing with markets for 20 years starting a debate on exit now would be dangerous to markets Suzuki told a joint news conference He added that the price target was a high goal but he wants to achieve it by any means In May Japan s Parliament approved the two government nominees for the nine member BOJ board They replaced Takahide Kiuchi and Takehiro Sato whose five year terms ended on July 23 It was no surprise the two newcomers sounded supportive of the current policy given that they were picked by Prime Minister Shinzo Abe s government said Naomi Muguruma senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS The BOJ board is on course for a unanimous vote for the time being as long as the current policy continues But the unity will be put to the test when the time comes to shift policy in either direction LOST COUNTER BALANCE The departure of Kiuchi and Sato who both disagreed with most of Governor Haruhiko Kuroda s money printing steps means the BOJ may lose a counter balance to the leader s radical policies The appointment of Kataoka could tip the balance more in favor of aggressive stimulus just as the central bank quietly retreats from its monetary experiments Whether to resort to interest rates or quantity in steering policy depends on judgment at the time Kataoka said I d like to avoid mistakes while taking into account economic conditions at the time and various policy options Suzuki said the BOJ s negative interest rate policy has had a significant impact on banks earnings but that is not hurting the financial system or intermediation The two men join just after the central bank pushed back the target for hitting its ambitious 2 percent price goal for the sixth time since Kuroda launched his huge asset buying program in 2013 On July 20 the BOJ maintained its short term interest rate target of minus 0 1 percent and its 10 year government bond yield target of around zero percent
The newcomers first policy setting meeting will be on Sept 20 21 |
MS | Heading to Germany because of Brexit Call this free tax hotline | FRANKFURT Reuters The western German state of Hesse home to Frankfurt has set up a toll free hotline and website both in English aimed at handling tax queries from finance professionals considering a move in the age of Brexit Do you have any initial questions regarding your income tax matters and in English Then you have come to the right place the website gofrankfurttax com welcomes visitors on its homepage which is illustrated with a banner of the Frankfurt skyline The English language hotline is free for anyone calling from Germany or Britain Hesse s Finance Minister Thomas Schaefer also invites prospective migrants for face to face conversations with his tax experts The state has been working hard to market itself as a home to the financial industry following Britain s exit from the European Union Wall Street banks Morgan Stanley NYSE MS and Citigroup NYSE C both said last week they were going to establish their EU trading headquarters in Frankfurt to ensure they could still serve customers in the bloc after Brexit German tax law is a challenge even for Germans said Bernadette Weyland state secretary in the Hesse finance ministry Those who come from another country are sure to have even more questions
International banks that have said they would set up subsidiaries in Frankfurt include Mizuho Financial Group Nomura Daiwa Securities Sumitomo Mitsui Financial Group and British lender Standard Chartered LON STAN |
MS | AstraZeneca slump dominates European shares on busy earnings day | By Danilo Masoni MILAN Reuters The biggest one day drop in AstraZeneca shares following a drug study failure dominated trading in Europe on Thursday though a handful of well received corporate results helped broader indexes nudge higher The British drugmaker fell 15 percent to its lowest level in almost five months after a closely watched advanced lung cancer trial failed in what Morgan Stanley NYSE MS said was a major setback for the group Regional healthcare stocks fell 1 1 percent to their lowest in more than four months but solid results from big firms including Swiss drugmaker Roche beer maker AB InBev and Diageo LON DGE underpinned gains on broad indexes The pan European STOXX 600 index added 0 1 percent higher and euro zone bluechips rose 0 4 percent while German s DAX fell 0 4 percent as results from BASF and Deutsche Bank DE DBKGn underwhelmed Markets overall are flat as earnings are pretty mixed today AFS Group analyst Jauke de Jong Diageo up 6 percent provided the biggest boost to the STOXX after the maker of Johnnie Walker whisky and Smirnoff vodka raised its profitability target and announced a share buyback program Roche gained 1 2 percent after it raised its 2017 outlook while AB InBev up 5 5 percent reported an increase in second quarter earnings Thursday will see the heaviest day of European earnings in the current earnings season and by the end of the week about half the market cap of STOXX 600 will have reported earnings As of the previous day s close a quarter of the companies on the MSCI Europe had issued results with nearly half of them beating profit expectations and 8 percent matching them Results point to aggregate second quarter earnings growth of 11 percent Elsewhere French firms Elior Group and Imerys were the worst performers on the STOXX 600 after AstraZeneca after respective results Among large companies Nestle results also disappointed Its shares fell 1 5 percent after the world s largest food group trimmed its 2017 sales outlook adding fuel to shareholder demands on CEO Mark Schneider to speed up a turnaround It shows you that CEO Mark Schneider has a lot of work to do and there isn t a magic wand in terms of getting the top line going said Jon Cox from Kepler Cheuvreux
Siemens Gamesa fell 15 percent after third quarter net profit missed analyst expectations |
JPM | Stocks Head for Sixth Loss Shrug off Tech Gains | Bloomberg U S stocks fell for a sixth day extending the longest losing streak of Donald Trump s presidency as energy companies and utilities plunged and tech couldn t maintain earlier gains The dollar fell with oil Treasuries rose and gold posted its biggest gain in more than two years
The S P 500 Index dropped more than 1 percent on the day and is down nearly 6 percent in the past six sessions The tech heavy Nasdaq indexes surrendered earlier rallies and added to their declines on Wednesday Trading was heavy with volume surging roughly 55 percent above average for this time over the past 30 days
This is just a normal run of the mill correction that happens to be concentrated in some of the more expensive and most notable names in technology said Jamie Cox managing partner at Harris Financial Group But I think it s been precipitated by the uncertainty about global growth and whether or not Fed policy is going too far too fast
In addition to energy insurers and household products manufacturers weighed on the market while media companies and software makers were among the few bright spots The Cboe Volatility Index declined but remained close to its highest level since April
Volatility is back and it may require more active strategies on the part of investors to pursue their long term goals John Lynch chief investment strategist for LPL Financial wrote in a note to clients Thursday Volatility is also not to be feared but embraced as varying data points will cause bouts of market anxiety But remember that fundamentals are still strong
Earlier Asian and European equities plunged as the market rout extended around the world China s Shanghai Composite gauge closed down more than 5 percent and Taiwan s technology heavy benchmark plummeted more than 6 percent Europe s main equity index fell to the lowest since early 2017 The euro and the pound both advanced
Investors seeking to pinpoint the cause of the current rout in equities have no shortage of culprits U S companies are increasingly fretting the impact of the burgeoning trade war while the same issue prompted the International Monetary Fund to dial down global growth expectations In the tech sector which was a key driver of the rally that pushed American equities to a record just a month ago expensive looking companies have been roiled by a hacking scandal
Against this backdrop the Federal Reserve has been trimming its balance sheet and raising interest rates provoking the ire of an unpredictable American president and helping force a repricing of riskier assets
What you re seeing right now is a bit of a panic we wouldn t say this looks like the end of the cycle said William Hobbs head of investment strategy at Barclays LON BARC Investment Solutions in London You ve got to try to keep the skin in the game for as long as possible because it s an incredibly profitable period of the cycle to be invested through if you can keep your nerve
Elsewhere West Texas Intermediate crude tumbled toward 71 a barrel amid a broad decline in commodities as OPEC cut estimates for demand Precious metals gained with gold A Bloomberg index of cryptocurrencies dropped as much as 11 percent
Here are some key events coming up
The U S Treasury is in the midst of 230 billion worth of debt auctions this week
The IMF and World Bank will hold meetings in Bali beginning Friday where finance chiefs from around the world will gather
JPMorgan Chase Co NYSE JPM Citigroup Inc NYSE C and Wells Fargo NYSE WFC Co kick off earnings season for U S banks on Friday
These are the main moves in markets
Stocks
The S P 500 Index was down 1 2 percent as of 2 20 p m in New York
The Dow Jones Industrial Average declined 1 1 percent while the Nasdaq 100 Index slid 0 6 percent
The Stoxx Europe 600 Index sank 2 percent to the lowest since December 2016
The MSCI Asia Pacific Index plunged 3 3 percent to the lowest since May 2017
The MSCI Emerging Market Index dropped 3 1 percent to the lowest since April 2017 on the biggest decline in more than two years
Currencies
The Bloomberg Dollar Spot Index fell 0 5 percent
The euro increased 0 6 percent to 1 1586
The British pound added 0 2 percent to 1 3219
The Japanese yen rose 0 2 percent to 112 06 per dollar
Bonds
The yield on 10 year Treasuries declined two basis points to 3 14 percent
Germany s 10 year yield decreased three basis points to 0 517 percent
Britain s 10 year yield dipped five basis points to 1 674 percent
Commodities
The Bloomberg Commodity Index declined 0 5 percent
West Texas Intermediate crude decreased 2 9 percent to 71 02 a barrel
Gold rose 2 4 percent to 1 223 22 an ounce its biggest gain since June 2016 |
JPM | U S banks need more than in line third quarter to boost shares | By Sin ad Carew Reuters Major U S banks beginning on Friday are expected to report earnings growth that exceeds that of the broader market but that may not be enough to impress investors who have been unimpressed by loan growth and are anticipating higher deposit rates and credit costs Investors skepticism has been significant in 2018 The S P 500 Banks Index has fallen 3 7 percent year to date compared with a 3 6 percent increase for the S P 500 SPX even after a market tumble on Wednesday Still Wall Street expects S P 500 banks to report third quarter earnings growth of 26 5 percent compared with a 21 4 percent for the broader S P 500 according to I B E S data from Refinitiv JPMorgan Chase Co N JPM Citigroup Inc N C and Wells Fargo Co N WFC will kick off the reporting season on Friday It s going to be an OK quarter Capital markets activity will be a little disappointing said Sandler O Neill analyst Jeffery Harte referring to trading results Even if earnings reports meet expectations bank stock weakness may continue as analysts struggle to find the next positive catalyst but can easily identify risks such as rising deposit costs and a deterioration in credit quality I don t think if the results are in line that it really gets us moving in the right direction you continue to have late cycle concerns weighing on the stocks said Michael Cronin investment manager at Aberdeen Standard Investments in Boston One issue is how much bank costs will rise as banks feel pressure to raise interest rates paid on customer deposits since the U S Federal Reserve has already raised overnight rates eight times since late 2015 and has settled into a quarterly tightening cycle On top of this credit costs are so low that analysts worry they will increase if the economy deteriorates because they can t get much better from where they are right now according to Cronin Many investors had started out the year with high hopes for bank stocks as they had expected the Trump administration s slashing of corporate taxes to boost loan growth with the broader economy But 10 months after the tax cut this has yet to happen and investors seem to be losing hope I m starting to think it s not going to accelerate from here said Sandler O Neill s Harte adding that it seems investors have adopted more of a show me attitude in the face of recent trends Those trends include concerns about macroeconomic growth and the trade war between the United States and China You ve talks about tariffs and trade wars which continue to weigh on sentiment and can really impact companies decisions about whether to invest in longer term projects said Aberdeen Standard s Cronin Investor concerns about loan growth are big enough they appear to be offsetting any boost from a recent spike in U S Treasury yields Bank shares often rise on a steepening yield curve when the gap between short and long dated bonds widens as a steeper yield curve raise banks net interest income But banks have already erased any gains they made last week in response to a sharp increase in Treasury yields as investors are looking at the longer term
What s going to get incrementally better in the next year or two for bank earnings growth to accelerate said Sandler O Neill s Harte That s what the market is wrestling with not such much that there s a downturn looming but what s going to drive another incremental leg up in earnings growth |
JPM | SEC in no rush to change quarterly reporting chairman | By Pete Schroeder WASHINGTON Reuters The head of the U S Securities and Exchange Commission said on Thursday the agency was in no rush to change quarterly reporting requirements for large public companies two months after President Donald Trump ordered his agency to study the matter I don t think quarterly reporting is going to change for our top names anytime soon said Chairman Jay Clayton at an event in Washington confirmed by an SEC spokeswoman In August Trump tweeted the SEC should study a semiannual reporting requirement saying he had heard from business leaders it would allow greater flexibility save money The day of Trump s tweet Clayton said in a statement the president had raised a key consideration for U S companies and that the agency would continue to study public company reporting requirements including the frequency of reporting A move to semiannual reporting would mark a significant shift from decades of quarterly reporting by U S companies and put the U S in line with European Union and United Kingdom rules Some investors and analysts said less frequent reporting could result in lower costs for companies and remove short term demands and expectations But others insist the quarterly system provides critical information to investors and reduces volatility in markets Billionaire investor Warren Buffett and JPMorgan Chase Co N JPM Chief Executive Jamie Dimon wrote in the Wall Street Journal in June that companies should move away from quarterly guidance but did not call for an end to quarterly reporting
While Clayton threw cold water on the notion of less frequent reporting by large companies he said the frequency of reporting for smaller companies may merit further study Clayton has made attracting more companies to public markets a top priority since taking control of the SEC in 2017 |
JPM | FX Tranquillity Shows Faith in Fed Staying Course in Stock Rout | Bloomberg The currency market has a message for global investors Don t assume the sell off in U S stocks will knock the Federal Reserve off its tightening path
Investors have refrained from piling into traditional haven currencies and foreign exchange volatility has been held in check While the U S share market turmoil of the past few days has encouraged some trimming of bets on Federal Reserve interest rate increases the current scale of the risk sell off appears unlikely to derail the central bank s plan to tighten policy Some observers point to February when a spike in equity volatility did little to deter the Fed from its path That along with the global nature of the stock market rout may be helping FX markets to remain relatively circumspect
Appetite for the Japanese yen remained relatively muted even as the U S stock sell off extended to equity markets in Asia and Europe while the Swiss franc has actually fallen versus the euro Showing how FX moves have been contained a JPMorgan Chase Co NYSE JPM index of G 7 volatility actually slid Wednesday and an equivalent gauge for emerging market currencies is below last week s closing level
The scale of the moves in FX is not remarkable suggesting that investors don t yet see the equity moves as a game changer Westpac Banking Corp strategists including Sean Callow wrote in a note Thursday
The euro is up more than 0 6 percent over the past two days against the franc at about 1 14724 while the yen is up less than 1 percent against the dollar The Australian dollar cross rate against the Japanese currency often viewed as a global barometer of risk has recovered some ground after dipping Wednesday
We saw something similar in February where the spillover into currency markets from an equity specific sell off was limited said Viraj Patel a currency strategist at ING Groep AS INGA NV If this is just deja vu when it comes to the equity market sell off and VIX spike then it s just an equity market correction that has a small and trivial spillover into FX and bonds
The current bout of equity turmoil is yet to match the February 2018 episode and if anything the Fed sounds even more confident about the resilience of the U S economy than it did in the first quarter according to the Westpac strategists The Fed will probably regard the equity pullback as immaterial to the growth and inflation outlook meaning there s little prospect of policy makers stepping in with rate cuts to stem a slide in stocks they wrote If that s the case it is probably wise for FX markets to not be aggressive in response to this bout of equity turbulence
Treasury Focus
ING s Patel is watching haven bonds as a continued stock sell off that pushes yields down by 10 to 20 basis points could trigger a move in currency markets and see the yen appreciate to 110 to the dollar he predicts That would be the strongest level for the Japanese currency since Aug 21
Recent spreading widening in Treasuries could explain at least some of the quietude according to Steve Barrow head of currency strategy at Standard Bank in London The risk off flight to the yen is being counter balanced by spread widening in Treasuries he said
As for the rest of the market Barrow wasn t entirely certain but pointed to correlation between global equities markets as a possible factor Stock markets move so much in tandem they re so highly correlated he said by phone It doesn t give currencies as much room for variation than we would ve seen in the past
Until recently any market uncertainty has provided support for the dollar and traditional beneficiaries of risk off sentiment haven t been getting the usual traction said Jeremy Stretch head of Group of 10 currency strategy at Canadian Imperial Bank of Commerce
The longer term presumptions of risk off tendencies benefiting the Swissie and the yen are going to come back into play Stretch said |
JPM | Day Ahead Top 3 Things to Watch | Investing com Here s a preview of the top 3 things that could rock markets tomorrow
1 Big Bank Earnings Highlight Pre market
Earnings season picks up tomorrow as three big name banks report And with the volatile market desperate for some positive news there s a lot riding on the numbers
Dow component JPMorgan Chase NYSE JPM is on the docket expected to earn 2 27 per share on revenue of more than 27 billion
Citigroup NYSE C will also report On average analysts predict a profit of 1 67 a share on revenue of around 18 5 billion
And Wells Fargo NYSE WFC is expected to come in with earnings of 1 19 per share with revenue of about 22 billion
Investors will be focusing on possible weak spots in the results which include slowing loan growth and pressure on net interest margins
Citi and J P Morgan stocks are slightly down in the last three months while Wells Fargo is off more than 8
2 Import Export Prices and Michigan Sentiment Arrive
Economic indicators keep coming tomorrow
The latest numbers on import and export prices arrive at 8 30 AM ET 12 30 GMT with economists predicting a 0 2 September increase for both
At 10 00 AM ET the University of Michigan releases its preliminary measure of October consumer sentiment
On average economists are predicting a slight rise to 100 4
Also at the University of Michigan you ll find Chicago Fed President Charles Evans who is speaking at 9 30 AM ET Evans will give a speech at the ENGAGE Undergraduate Investment Conference
And Atlanta Fed President Raphael Bostic will be talking at 11 30 AM ET participating in an armchair chat on recruitment and economics at the Network of Schools of Public Policy Affairs and Administration Conference in Atlanta
3 Gold Finally Shines
The deep selling on Wall Street has finally piqued some interest in gold as a hedge
Gold jumped nearly 3 today its biggest one day gain in more than two years as the safe haven looked more attractive A weaker dollar on the tame CPI number also helped
The yellow metal settled above 1 200 an ounce today a key level of late
A steady rise in gold in the next few trading session could mean even less buying interest for equities
The next potential resistance is 1 238 Fawad Razaqzada technical analyst at forex com said |
JPM | JPMorgan Brexit Trade Backs Ireland s Stocks to Outshine London | Bloomberg The future of the Irish border has been a focal point of Brexit ever since the U K voted to leave the European Union almost 28 months ago What s garnered less attention is the impact the event will have on stocks traded in Dublin
But a new position taken by analysts at JPMorgan Chase Co NYSE JPM is speculating Ireland will outshine Britain after the divorce
JPMorgan moved to overweight on small and mid caps in Ireland versus U K betting the equities will outperform similarly sized British companies according to a report published Wednesday While many commentators suggest suggest Brexit will have a negative impact on the Irish economy overall the bank s strategy will pay as long as the nation s stocks fare relatively better
The stocks listed on Dublin s main market had a combined value of about 104 billion euros 120 billion as of Oct 10 according to daily summary from Euronext That compares with about 2 5 trillion pounds 3 3 trillion for companies on London s FTSE All Share Index data compiled by Bloomberg show
The Irish market is both cheap and growing in value Eduardo Lecubarri the bank s head of SMid strategy said in a phone interview But it s also small
Yet the Irish market s size may work in its favor as some investors are attracted to the greater volatility of a smaller exchange according to JPMorgan It takes very little to make the stocks move Lecubarri added
It hasn t been plain sailing so far The 45 member Irish Stock Exchange Overall Index has fallen more than 5 percent since the June 2016 referendum while the STOXX 600 Europe benchmark has gained about 4 percent and the FTSE All Share gauge around 11 percent
But after Brexit Ireland s strength as an EU member and the bloc s relationships with emerging markets will outweigh any loss of trading with the U K he said In any economy it s more about opening up to the world and opening up to the east than it is about strengthening ties with developed countries Lecubarri said
Meanwhile Lecubarri said the level of progress being made on a deal by U K and EU negotiators will have little impact on his Ireland call
The reality is better growth and cheaper and better balance sheets with a kicker he said Whatever happens it s going to be better on the margin for Ireland than it is the U K |
JPM | Top 5 Things to Know in the Market on Friday | Investing com Here are the top five things you need to know in financial markets on Friday October 12
1 Big Banks Report Earnings
Results from three of the four big banks are expected before the opening bell on Friday Investors are waiting to see whether bank stocks remain a safe haven after the volatile week in the stock market as JPMorgan NYSE JPM Wells Fargo NYSE WFC and Citigroup NYSE C kick off the start of third quarter earnings results
Analysts expect JPMorgan to report earnings per share of 2 27 on revenue of 27 58 billion while Citigroup is expected to announce 1 67 earnings per share on revenue of 18 45 billion Meanwhile Wells Fargo is expected to show earnings per share of 1 19 and 21 82 billion in revenue
2 Stocks Recover From Volatile Week
Global stocks were poised to recover on Friday with Wall Street set to open higher after closing in the red all week as U S inflation slowed in September
The S P 500 futures rose 0 92 while Dow futures gained 0 80 and tech heavy Nasdaq 100 futures increased 1 60
Data on Thursday showed that consumer prices rose less than expected in September as underlying inflation pressures appeared to cool slightly
U S President Donald Trump blamed the Federal Reserve s uptick in interest rates for the fall in stock prices
It s a correction that we ve been waiting for for a long time but I really disagree with what the Fed is doing he said Wednesday
Trading in Europe was higher with the DAX FTSE 100 and CAC 40 all in the green
Meanwhile in Asia stocks closed higher In Hong Kong the Hang Seng rose 2 12 and the China A50 Index increased 2 47 The Shanghai Composite was up 0 91 while in Japan the TOPIX inched up 0 03 and the Nikkei 225 gained 0 56
3 UK Closes in on Brexit Deal
The UK is closing in on a deal with the European Union to leave the Financial Times reported Prime Minister Theresa May has told her cabinet that her negotiation team is close to finalizing the UK s divorce from the EU including details over the Irish border item Settling the Irish backstop issue over whether or not Northern Ireland remains in the single market or whether the country imposes a hard border has been one of the biggest hurdles in negotiations
Cable reversed on earlier gains with GBP USD falling to 1 3215
4 U S Dollar Recovers Slightly
The greenback gained some strength on Friday as investors gained back confidence in the U S economy after inflation data on Thursday
The U S dollar index which tracks the greenback against a basket of other currencies was at 94 77 not far from a two week low of 94 67
The dollar had fallen this week as a sell off in equities and increasing bond yields put pressure on the greenback
5 Oil Prices Rise on Oversupply Fears
Oil prices rose on Friday as an increase in stockpile data sparked concerns about a global oversupply as demand for oil wanes
Data on Thursday showed that inventories in the U S continue to rise more than expected leading to a concern of oversupply U S crude inventories rose by 6 million barrels last week compared with the general consensus of a 2 6 million barrel increase the EIA reported on Thursday
A week earlier the agency reported 8 million barrel rise in U S crude stocks
Meanwhile the Organization of the Petroleum Exporting Countries cut its oil demand growth estimates for 2018 and 2019 in its monthly report on Thursday
The organization revised its global oil demand growth to 1 54 million barrels per day this year down by 80 000 bpd Potential headwinds to global economic growth were cited as the reason for the downgrade
The weekly U S Baker Hughes oil rig count which is a leading indicator of demand for oil products comes out later in the session |
MS | Darst The Little Book That Still Saves Your Asset | In 2008 David M Darst currently the chief investment strategist of Morgan Stanley s global wealth management group and chairman of its asset allocation committee wrote The Little Book That Saves Your Assets Five years later he is back with an update The Little Book That Still Saves Your Assets What the Rich Continue to Do to Stay Wealthy in Up and Down Markets Wiley 2013 The recommended keys to protecting your wealth as you might suspect from Darst s credentials are asset allocation and diversification The author does not however offer the reader a model portfolio that would be appropriate for investors of all ages and personalities and for all situations Portfolios must be personalized What is right for a 25 year old who wants to buy a house in two years is different from what is right for the 25 year old who is saving for his child s college education As Darst writes The single most important factor in determining how you manage your investments and structure your asset allocation plan is you From the start you need to establish your goals honestly evaluate your current financial condition and be aware of your state of mind and feelings about the financial markets pp 91 92 Throughout the book Darst assumes the role of a trusted financial advisor and sometimes a meta advisor with the help of words of wisdom from Uncle Frank If you have a small portfolio and a resolute do it yourself attitude you can heed his advice and perhaps profit Otherwise you can learn what to look for in a money manager Admittedly the DIYer who is new to investing will face a pretty steep learning curve and will need far more than this little book to design and implement an appropriate investment plan Darst introduces him for instance to strategic vs tactical asset allocation a distinction deceptively simple in principle tough to carry out effectively A single sentence highlights the difficulties A large part of your success in using Tactical Asset Allocation is the ability to determine what an asset s true intrinsic value is at a given point in time how far out of line the asset s price is versus its true intrinsic value and what conditions will make it return to its value p 85 Considering that even those who earn their livings as stock analysts usually lack this ability and that so called true value rarely coincides with price the amateur investor who wants to pursue this tactic faces an uphill battle For those with some experience in the financial markets Darst s book is an enjoyable nay wise read You ll have two new uncles to guide you in your effort to save your assets Frank and David |
MS | Sector Detector Bulls Plot Attack On 2012 Highs | Another earnings season is underway I haven t noticed much in the way of pre announcements i e warnings which is a positive sign However the big banks continue to consolidate and rationalize their cost structure in the wake of the post 2008 crisis and the resulting new regulations with Morgan Stanley on Wednesday announcing layoffs of some 6 of its workforce primarily in sales trading and investment banking roles plus some IT support But this is mostly impacting the big banks alone while much of the rest of the Financial sector looks strong and poised to lead the markets this year Overall the markets sure look positive Despite the brief stock rally in the wake of the fiscal cliff resolution investors are now wary of the intractable problems that remain particularly the looming debt ceiling and runaway spending But the bulls are pushing ahead consolidating their recent gains and appear to be plotting an attack on the 2012 highs On that bullish note Sabrient Baker s Dozen Top Stocks list for 2013 will be released on January 11 in conjunction with a Unit Investment Trust for the same 13 high potential and reasonably priced stocks Last year s model portfolio gained an astounding 43 You can learn more The S P 500 SPDR Trust SPY closed Wednesday at 145 92 which is just about where it was last Wednesday consolidating gains and reloading in an attempt to break through triple top resistance in the 146 148 range You can see on the chart that price is still consolidating last week s massive gap breakout which blasted through resistance at 143 and 145 It now is trying to break through this area of triple top resistance 146 148 Oscillators RSI MACD and Slow Stochastic are all quite overbought although MACD shows a bullish crossover so perhaps a partial retracement of the breakaway gap is in the works before the next breakout The CBOE Market Volatility Index VIX a k a fear gauge closed Wednesday at 13 81 which is well below the important 20 threshold but also right at strong support around 14 The mixed message here is that fear is low which is bullish for stocks but a bounce from support might send stocks lower at least temporarily Latest rankings The table ranks each of the ten U S industrial sector iShares ETFs by Sabrient s proprietary Outlook Score which employs a forward looking fundamentals based quantitative algorithm to create a bottom up composite profile of the constituent stocks within the ETF In addition the table also shows Sabrient s proprietary Bull Score and Bear Score for each ETF High Bull score indicates that stocks within the ETF have tended recently toward relative outperformance during particularly strong market periods while a high Bear score indicates that stocks within the ETF have tended to hold up relatively well during particularly weak market periods Bull and Bear are backward looking indicators of recent sentiment trend As a group these three scores can be quite helpful for positioning a portfolio for a given set of anticipated market conditions Observations 1 Technology IYW has surged back to the top and into a tie with Healthcare IYH each with an Outlook score of 86 IYH shows relatively good support among analysts a reasonably good forward P E and solid return ratios while Technology IYW shows strong projected growth and a low forward P E as well as impressive return ratios Consumer Goods IYK comes in third this week at 73 and then there s a 20 point gap down to fourth place Industrial IYJ 2 Telecom IYZ stays in the cellar with an Outlook score of 14 and is again joined in the bottom two this week by Consumer Services IYC with a 22 Stocks within IYZ appear overvalued from the standpoint of the forward P E and lack analyst support 3 This week s rankings are decidedly less defensive given the rise in Tech Industrial and Basic Materials IYM at the expense of Consumer Goods Overall I would characterize the fundamentals based Outlook rankings as neutral but with a bullish trend in place compared with recent rankings 4 Looking at the Bull scores Technology IYW has surged into the lead as the clear leader on strong market days scoring 58 Utilities IDU is the laggard on strong market days scoring 41 In other words Tech stocks have tended to perform the best when the market is rallying while Utilities stocks have lagged 5 Looking at the Bear scores none of the sectors are scoring very high Utilities IDU is still the favorite safe haven on weak market days but it s only scoring an anemic 50 which indicates that most everything is selling off during recent market weakness Energy IYE is the worst during market weakness as reflected in its low Bear score of 39 but there s only an 11 point range from top to bottom Still Energy stocks have been selling off the most when the market is pulling back while Utilities stocks have held up the best 6 Overall Technology IYW now shows the best all weather combination of Outlook Bull Bear scores Adding up the three scores gives a total of 187 Telecom IYZ is by far the worst at 112 Looking at just the Bull Bear combination Healthcare IYH although tied for first in Outlook score doesn t look very good at all with a total score of only 91 which is tied with Utilities IDU for the lowest Basic Materials IYM has the best score at 102 Undervalued SectorsThese scores represent the view that the Technology and Healthcare sectors may be relatively undervalued overall while Telecom and Consumer Services sectors may be relatively overvalued based on our 1 3 month forward look Top ranked stocks within IYW and IYH include Google GOOG Rackspace Hosting RAX Intuitive Surgical ISRG and Regeneron Pharmaceuticals REGN Disclosure Author has no positions in stocks or ETFs mentioned About SectorCast Rankings are based on Sabrient s SectorCast model which builds a composite profile of each equity ETF based on bottom up aggregate scoring of the constituent stocks The Outlook Score employs a fundamentals based multi factor approach considering forward valuation earnings growth prospects Wall Street analysts consensus revisions accounting practices and various return ratios It has tested to be highly predictive for identifying the best most undervalued and worst most overvalued sectors with a 1 3 month forward look Bull Score and Bear Score are based on the price behavior of the underlying stocks on particularly strong and weak days during the prior 40 market days They reflect investor sentiment toward the stocks on a relative basis as either aggressive plays or safe havens So a high Bull score indicates that stocks within the ETF have tended recently toward relative outperformance during particularly strong market periods while a high Bear score indicates that stocks within the ETF have tended to hold up relatively well during particularly weak market periods Thus ETFs with high Bull scores generally perform better when the market is hot ETFs with high Bear scores generally perform better when the market is weak and ETFs with high Outlook scores generally perform well over time in various market conditions Of course each ETF has a unique set of constituent stocks so the sectors represented will score differently depending upon which set of ETFs is used For Sector Detector I use ten iShares ETFs representing the major U S business sectors About Trading Strategies There are various ways to trade these rankings First you might run a sector rotation strategy in which you buy long the top 2 4 ETFs from SectorCast ETF rebalancing either on a fixed schedule e g monthly or quarterly or when the rankings change significantly Another alternative is to enhance a position in the SPDR Trust exchange traded fund SPY depending upon your market bias If you are bullish on the broad market you can go long the SPY and enhance it with additional long positions in the top ranked sector ETFs Conversely if you are bearish and short or buy puts on the SPY you could also consider shorting the two lowest ranked sector ETFs to enhance your short bias However if you prefer not to bet on market direction you could try a market neutral long short trade that is go long or buy call options on the top ranked ETFs and short or buy put options on the lowest ranked ETFs And here s a more aggressive strategy to consider You might trade some of the highest and lowest ranked stocks from within those top and bottom ranked ETFs |
MS | The Four Week Move In Oil Is Criminal | No Fundamental Reason For Oil To Move Higher When is this country going to say enough is enough and start putting people in jail for this kind of blatant market manipulation It is obvious that the Oil market is manipulated oil has gone nowhere for five months because there is no reason for it to go anywhere i e there are a ton of supplies on the market no Middle East disruptions Israel hasn t attacked Iran huge builds in gasoline products no jump in demand And yet Oil mysteriously rises 10 in this common period for manipulating markets at the tail end of the year and the beginning of the new year let s juice it up before the contract rollover no one cares no one is really looking too closely at what we are doing everybody is focusing on fiscal cliff issues and the debt ceiling debate Another Bearish EIA Report So we have another bearish inventory report on Wednesday and oil refuses to go down why so they can force it one leg higher and get other trapped traders to buy their contracts from them so they don t have to rollover at a huge cost Force Stops And Reduce Rollover Exit Costs This is why when nobody takes physical delivery prices do not go down an equal amount on rollover as less than 005 take physical delivery this way prices aren t negatively affected after a large amount of money comes into a futures contract in an equally large rollover effect on exiting It is because the side which has pumped the futures contract with a bunch of cash makes the other side who rationally would be short based upon the normal price history and abundance of supplies has to cover thus buying the contracts from the pumpers in this case thus avoiding a large rollover effect when they have to exit because the contract ends after a month There is a whole art to the manipulating game in the oil market and the big banks play it quite well And given how inept congress who has investigated them twice in the last five years every time prices run up and has done nothing the big banks think they are invulnerable on this issue If you haven t clamped down on us yet and you cannot even get you own house in order then there is no way you can figure out how we are manipulating the oil markets Trading Records Last Four Weeks But enough is enough this is blatant criminal behavior and it is pretty easy to know who the culprits are just pull the last four weeks trading records and see who bought large positions the last four weeks while the fundamentals never materially changed in fact they got more bearish as the products supplies grew at a substantial rate and there were no Middle East supply disruptions or strategic hot spots that were in danger of having supply disruptions nada Asset Class Euphemism for Roulette Table Prices are not determined by the fundamentals in a manipulated market they are determined by oil being an Asset Class which is code word or a euphemism for giant Casino in New York instead of Vegas So we cannot legally play poker online in this country but you can pull up your internet connection and place your wager on the price of oil such hipocracy in this country The price of oil and as such gas is determined not by supply and demand factors but by whether Goldman Sachs or Morgan Stanley or J P Morgan puts 400 million on Black or Red the literal Oil Roulette game of the big banks If Goldman Sachs puts 400 million on Black prices go up if they put 400 million on Red prices go down as simple as that this is actually how the price of oil is determined nothing more and nothing less Market Correlation And Wagering Strategy Furthermore Goldman Sachs or Morgan Stanley doesn t factor in how this aligns with the fundamentals of the market they don t care they more care about how putting 400 million on Red will affect their other manipulated market the equities market as the equities market has a lot of oil and gas components in it Thus they do think somewhat strategically i e they try to align their betting strategies so when we put 400 million on Red let s pick a time when we are going to sell off the S P 500 as well This is why markets are so correlated even when one is a commodity that consumers put in their car and has supply and demand issues where the other is purely an investment vehicle Betting Reports And Market Collusion So Mr Consumer the next time gas prices go up and they will for the next month as retail prices catch up to the manipulated move in the futures market just realize that Morgan Stanley decided to put it on Black this past month and when your prices go down praise the alter of J P Morgan as they decided to go Red that particular month And it is always coordinated you never have the big banks putting on Black and Red thus trading wagering against each other They will all come out with their Betting Reports I mean Research Reports designating the myriad of market conditions as to why they decided to put the cash on Black versus Red this month CFTC These Small Fines Are A Joke The real reason for market selloffs in Oil is usually due to the occurrence that the big banks are going to sell off equities in the summer late April anyway so they start selling off oil as well i e 400 million on Red Such a scam such a rigged market this is getting so old where are the regulators I don t want congress to have more hearings on the subject I want the governmental organizations who are tasked with monitoring this to start investigating and shutting trading shops down EIA Reports Why Bother Why even continue this farce of having EIA reports anymore they are completely irrelevant to the price of oil and oil continuously goes the opposite way of the reports why even bother with this government agency it is not like the history of the market the last five years tracks the fundamentals of supply and demand Government Agencies And Regulators At Their Finest Let s just save some more tax money and shut down the agency at least consumers will only be getting screwed by wall street traders And while we are at it lets just abolish the SEC and the CFTC as they are completely useless Furthermore since all markets are ripe with manipulation essentially the wild west why not reduce government costs by cutting funds to these two agencies entirely They serve no real purpose when markets are corrupted everyday with Fake Orders Dark Trading Pools High Frequency Trading Algos and the like except to further government costs and bureaucracy while strictly providing the illusion of fair markets These organizations are a complete joke and have been for decades The Cheating Isn t Even Hidden Anymore Literally the CFTC only has to pull up a trading Dom watch it for five minutes and watch all the flashing fake large orders that appear and disappear as price reacts to their presence to know that these markets are infested with manipulation termites They obviously purposely look the other way or avoid looking at all OPEC Points To A Manipulated Market Americans have it all wrong you are not being held hostage by the middle east or the cartels like OPEC it is the Big Banks Cartel let s call them the Roulette Cartel that is holding the American and World consumer hostage and this crap needs to stop Even OPEC realizes this manipulation and they have publicly stated many times it is the speculators that are determining the price of oil But they use too kind of a word because these are just a bunch of Vegas style Roulette players with deep pockets who unlike Roulette have no risk because while there is randomness with a slight edge to the casino in Las Vegas the Oil Roulette table of the Wall street banks never have a losing quarter shoot they very rarely have a losing day and it is hard to ever lose when you re the ones moving the market Wall Street Mansions Don t Build Themselves Consumers realize when they gamble in Las Vegas that those casinos are not built by them winning but they probably don t realize to the extent that those Hampton and Connecticut mansions are being built through the sacrifices of consumers at the pump Yes there have been 30 million barrels added to gasoline supplies over the past 6 weeks but you are charged 30 cents higher in the futures market and these prices will be coming to a neighborhood near you Are You Kidding Me So let me get this straight the gasoline market went from a tight to a well supplied market in six weeks and consumers are going to be punished 30 cents more for this ridiculous build in more supplies All these gasoline supplies are building in storage because there is not enough consumer demand for the product and prices are going substantially higher not lower This is the exact opposite of how efficient markets are supposed to work in a non rigged market this very fact should be a wake up call for regulators Hello CFTC what is going on in the gasoline RBOB market Do you think you should start investigating you do exist for a reason there is a blatant clear cut case of price manipulation in the RBOB gasoline market now get to work and do your job |
MS | The 4 Week Manipulated Move In Oil Prices Is Criminal | No Fundamental Reason for Oil to Move HigherWhen is this country going to say enough is enough and start putting people in jail for this kind of blatant market manipulation It is obvious that the Oil market is manipulated oil has gone nowhere for five months because there is no reason for it to go anywhere i e there are a ton of supplies on the market no Middle East disruptions Israel hasn t attacked Iran huge builds in gasoline products no jump in demand And yet Oil mysteriously rises 10 in this common period for manipulating markets at the tail end of the year and the beginning of the new year let s juice it up before the contract rollover no one cares no one is really looking too closely at what we are doing everybody is focusing on fiscal cliff issues and the debt ceiling debate Another Bearish EIA ReportSo we have another bearish inventory report on Wednesday and oil refuses to go down why so they can force it one leg higher and get other trapped traders to buy their contracts from them so they don t have to rollover at a huge cost Force Stops Reduce Rollover Exit CostsThis is why when nobody takes physical delivery prices do not go down an equal amount on rollover as less than 005 take physical delivery this way prices aren t negatively affected after a large amount of money comes into a futures contract in an equally large rollover effect on exiting It is because the side which has pumped the futures contract with a bunch of cash makes the other side who rationally would be short based upon the normal price history and abundance of supplies has to cover thus buying the contracts from the pumpers in this case thus avoiding a large rollover effect when they have to exit because the contract ends after a month There is a whole art to the manipulating game in the oil market and the big banks play it quite well And given how inept congress who has investigated them twice in the last five years every time prices run up and has done nothing the big banks think they are invulnerable on this issue If you haven t clamped down on us yet and you cannot even get you own house in order then there is no way you can figure out how we are manipulating the oil markets Trading Records Last 4 WeeksBut enough is enough this is blatant criminal behavior and it is pretty easy to know who the culprits are just pull the last 4 weeks trading records and see who bought large positions the last 4 weeks while the fundamentals never materially changed in fact they got more bearish as the products supplies grew at a substantial rate and there were no Middle East supply disruptions or strategic hot spots that were in danger of having supply disruptions nada Asset Class Euphemism for Roulette TablePrices are not determined by the fundamentals in a manipulated market they are determined by oil being an Asset Class which is code word or a euphemism for giant Casino in New York instead of Vegas So we cannot legally play poker online in this country but you can pull up your internet connection and place your wager on the price of oil such hipocracy in this country The price of oil and as such gas is determined not by supply and demand factors but by whether Goldman Sachs or Morgan Stanley or J P Morgan puts 400 million on Black or Red the literal Oil Roulette game of the big banks If Goldman Sachs puts 400 million on Black prices go up if they put 400 million on Red prices go down as simple as that this is actually how the price of oil is determined nothing more and nothing less Market Correlation Wagering StrategyFurthermore Goldman Sachs or Morgan Stanley doesn t factor in how this aligns with the fundamentals of the market they don t care they more care about how putting 400 million on Red will affect their other manipulated market the equities market as the equities market has a lot of oil and gas components in it Thus they do think somewhat strategically i e they try to align their betting strategies so when we put 400 million on Red let s pick a time when we are going to sell off the S P 500 as well This is why markets are so correlated even when one is a commodity that consumers put in their car and has supply and demand issues where the other is purely an investment vehicle Betting Reports Market CollusionSo Mr Consumer the next time gas prices go up and they will for the next month as retail prices catch up to the manipulated move in the futures market just realize that Morgan Stanley decided to put it on Black this past month and when your prices go down praise the alter of J P Morgan as they decided to go Red that particular month And it is always coordinated you never have the big banks putting on Black and Red thus trading wagering against each other They will all come out with their Betting Reports I mean Research Reports designating the myriad of market conditions as to why they decided to put the cash on Black versus Red this month CFTC These small fines are a joke The real reason for market selloffs in Oil is usually due to the occurrence that the big banks are going to sell off equities in the summer late April anyway so they start selling off oil as well i e 400 million on Red Such a scam such a rigged market this is getting so old where are the regulators I don t want congress to have more hearings on the subject I want the governmental organizations who are tasked with monitoring this bullshit to start investigating and shutting trading shops down for this crap EIA Reports Why bother Why even continue this farce of having EIA reports anymore they are completely irrelevant to the price of oil and oil continuously goes the opposite way of the reports why even bother with this government agency it is not like the history of the market the last five years tracks the fundamentals of supply and demand Government Agencies Regulators at their finestLet s just save some more tax money and shut down the agency at least consumers will only be getting screwed by wall street traders And while we are at it lets just abolish the SEC and the CFTC as they are completely useless Furthermore since all markets are ripe with manipulation essentially the wild west why not reduce government costs by cutting funds to these two agencies entirely They serve no real purpose when markets are corrupted everyday with Fake Orders Dark Trading Pools High Frequency Trading Algos and the like except to further government costs bureaucracy while strictly providing the illusion of fair markets These organizations are a complete joke and have been for decades The Cheating isn t even hidden anymoreLiterally the CFTC only has to pull up a trading Dom watch it for five minutes and watch all the flashing fake large orders that appear and disappear as price reacts to their presence to know that these markets are infested with manipulation termites They obviously purposely look the other way or avoid looking at all OPEC points to a Manipulated MarketAmericans have it all wrong you are not being held hostage by the middle east or the cartels like OPEC it is the Big Banks Cartel let s call them the Roulette Cartel that is holding the American and World consumer hostage and this crap needs to stop Even OPEC realizes this manipulation and they have publicly stated many times it is the speculators that are determining the price of oil But they use too kind of a word because these are just a bunch of Vegas style Roulette players with deep pockets who unlike Roulette have no risk because while there is randomness with a slight edge to the casino in Las Vegas the Oil Roulette table of the Wall street banks never have a losing quarter shoot they very rarely have a losing day and it is hard to ever lose when you re the ones moving the market Wall Street Mansions don t build themselvesConsumers realize when they gamble in Las Vegas that those casinos are not built by them winning but they probably don t realize to the extent that those Hampton and Connecticut mansions are being built through the sacrifices of consumers at the pump Yes there have been 30 million barrels added to gasoline supplies over the past 6 weeks but you are charged 30 cents higher in the futures market and these prices will be coming to a neighborhood near you Are You Kidding Me So let me get this straight the gasoline market went from a tight to a well supplied market in six weeks and consumers are going to be punished 30 cents more for this ridiculous build in more supplies All these gasoline supplies are building in storage because there is not enough consumer demand for the product and prices are going substantially higher not lower This is the exact opposite of how efficient markets are supposed to work in a non rigged market this very fact should be a wake up call for regulators Hello CFTC what is going on in the gasoline RBOB market Do you think you should start investigating you do exist for a reason there is a blatant clear cut case of price manipulation in the RBOB gasoline market now get to work and do your job |
MS | Major Currency Pairs Analysis January 11 2013 | EUR USDEuropean policy makers are shifting focus from a financial crisis to an economic growth crisis We are now back in a normal situation from a financial viewpoint but we are not at all seeing an early and strong recovery the worst is over but what we still have to do is difficult The ECB may be unhappy with the current economic situation of the eurozone but optimism about the future is growing the central bank yesterday held off doling out more recession fighting medicine keeping its benchmark interest rate at 0 75 percent in a unanimous decision a month after calls for a cut from some of its Governing Council It maintained its so far untapped offer to buy the bonds of sovereigns acquiescing to reform demands and will hand banks further cheap long term funding Draghi s optimism that the three year Greece led turmoil is in remission led Morgan Stanley to suspend its prediction for further rate reductions It also spurred the euro to its biggest gain in four months versus the dollar and to its strongest since July 2011 against the yen Spain s 10 year borrowing costs which hit a euro era record of 7 75 percent in July fell below 5 percent for the first time since March after a bond house prices stagnated in December and may record a modest increase in 2013 U K credit conditions have eased and mortgage approvals have risen in a sign the Bank of England s new credit program may be starting to have an impact While Acadametrics said 2013 may be a slightly easier year for mortgage lenders it noted that the strength of the economic recovery remains a key factor Much depends on what happens in the macro economy but from a housing market perspective and for the moment at least we end 2012 on a positive note with the general consensus that 2013 will build on that Of course all of this is at a national level The picture is far less rosy at the regional and local level Bank of England policy makers refrained from adding further stimulus to the U K economy today after their new credit boosting program showed signs of success USD JPYThe yen touched the weakest level since June 2010 against the dollar on speculation the Bank of Japan will cooperate with Prime Minister Shinzo Abe s government to ramp up efforts to stimulate the economy Japan s currency headed for a ninth week of declines as the Cabinet approved 10 3 trillion yen 116 billion of fiscal stimulus after the nation posted wider than expected current account and trade deficits The euro held the biggest gain in five months against the greenback from yesterday before a report that may show the region s industrial output increased The yen is being sold after the current account data the yen is vulnerable to negative headlines as the selling pressure is gathering momentum The yen touched 89 35 per greenback the weakest since June 29 2010 before trading at 88 94 0 2 percent lower than yesterday s close It is poised for a ninth week of losses the longest losing streak since Canadian dollar rose to a three week high against its U S counterpart after China s exports topped estimates boosting speculation a strengthening economy will drive demand for Canada s commodities The loonie as the currency is nicknamed briefly pared gains on signs the Canadian housing market was cooling faster than forecast Near term momentum of the country s economy appears to be softer than projected even as activity is forecast to pick up this year Canada s dollar fell the most in almost three months versus the euro after the region s central bank held its interest rate target unchanged The housing situation is a risk for Canada but I don t think we re going to see the chaos we saw in the United States The Canadian dollar rose 0 5 percent to 98 32 cents per U S dollar reaching the strongest level since December 18 One Canadian dollar buys 1 0171 |
C | Sinopec Says It Lost 688 Million on Misjudged Oil Prices | Bloomberg Chinese refining giant Sinopec said it will book a 4 65 billion yuan 688 million charge on an oil trading loss in 2018 after it misjudged prices The state owned company revealed the size of the loss at the same time as issuing a profit alert saying it sees full year net income rising 22 percent to 62 4 billion yuan Key InsightsIt s the first time Sinopec has revealed the size of the loss at its trading unit known as Unipec which was first reported in December The loss is not as big as some had speculated Citigroup Inc NYSE C analysts had estimated the hit could be as much as 7 6 billion yuan The losses were incurred as Unipec made mistakes in its hedging business the company said in a filing It said previously that losses were unearthed during regular supervision and that independent auditors were looking into the issue Sinopec s full year net income estimate which it reported in Chinese accounting standards is below the 70 3 billion average forecast by 12 analysts compiled by Bloomberg which uses international standards Get MoreSinopec also reported full year oil and gas output at 451 million barrels of oil equivalent of whichCrude was 288 51 million barrelsNatural gas reached 977 12 billion cubic feet |
C | Citi sees stronger China wealthy client base in 2019 despite economy slowing | By Sumeet Chatterjee and Jennifer Hughes HONG KONG Reuters Citigroup NYSE C expects its China wealth management client base to grow faster in 2019 than last year at more than 30 percent the bank s country chief said despite the world s second largest economy slowing and feeling the pain of a trade war Citi s total number of wealth management clients in China with at least 1 million yuan 148 610 49 in investable assets grew 21 percent last year Christine Lam told Reuters in an interview The fact there s significant accumulation of wealth in China that is not going to change said the Citi veteran who has worked at the bank for more than three decades and was named China chief executive in 2016 Citi is planning to invest more in digital initiatives to help expand its distribution reach and take a bigger share of the onshore wealth management business in China she said Foreign banks including Citi HSBC and Standard Chartered LON STAN have been investing heavily in courting the mass affluent those with investable assets of between 100 000 and 1 million in China The banks are bullish about the medium to long term growth prospects in the country with the world s fastest growing pool of wealth even as a bruising trade war with the United States dragged the economy last year to its slowest growth in nearly three decades and caused volatility in markets Individual investable assets as per top markets png Chinese citizens collectively held investable financial assets of around 133 trillion yuan at end 2017 and the pool would rise to 175 trillion yuan by 2020 consultancy PwC said in a report in October Regulatory measures to boost scrutiny and transparency in the wealth management business augur well for foreign players already used to close regulatory scrutiny it said Apart from cracking down on the sale of shadow banking linked wealth products China is also getting local banks to set up separate subsidiaries for their wealth management business for better oversight Lam said that those regulatory initiatives would educate investors about risk and suitability and that s good for us China is one of Citi s 10 markets in Asia that generate over 500 million in revenue annually Besides wealth management the bank s onshore China businesses include retail corporate and commercial banking Under new rules announced by Beijing in late 2017 foreign firms can now own 51 percent of an onshore Chinese securities joint venture which provides debt and equity underwriting and financial advisory services Late last year Citi agreed to sell its minority stake in its China brokerage joint venture to its Chinese partner Orient paving the way for the U S bank to set up a majority owned underwriting and trading business Lam said that Citi was currently in talks to find a potential partner for the new securities business and that the new venture would have additional offerings such as equities trading |
C | Exclusive U S regulator drops fine against Citi over fair lending claims sources | By Patrick Rucker WASHINGTON Reuters A top U S bank regulator has decided not to fine Citigroup NYSE C for discriminating against minority mortgage borrowers dropping the public rebuke that some officials had sought two people familiar with the matter told Reuters The decision is sure to be watched by consumer advocates who have questioned whether the Office of the Comptroller of the Currency OCC will enforce fair lending rules under the leadership of Joseph Otting an appointee of President Donald Trump and former banker who has pledged to be friendlier to the industry Reuters reported in October that the OCC was mulling sanctions against Citi for failing to give minority customers mortgage discounts that were available to many other borrowers Instead of a fine the OCC issued a warning after Citi assured the regulator it had repaid borrowers and fixed faulty lending policies the people said this week A spokesman for the OCC declined to comment and a Citi spokesman declined to comment for this story In October Citi told Reuters it believed it had not engaged in discrimination but also said it had reimbursed affected customers and that the third largest U S lender had strengthened internal controls The warning from the OCC known as a matter requiring attention does not entail the monetary penalties or reputational hit that makes public sanctions more effective at discouraging misconduct said enforcement experts There is no deterrence for banks when abuses are kept secret said Eric Halperin CEO of non profit Civil Rights Corps and a former Department of Justice official who prosecuted discrimination cases under former President Barack Obama Regulators should bring bad behavior to light Some OCC staff have argued since early 2017 that the faulty mortgage program violated federal law requiring equal treatment for all races Reuters has reported But officials seeking a tough line against Citibank were disappointed This summer the Justice Department decided it would not penalize the bank Reuters reported in October In recent weeks the OCC also declined to publicly sanction Citi sources said Citi s problem sprang from a relationship pricing program common throughout the industry that gives customers holding large deposits with the bank a preferential mortgage rate In 2014 Citi identified errors implementing the program the bank said in October Sources familiar with the issue said some minority borrowers who qualified for the mortgage rate discount had not received it Citi flagged the issue to the OCC saying the discrepancies were inadvertent and it had taken steps to resolve them Following a review OCC staff agreed in early 2017 that the loans were racially skewed and recommended public sanctions according to the sources In recent weeks a panel of senior OCC officials voted to issue the written warning the sources said Although Otting does not sit on that panel he has the final say on enforcement In October Citi said less than 4 percent of its mortgages were affected by the relationship pricing problem and harmed customers were typically refunded 850
The bank declined to say exactly how many customers were harmed but a Reuters estimate based on mortgage lending data provided by Inside Mortgage Finance suggests thousands of qualified borrowers may have missed out on the discounts |
C | U S corporate enthusiasm for France cools survey shows | By Leigh Thomas PARIS Reuters A dimming economic outlook and massive street protests against President Emmanuel Macron have made France less attractive for U S companies with investments in the country a survey showed Firms from the United States are the single biggest source of foreign corporate investment in France and their confidence surged after Macron s 2017 election on a reform platform But the latest annual survey by the American Chamber of Commerce in France and consultants Bain Company released on Tuesday showed that only 30 percent of executives at U S companies in France consider the country an attractive market in 2018 down from 72 percent the year before The drop was mainly due to the number with a neutral view which rose to 50 percent from 19 percent the survey said However 42 percent of the executives at the 127 companies polled planned to hire more people in France while 41 percent intended to keep headcount stable Even though the poll was conducted in December and January when waves of violent street protests saw cars burnt and windows smashed in central Paris and other cities 55 percent of those polled said France enjoyed either a good or excellent perception at headquarters in the United States up from 48 percent With Britain facing Brexit Italy doubts about its budget and German questions about its post Merkel future France is proving easier to grasp for U S firms the survey found The situation in our neighboring countries is difficult to read Citigroup NYSE C country head Mathieu Gelis told journalists France as a bet on an industrial or financial project offers more certainty versus our partners in a volatile environment But I agree that it remains fragile he added Some 56 percent of those polled considered that the pace of Macron s reform drive was meeting their expectations while seven percent indicated that it was surpassing theirs Macron launched an overhaul of France s strict labor laws and scrapped its wealth tax during his first year in office but planned reforms of corporate law unemployment insurance and pensions are falling behind schedule
Following the recent unrest the social climate was a concern for 84 percent of the executives polled in the survey with 77 percent concerned about France s national debt which is flirting with 100 percent of economic output |
JPM | Leveraged Financials ETF FAS Hits New 52 Week High | Investors seeking momentum may have Direxion Daily Financial Bull 3X Shares LON FAS on radar now The fund recently hit a new 52 week high Shares of FAS are up approximately 104 1 from the 52 week low of 27 42 share
But could there be more gains ahead for this ETF Let s take a look at the fund and the near term outlook to get a better idea of where it might be headed
FAS in Focus
FAS focuses on providing exposure to financials companies in the U S equity market It charges 105 basis points in fee per year and has top holdings in Berkshire Hathaway Inc JPMorgan Chase Co NYSE JPM and Wells Fargo Co NYSE WFC with 6 7 6 7 and 5 2 allocation respectively as of Jun 30 2017 see
Why the Move
Lately the financial sector has been in the spotlight There are renewed hopes of a tax reform as Republican leaders unveiled a tax reform plan that aims at reducing tax rates for businesses and individuals Moreover investors are betting on another rate hike by the end of this year President Donald Trump s meeting with former Fed Governor Kevin Warsh as a likely candidate to replace Janet Yellen also drove financial stocks higher
More Gains Ahead
Zacks does not rank inverse and leveraged ETFs in view of their short term performance objectives However the ETF has an impressive So there is a promising outlook ahead for those who want to ride this surging ETF a shade further
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 | Japan s Mizuho chooses Frankfurt for post Brexit EU hub | TOKYO Reuters Japan s Mizuho Financial Group said it would set up a subsidiary in Frankfurt the latest Japanese bank to choose the German city as its new base in the European Union as Britain prepares to leave the bloc termed Brexit The decision was made as the bank assessed the likely impact of Brexit and Mizuho s new subsidiary will lead securities operations in the EU countries the bank said in a statement dated Monday Financial institutions have already announced plans to open new subsidiaries in the EU to ensure they can continue serving customers there after March 2019 Mizuho s peers Nomura Daiwa Securities and Sumitomo Mitsui Financial Group have also said they are planning to set up new units there as has British lender Standard Chartered LON STAN
Wall Street banks Morgan Stanley NYSE MS and Citigroup NYSE C both said last week they were going to establish their EU trading headquarters in the city to ensure they could still serve customers in the bloc after Brexit |
JPM | JPMorgan Says Dumping Small Stocks at Recessions a Huge Mistake | Bloomberg Avoiding smaller stocks around recessions may be a big error
While U S small cap and midcap equities have historically underperformed large caps during recession linked downturns the gap pales in comparison with smaller stocks superior returns over a full economic cycle according to a note from JPMorgan Chase Co NYSE JPM strategists led by Eduardo Lecubarri They say an economic contraction isn t imminent but are encouraging investors to limit risk in case one comes sooner than expected
During the past five recessions the Russell 2000 s average loss from peak to trough is 39 2 percent compared with 34 percent for the S P 500 according to JPMorgan s calculations
However their performance in the 12 months before the peak and the 12 months after the trough far exceeds that of the big companies The Russell 2000 beats the S P 500 s by 18 2 percentage points prior to the apex and 30 4 percentage points after the nadir
Avoiding SMid in hopes of timing a recession is a money losing strategy the strategists wrote It is around recessions that one cannot afford to be out of SMid |
JPM | Asia shares swoon to 19 month lows investors await U S data | By Wayne Cole and Andrew Galbraith SYDNEY SHANGHAI Reuters Share markets in Asia plunged to a 19 month low on Thursday after Wall Street s worst losses in eight months led to broader risk aversion a rise in market volatility gauges and concerns over overvalued stock markets in an environment of rapidly rising dollar yields MSCI s broadest index of Asia Pacific shares outside Japan was off 3 8 percent around 0500 GMT and earlier touched its lowest level since March 2017 Markets in Europe are seen as unlikely to stem the bleeding with financial spreadbetters expecting London s FTSE to open 1 4 percent lower at 7 047 Frankfurt s DAX to open down 1 8 percent at 11 501 and Paris CAC to open down 2 1 percent at 5 096 The sell off which came as the head of the International Monetary Fund Christine Lagarde said stock market valuations have been extremely high erased hundreds of billions of dollars of wealth around the region Equity markets are locked in a sharp sell off with concern around how far yields will rise warnings from the IMF about financial stability risks and continued trade tension all driving uncertainty summed up analysts at ANZ Japan s Nikkei ended down 3 9 percent its steepest daily drop since March while the broader TOPIX lost around 207 billion in market value falling 3 5 percent Shanghai shares dropped 4 9 percent on track for their worst day since February 2016 to their lowest level since late 2014 while China blue chips slid 4 4 percent Shares in Taiwan were among the region s worst hit with the broader index losing 6 3 percent Seoul s Kospi index was down 3 8 percent We can t see where the bottom point will be said Chien Bor yi an analyst at Taipei based Cathay Futures Consultant Further short term equity pain may well be unavoidable in South Korea as foreigners are selling but bond market is holding up said Peter Park head of securities management at South Korea s IBK Insurance Sinking global shares have raised the stakes for U S inflation figures due later on Thursday as a high outcome would only stoke speculation of more aggressive rate hikes from the Federal Reserve We re all just watching the Fed We re all watching the U S economy we re worrying about an inflation spike or a wages spike that will come through said Rob Carnell chief economist and head of research at ING in Singapore But he said that he expected the data to show inflation peaking rather than moving sharply higher which could restore a little bit of calm MSCI Asia Ex Japan index at 19 month lows On Wall Street the S P500 s sharpest one day fall since February wiped out around 850 billion of wealth as technology shares tumbled on fears of slowing demand The S P 500 ended Wednesday with a loss of 3 29 percent and the Nasdaq Composite 4 08 percent while the Dow shed 2 2 percent The blood letting was bad enough to attract the attention of U S President Donald Trump who pointed an accusing finger at the Fed for raising interest rates I really disagree with what the Fed is doing Trump told reporters before a political rally in Pennsylvania I think the Fed has gone crazy It was hawkish commentary from Fed policymakers that triggered the sudden sell off in Treasuries last week and sent long term yields to their highest in seven years The surge made stocks look less attractive compared to bonds while also threatening to curb economic activity and profits The rise in Treasury yields has been the primary catalyst for the sell off in equities since higher yields suggest a lower present value of future dividend streams assuming an unchanged economic outlook said Steven Friedman senior economist at BNP Paribas PA BNPP Asset Management It is also possible that equity investors are growing concerned that the Federal Reserve s projected rate path will choke off the expansion YUAN A FLASHPOINT The shift in yields is also sucking funds out of emerging markets putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States On Thursday the president of the World Bank said he is very concerned about trade tensions and warned of a clear global economic slowdown if tariff threats escalate China has suspended approvals for an overseas investment product in Shanghai and has asked license holders such as JPMorgan NYSE JPM Asset Management and Aberdeen Standard Investments to be low profile in marketing it as concerns rise in Beijing over possible outflow pressures China s central bank has been allowing the yuan to gradually decline breaking the psychological 6 9000 barrier and leading speculators to push the dollar up to 6 9377 at 0602 GMT The onshore yuan was trading at 6 9305 per dollar at 0606 GMT 65 pips weaker than the onshore close of 6 9240 Wednesday China s move has forced other emerging market currencies to weaken to stay competitive and drawn the ire of the United States which sees it as an unfair devaluation The yuan has already weakened significantly to offset the tariffs announced so far said Alan Ruskin Deutsche s global head of G10 FX strategy Further weakness could exacerbate concerns of a self fulfilling flight of capital and a loss of control There was also a danger for the U S if Beijing had to intervene heavily to support the yuan as it could lead to China selling U S Treasuries he added The dollar was already losing ground to both the yen and the euro as investors favored currencies of countries that boasted large current account surpluses The euro was at 1 1550 up from a low of 1 1429 early in the week The dollar lapsed to 112 17 yen a telling retreat from last week s 114 54 peak That left the dollar at 95 263 against a basket of currencies USD In commodity markets gold struggled to get any safety bid and edged down to 1 192 77 Oil prices skidded in line with U S equity markets even though energy traders worried about shrinking Iranian supply from U S sanctions and kept an eye on Hurricane Michael which closed some U S Gulf of Mexico oil output O N
Brent crude fell 1 6 percent to 81 75 a barrel while U S crude dropped 1 5 percent to 72 07 |
MS | Why Aren t We Seeing A Resource Stock Rally | Regular readers know that I have been tactically bullish by calling for a Santa Claus rally Indeed with relative breakouts seen in emerging market and European equities see Intriguing head and shoulders patterns the weight of the evidence suggests a friendly risk on environment Indeed the relative performance of the Morgan Stanley Cyclical Index against the market is also suggestive of a bullish view on the economy and risky assets Waiting for the resource sectorHere s what s bugging me With most of my indicators in bullish territory why is the resource sector lagging In particular why aren t Materials and Energy leading this market upward Until I can see participation from the resource sector in this rally I remain constructive but cautious on this bull move Here is the relative performance of the cyclically sensitive Materials ETF XLB against the market SPY Materials remain range bound on a relative basis While these stocks have shown some degree of relative strength in the last couple of weeks they are by no means in a relative uptrend indicating sustainable leadership This pattern is not restricted to American stocks The Basic Materials sector in Europe is showing a similar pattern of relative performance More worrisome for the bull case is the performance of the Energy sector which is in a minor relative downtrend against the market The relative performance of energy stocks in Europe can only be described as dismal Commodity outlook Nevertheless I remain cautiously bullish on the outlook for commodity prices The chart pattern for Dr Copper which is an important cyclically sensitive industrial commodity appears to be constructive The price of the red metal remains in an uptrend but at the current rate of ascent it will encounter important overhead resistance The truth of the matter is the energy complex is underperforming for reasons unknown Nevertheless a relative performance chart of the equal weight Continuous Commodity Index CCI against the CRB Index shows a relative uptrend indicating positive breadth To explain both the CCI and CRB have the same commodity components While the CCI is equal weighted the CRB is liquidity weighted which gives a higher weight to the energy complex Thus the CCI to CRB ratio is a measure of market breadth in the commodity complex The relative uptrend shown in the above chart is an indication that the general commodity complex is performing better than the headline CRB which is one reason why I remain cautiously bullish on the commodity outlook Bottom line I am watching for commodities and commodity related stocks to start outperforming as a sign that this rally has legs If we don t see sustainable relative strength breakouts from the Materials and Basic Industry sectors then I would interpret such a development as a negative divergence and a caution flag for the bulls For now I am inclined to give the bull case the benefit of the doubt but I remain cautious Disclosure Cam Hui is a portfolio manager at Qwest This article is prepared by Mr Hui as an outside business activity As such Qwest does not review or approve materials presented herein The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives financial situation or particular needs of any specific recipient Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions Past performance is not indicative of future results Either Qwest or Mr Hui may hold or control long or short positions in the securities or instruments mentioned |
C | Explainer Why crisis hit Argentina is now trying to weaken its currency | By Cassandra Garrison and Gabriel Burin BUENOS AIRES Reuters Argentina s central bank bought 190 million in foreign exchange markets over the past week to weaken its peso currency a radical change from just months ago when it was spending billions to prop it up and may be forced to intervene further After a run on the peso last year halved its value the central bank introduced a super tight monetary policy that boosted the currency But over the past week the strengthening currency has slipped outside the limits of a non intervention band agreed with the International Monetary Fund In part the improvement in the peso s fortunes has been due to dwindling expectations that the Federal Reserves will raise U S interest rates Rising U S Treasury yields last year drained money from emerging markets hurting the peso In addition the tighter monetary policy introduced last year to stabilize the peso has left many small and medium sized Argentine companies without access to pesos President Mauricio Macri s government froze growth in the money supply last year as part of the 56 3 billion IMF agreement As a result many companies in Argentina have been forced to sell dollars in recent weeks to make payments in local currency to pay suppliers salaries and taxes The combination of domestic and international factors pushed the peso to strengthen past the limit of its band for the first time on Jan 10 prompting the central bank to intervene for five days in a row over the past week On Thursday the bank remained on the sidelines of the market after several days of intervention as the peso fell 0 56 percent to 37 7 per U S dollar pushing it back inside the band The moving band stood at 37 523 pesos to the dollar to 48 559 on Thursday Yet some economists suggested the bank may be forced to resume its dollar buying in the coming days Purchases of dollars could continue as pressures on the exchange rate increase because companies and families have to sell dollars to get pesos said Martin Vauthier director of consultancy Eco Go While the slump in the peso last year sowed economic chaos the strengthening in the currency isn t necessarily a good thing economists say The weaker peso helped to make Argentina s products more competitive overseas raising hopes that a rebound in exports could fuel growth after a painful recession Argentina needs a weaker peso Further peso appreciation could halt the external adjustment that Argentina needs to rebalance and narrow its current account deficit said Edward Glossop who covers emerging markets at Capital Economics in London MAINTAINING THE BAND For Carlos de Sousa a senior economist at Oxford Economics Argentina s sky high interest rates need to fall to prevent the peso from strengthening above the upper limit of its band in the medium term as the central bank has pledged not to buy more than 50 million a day to stabilize it The central bank of Argentina has made too many promises You are promising that you are not going to allow the monetary base to grow and that you are not going to intervene more than 50 million a day and not more than 2 percent of your monetary base per month That is a really big set of promises De Sousa said However with elections looming in October in which business friendly President Mauricio Macri faces a tough battle to win a second term the peso could also come under selling pressure as political uncertainty mounts economists said If the peso strays outside the band for weeks on end it would raise questions over whether the bank should drop the policy said Ilya Gofshteyn of Standard Chartered LON STAN in New York It s almost a self fulfilling prophecy The more speculation heats up the more capital inflows you get and therefore the more pressure on the bank there is to let the band go all together Gofshteyn said Other economists took a cautious view that the band will remain in place but could flatten as the peso stabilizes
Over time you hope it becomes a freely floating exchange rate but there is a case for waiting until after the election before you make the next step said Dirk Willer an emerging market analyst at Citigroup NYSE C |
C | Davos Attendees Wonder What on Earth Is Donald Trump Up To | Bloomberg In 2018 Davos was basking in a robust global economy as Donald Trump pledged that America is open for business
One year on the U S government is partially shut and the market ebullience that greeted the president s corporate tax overhaul is a distant memory
In the 12 months since he visited the World Economic Forum in the Swiss Alps Trump has launched a trade war with China slapped tariffs on Europe weighed in on Prime Minister Theresa May s Brexit deal expressed understanding for France s Yellow Vest protests against President Emmanuel Macron and threatened to devastate Turkey s economy
That unpredictable stance toward traditional U S allies and rivals alike fans geopolitical risk and ensures that Trump s policy choices will be the talk of the retreat even as the president skips the forum to focus on the shutdown
The number one question in the mind of leaders in Davos now is what on earth is Donald Trump up to said Tina Fordham chief global political analyst at Citigroup Inc NYSE C and a WEF regular We ve very clearly moved in terms of investor sentiment from the Trump bump euphoria surrounding tax cuts and deregulation to fears of a Trump slump
The president enters the second half of his term accompanied by an end of year meltdown in markets and the International Monetary Fund s warning that escalating trade tensions are the biggest risk to global growth He does so without restraining influences like Defense Secretary James Mattis whose departure last month over Trump s abrupt decision to pull U S troops from Syria reinforced the sense that his foreign policy is ever more beholden to the pursuit of America First
Three Camps
Faced with that reality world leaders are increasingly falling into one of three camps in their approach to the president according to Stephen Walt a professor of international affairs at Harvard University following Trump s lead resistance however futile and trying to make the most of his policy vagaries Yet lacking any consensus against Trump Walt sees many leaders as engaged in a waiting game to try and sit him out
There is no longer this idea that he d be reined in by the establishment and that you d have a fairly normal administration said Walt People are now fully aware that he s extremely impulsive and erratic and will continue to challenge the status quo That means something different depending where you are
Leaders from all three camps will be present in Davos those from traditional U S allies such as Canada and Germany who are resisting as far as possible in the hope they can wait Trump out rivals from China and Russia who thought they could exploit the opportunities but have found him too erratic and those in countries like Israel Hungary and Brazil who have benefited from the environment around Trump s rise
Among the forum s headline attractions is German Chancellor Angela Merkel who can be expected to build on her New Year s address denouncing nationalism and populism that reinforced her status as a Trump adversary Yet she and Macron were unable to prevent Trump from quitting the Iran nuclear deal or the Paris climate accord Germany is in the firing line if he follows through on his threat to impose punitive tariffs on imported cars
Euro vs Dollar
Trump s attacks on allies and persistent questioning of the value of the transatlantic alliance have accelerated European efforts to gain greater autonomy including moves to boost the role of the euro and reduce dependence on the U S dollar Until that happens however allies in Europe remain vulnerable said Erik Brattberg director of the Europe Program and a fellow at the Carnegie Endowment for International Peace in Washington
They talk the talk of becoming more strategically autonomous more sovereign in their foreign policy said Brattberg But the answer from Europe will be passive They will not be able to assert themselves
Then there are swathes of the globe whose leaders are emboldened by Trump Israel s Prime Minister Benjamin Netanyahu who benefited from the U S decision to move the American embassy from Tel Aviv to Jerusalem will be in Davos as will Italy s prime minister Giuseppe Conte whose populist coalition government shares Trump s hard line on migration
Also in town will be new Brazilian President Jair Bolsonaro the leader of Latin America s largest nation dubbed by some the Latin Trump From the right to bear arms to a disdain for multilateralism the ideological ties run deep In Davos Bolsonaro wants to present Brazil as reinvigorated with a more open economy his team plans to lay out priorities including privatizations and lower taxes
No Illusions
Still as the IMF makes clear increased tariffs are the main drag on the global economic outlook and an improvement hinges on resolution of the U S trade conflict with China along with the resulting policy uncertainty
China s delegation to Davos this year is led by Vice President Wang Qishan Trump s decision last week to pull the whole U S government delegation means Wang won t get to meet with Treasury Secretary Steve Mnuchin and discuss the trade conflict
For all his bluster diplomats point to the fact that Trump has not radically altered the American led web of alliances He renegotiated trade deals with Canada Mexico and South Korea that left much of the substance intact and his complaints about Europe s defense spending China s trade practices and Iran s regional role could have been championed by other Republican presidents
Yet for Russia Trump s unpredictability has led to worsening ties The president s abrupt cancellation of an expected meeting with Vladimir Putin at the Group of 20 summit in Argentina last year the third such snub for the Russian leader in 12 months was the last straw with Russian government officials lamenting that the president s aides are playing him as they like
Moscow is ready for more disturbing moves in all possible directions said Fyodor Lukyanov head of the Council on Foreign and Defense Policy a research group which advises the Kremlin There are no illusions about Trump left |
C | Davos bankers try to put brave face on gloomy outlook | By Silvia Aloisi DAVOS Reuters The International Monetary Fund has cut its global growth forecasts for the second time in three months Central banks in the U S and Europe are reversing a decade of ultra loose monetary policy Trade tensions between Washington and Beijing are hurting investor sentiment worldwide And a flurry of crises from Brexit to the U S government shutdown are keeping top world leaders away from Davos as they have more urgent problems to solve at home No wonder the mood at the World Economic Forum this year is decidedly somber in striking contrast to the widespread optimism that dominated the annual Alpine meeting of the rich and powerful just 12 months ago Going back a year or so there was abnormally large positivity as we went into the year It s amazing how a year later that barometer has definitely taken two or three nudges down Standard Chartered s L STAN Chief Financial Officer Andy Halford told Reuters in an interview Ray Dalio founder and chairman of Bridgewater Associates the world s largest hedge fund offered a particularly dark view of the global outlook saying the current climate bears a striking resemblance to market conditions during the final years of the Great Depression in the late 1930s We will be in a slowing economic environment Europe the U S China all of those will be experiencing a period of slowing he said What scares me the most longer term is that we have limitations to monetary policy which is our most valuable tool at the same time as we have a greater political and social antagonism The next downturn in the economy worries me the most he said Jes Staley the chief executive of Barclays L BARC said the general consensus had turned from excessive optimism to heavy concern pointing to the rise of geopolitical uncertainty and the reversal of monetary easing as the two main worries on people s minds The U S China issues the UK Europe issues all this political uncertainty It seems as if the center is holding together less politically than what we had in the past he told Reuters TV But among the overarching gloom and doom financial leaders were putting on a brave face and trying to see the glass half full Citigroup N C Chief Executive Michael Corbat said market fears about an escalation of the trade dispute between the United States and China might be overdone We actually published a piece this morning saying that there is a potential surprise to the upside around getting to a trade deal that might be better than people expect he told Reuters U S President Donald Trump has vowed to increase tariffs on 200 billion worth of Chinese imports on March 2 if China fails to address intellectual property theft forced technology transfers and other non tariff barriers His Secretary of State Mike Pompeo voiced optimism on Tuesday for a good outcome in upcoming trade talks with China and said a superpower conflict between the two nations could be avoided Corbat said the market sell off at the end of 2018 was disconnected from the empirical evidence in the United States and economies around the world Going into the new year we have seen a pretty significant rebound in various sectors You ve seen earnings coming out and of the companies that have reported so far over 75 percent are above analyst consensus he said I think you are seeing people now potentially moderating from recessionary fears to slowdown trying to understand what s that slowdown going to look and feel like he said Standard Chartered s Halford said the Chinese economy was slowing in part because of the trade tensions but still growing at a pace that would make most other countries truly envious Overall if you look at the profitability of businesses globally they are still by historical standards going pretty well and generally speaking consumption patterns around the world are still holding up he said
Maybe in a few months time especially if the tariff situation is a bit clearer and Brexit is a bit clearer maybe later this year some of these clouds will lift themselves Aditional reporting by Jessica DiNapoli Editing by Mark Trevelyan |
C | India Stocks Swing as Investors Weigh Trade Talks Global Growth | Bloomberg Indian equities fluctuated as investors continued to assess the outcome of China U S trade talks and the outlook for global growth
The benchmark S P BSE Sensex fell less than 0 1 percent to 36 426 08 as of 9 59 a m in Mumbai swinging between a gain of as much as 0 2 percent and a drop of 0 1 percent The NSE Nifty 50 Index was little changed at 10 925 45
In the absence of any surprises in the earnings reports of Indian companies for the last quarter of 2018 local equities are seen reacting to the developments of global trade negotiations and domestic political campaigning ahead of the national elections that are likely to start in April
Strategist Views
Slowing global growth drying liquidity from both overseas and local investors are the major risks to stocks said Manish Sonthalia chief investment officer of portfolio management services at Motilal Oswal Asset Management Co in Mumbai
A likely better economic expansion for India companies reducing their debts and lower oil prices are the tailwinds
The outcome of U S China trade talks interest rate action by the Reserve Bank of India and political rhetoric heading into the general elections will determine short term direction Sonthalia said
We remain long on Indian equities and prefer shares of consumer staples privately owned banks that lend more to companies than retail customers software exporters and drug makers he said
The Numbers
Fourteen of the 19 sector indexes compiled by BSE Ltd gained paced by a gauge of metal stocks that rebounded from a drop of 2 3 percent on Tuesday
Nineteen of the the 31 Sensex members and 33 of the 50 Nifty companies climbed
Net incomes of seven of the 10 Nifty companies that have reported earnings so far have either topped or matched analyst estimates according to data compiled by Bloomberg
ICICI Prudential LON PRU Life Insurance Co plunged 8 3 percent the steepest drop on the S P BSE 200 and S P BSE 500 gauges after it reported a 34 percent decline in its December quarter net income from a year earlier
Analyst Notes Market Related Stories
Nifty Pattern Shows Breakout Avoid Over Leverage IndiaNivesh
Asian EM Bank Stocks May Have a Volatile 2019 Citigroup NYSE C Says
Asian Paints Raised to Outperform at Macquarie PT 1 580 Rupees |
C | U S bank Citi to shrink Russia branch network but expects to do more business | By Gabrielle T trault Farber MOSCOW Reuters The Russian arm of U S bank Citi N C said on Wednesday it planned to reduce the number of its offices in the country but expected to do more business this year Foreign banks in Russia have been under pressure since Western countries began imposing sanctions on Moscow over its annexation of Crimea from Ukraine in 2014 Many foreign banks were forced to significantly cut their exposure to Russia But as some of the banks adjusted to the new circumstances they started to grow in fields not covered by the sanctions Michael Berner a Citi Russia board member and its consumer business manager said on Wednesday the bank would reduce its number of branches from 22 to 15 in Russia by the end of the year to try to further move its client base online the Interfax news agency reported Citi said in a presentation on Wednesday its Russian assets under management had grown 24 percent last year with the number of retail client accounts and deposits up 8 percent year on year We think these results are positive and we are planning to keep that same growth rate this year Berner said The Russian banking market is dominated by large state owned companies They make up almost 70 percent of Russian bank assets and five large banks control 60 percent of the assets according to the World Bank Citi Russia which has been in the country since 1992 and is its 21 largest bank by assets said the competition from state owned players would not affect its business Do we feel the strengthening of state banks No because we have a clearly defined strategy and a clearly defined segment in which we operate said Maria Ivanova president of Citi Russia
Russia s central bank has said the country needs to increase competition in the financial sector |
C | 20 Million Funding Round in Blockchain Firm Symbiont Includes Citigroup and Nasdaq | Citigroup NYSE C and Nasdaq are among a group of firms investing 20 million dollars in Symbiont io Inc Bloomberg reports on Jan 23 Other investors reportedly include Mike Novogratz s crypto focused merchant bank Galaxy Digital Holdings
Symbiont s blockchain and smart contract platform Assembly will be applied in capital markets The offering purportedly allows financial institutions to share and verify data and uses smart contracts to accelerate settlement times for syndicated loans and streamline mortgage bond markets |
JPM | Should You Follow Hedge Funds And Play Metal ETFs | Metals are riding high on favorable demand supply dynamics and a subdued greenback Powershares DB US Dollar Index Bullish Fund is off about 9 7 so far this year and has lost about 1 in the last one month as of Sep 19 2017 Since most commodities are priced in the greenback a dip in the U S dollar bodes well for metal investing read
Probably this is why Hedge funds are targeting the metals industry at their since 2011 Industrial metals which have long been in stagnation are now getting the love of hedge funds Reduction in output has finally adjusted excess supplies leading to higher prices for industrial metals What Makes Metals So Popular As per a source that oversupply crisis led to the closure of some specialist metals hedge funds including those run by Apollo Global Management and Hall Commodities But things like pollution control are now fueling the space The above mentioned source went on to explain that an environmental clampdown in China the world s biggest user and maker of industrial metals reduced supplies to keep pollution at check Barclays LON BARC data revealed that investment in industrial metals including from indices and exchange traded funds totaled 27 billion in July up from 23 billion a year ago and 14 billion in 2015 Among some of soaring metals copper aluminum and nickel deserve special mention Copper price jumped to a 32 month high on bullish bets in August Early last month research house indicated that prices may remain erratic in the near term and rise to 2 75 lb in 2018 and 3 lb in 2019 from the current 2 87 lb Research house Jefferies even sees the possibility of 4 lb or above pricing in copper in the next five years This benefited funds like United States Copper Index Fund read Aluminum prices are now close to a despite China s restrictions iPath Pure Beta Aluminum ETN SI FOIL is thus a great bet now JPMorgan NYSE JPM sees aluminum prices rising another 100 a ton in the fourth quarter noting they have been well supported by collective realization that supply reform is a reality despite Chinese aluminum inventories more than quadrupling so far this year as quoted on Financial Times The key steel making ingredient iron ore is now hovering around its five month high level while zinc prices are at the as per Financial Times ETFs to Profit While metal ETFs are ways to play this euphoria investors can try equity forms as well Below we highlight a few such products SPDR S P Metals Mining P XME ETF BE XME The fund has about half the exposure to the steel industry followed by Coal Consumable Fuels 13 94 and Aluminum 11 64 The fund charges 35 bps in fees iShares MSCI Global Select Metals Mining Producers ETF This underlying index of the fund looks to track the performance of companies in both developed and emerging markets that are mainly engaged in the extraction and production of diversified metals aluminum steel and precious metals and minerals excluding gold and silver The fund focuses on BHP BILLITON Ltd 8 73 Rio Tinto LON RIO Plc 7 62 and Glencore LON GLEN Plc 7 45 It charges 39 bps in fees read Bottom Line While demand supply dynamics may favor these products investors should note that hawkish Fed policies can deter the rising momentum of metal and mining ETFs Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
JPM | Bitcoin Or Gold | Its no secret that Bitcoin has taken the world by storm A huge number of new and interesting ways to spend and invest with Bitcoin are coming online from Bitcoin IRA solutions to buying houses with Bitcoin
This explosive growth has led to some speculation that Bitcoin is moving to replace gold as a safe haven asset Even substantially well respected analysts like Fundstrat founder Tommy Lee have suggested that such a transition could conceivably occur moving Bitcoin into a dual role as both currency and investment
For all the positive news however there are an equal or greater number of detractors suggesting that Bitcoin is a scam both as asset and investment since it is founded on nothing but consensus
Jamie Dimon CEO of JPMorgan Chase NYSE JPM famously called Bitcoin a fraud suggesting that the lack of financial support makes the cryptocurrency purely speculative Other analysts have echoed Dimon noting that the cryptocurrency is backed by nothing but consensus which could change in a moment rendering the currency worthless
So with all the conflicting opinions should investors be long on Bitcoin Or stick to traditional safe haven investments like gold
Advantage Gold
Gold has been the traditional hedge investment for safe haven investing during times of financial uncertainty or geopolitical crisis This investment strategy has not changed much for the last 100 years
Gold is used as a safe haven because it has been thought to have intrinsic value Gold is gold regardless of what happens globally or financially The price of gold is linked to its intrinsic quality which can be evaluated simply by comparison with fiat currency Gold has shown remarkable resiliency as a stable asset for store of value For this reason the precious metal is often used as a stable asset fixed against fluctuations in markets
The value of gold however is more of a concept than an intrinsic reality and varies with market climate The general value of gold is based on its anonymity and ease of transport for large financial exchanges Plus as a source of value during uncertainty gold is able to weather governmental and political turbulence
For this reason gold can be a relative hedge against risk and can therefore provide a method for investor portfolio risk aversion Which is why the price of gold remains generally stable especially when considered against other more volatile vehicles
Advantage Bitcoin
Bitcoin also holds many of the same properties as gold as a financial class The fact that Bitcoin is widely regarded as having value effectively makes it like gold in its value based on consensus
The cryptocurrency faithful argue that gold has value based only on consensus The metal has intrinsic value simply because people have assigned it that value They argue that since value is consensus based other assets can have the same value as gold simply based on general consensus with the most notable example being the ancient price of salt
While Bitcoin carries consensus it is nevertheless wildly volatile This volatility is generally thought to be fully contrary to a store of value hedge against market risk However because Bitcoin is not tied to any government it can nevertheless function well as a hedge investment while still offering the potential of substantial returns
Since Bitcoin carries increasingly wide consensus as a currency it should be considered as such regardless of what governments may say In this way Bitcoin shares the anonymity that has made gold a safe haven asset
With consensus and decentralized anonymity Bitcoin functions essentially as a gold like investment vehicle Bitcoin faithful Bobby Lee has even called it digital gold referring to its status as an asset
Which To Choose
Bitcoin carries the risk factor of volatility and a lack of intrinsic value Gold is stable and intrinsic but does not provide opportunity for return the way that Bitcoin and other cryptocurrencies do
Some companies are trying to bridge the gold Bitcoin gap using blockchain technology to create tokenized gold assets In many ways this moves the intrinsic value of gold into the cryptosphere effectively digitizing gold as an asset
For example Goldmint has created a system where GOLD tokens are created by bringing gold items to a local Custody Bot created by Goldmine The Custody Bot is a machine that weighs and grades gold objects and then sends the appropriate amount of GOLD tokens to the user s wallet
The GOLD tokens can then be converted to Bitcoin or fiat currency through digital exchanges or held by investors as a gold backed store of value Such a system unites the power of gold as stable asset with the liquidity and market potential of Bitcoin
Whether investors choose gold or Bitcoin in the coming years remains to be seen but the reality for an investor as a hedge against the instability facing the world these days is clear |
JPM | Top 3 Small Cap Growth Mutual Funds For Solid Returns | Small cap growth funds are natural choices for investors with a high risk appetite when capital appreciation over the long term takes precedence over dividend payouts These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are projected to rise in value over the long term
Meanwhile small cap funds are good choices for investors seeking diversification across different sectors and companies Small cap funds generally invest in companies having market cap lower than 2 billion The companies smaller in size offer growth potential and their market capitalization may increase subsequently Also due to their less international exposure small cap funds offer higher protection than their large and mid cap counterparts against any global downturn
Below we share with you three top rated small cap growth mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can
Vanguard Explorer Investor normally invests its assets in common stocks of small cap companies which are expected to have strong growth prospects The fund generally has various investment advisors Vanguard Explorer Investor has a three year annualized return of 9 1
Chad Meade is one of the fund managers of VEXPX since 2014
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 JPMorgan Small Cap has a three year annualized return of 13 4
PGSGX has an expense ratio of 1 25 as compared to the category average of 1 26
Wasatch Ultra Growth invests heavily in equity securities of those small cap companies that are expected to grow at a rapid pace The fund may invest around 30 of its assets in equity securities of foreign companies based in developed and emerging markets Wasatch Ultra Growth Investor has a three year annualized return of 13 6
John Malooly is the asset manager of WAMCX since 2012
To view the Zacks Rank and past performance of all small cap growth mutual funds investors can
Want key mutual fund info delivered straight to your inbox
Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
MS | Morgan Stanley chooses Frankfurt as EU hub post Brexit source | By Tom Sims and Anjuli Davies FRANKFURT LONDON Reuters Morgan Stanley N MS has chosen Frankfurt to be a new base for its European Union operations as Britain prepares to leave the bloc according to a source familiar with the matter becoming the latest U S bank to pick the German city International banks are planning to set up subsidiaries in the EU to ensure they can continue to serve clients if their London operations lose the ability to operate in the EU after Britain leaves in March 2019 Morgan Stanley is planning to use its Frankfurt subsidiary as the center for its EU trading operations according to the source That means 200 new people will be coming to Frankfurt the source said But the bank is likely to spread some of its operations across the EU with its asset management business expected to go to Dublin That pattern is likely to be followed by many banks picking one EU center to be their main regional subsidiary in the bloc but then locating other parts of their businesses in several countries A spokesman for Morgan Stanley declined to comment The news was first reported by the Press Association Details of banks Brexit arrangements are starting to emerge following a July 14 deadline for them to submit details of their contingency plans to the Bank of England Citigroup N C is expected to announced officially this week that it will also be using Frankfurt as its new EU base while Barclays L BARC said on Friday it was in talks with regulators in Dublin about expanding its operations there Morgan Stanley s choice was expected with a source telling Reuters in January that the bank was likely to move jobs to Frankfurt after Brexit given it already had a licensed entity there JPMorgan NYSE JPM CEO Jamie Dimon said on July 11 that his bank would probably use Frankfurt as the legal domicile of its European operations after Brexit but that jobs may be put elsewhere as well Banks are pushing ahead to implement the first stages of their Brexit contingency plans warning that they do not have time to wait to see the outcome of Britain s exit discussions with the EU Most are currently focused on ensuring they have the right legal and operational structures in place holding back on plans to move hundreds of staff until the final Brexit deal is clearer Frankfurt is so far looking to be the most popular choice for banks post Brexit centers
Japanese banks Nomura T 8604 Daiwa Securities T 8601 and Sumitomo Mitsui Financial Group T 8316 have all said they are planning to set up new units there as has British lender Standard Chartered L STAN |
MS | Ethereum holds firm amid bitcoin slump | Investing com Bitcoin remained under pressure on Wednesday amid comments by a senior European Central bank official warning that the digital currency lacked stability but Ethereum held steady adding to recent gains
On the U S based GDAX exchange Bitcoin fell to 2 278 down 50 9 or 2 19 giving up recent gains as investors fled the digital currency after ECB governing council member Ewald Nowotny warned against accepting Bitcoin as an official payment method as it lacks stability
Bitcoin lacks the one thing that makes a good currency namely stability Nowotny said in an interview published on Wednesday Bitcoin is an object of speculation he said
Nowotny s warning comes amid a report from Morgan Stanley NYSE MS indicating a lack of demand from merchants to accept Bitcoin as a form of payment highlighting that bitcoin acceptance is virtually zero and shrinking
Ethereum tacked on 3 82 to 215 91 as traders continued to pile into the world s second best capitalized digital currency following its recent dip below 180 on Sunday
To stay on top of the latest moves in the crypto space be sure to check out |
MS | Craft brewer targets Nigerian palates and big brands | By Paul Carsten ABUJA Reuters From pale ale with tangs of passion fruit and mango to a heady stout with 10 percent alcohol a pioneering craft brewer in Nigeria is seeking to expand and grab more of a market dominated by Heineken and Diageo LON DGE Bature Brewery has faced a slog to launch the first commercial products from its microbrewery tucked behind a burger joint in the capital seeking to gain a foothold albeit a small one in Africa s second biggest beer market It has had to navigate Nigeria s Byzantine bureaucracy to secure a license install cables and a generator to deal with frequent blackouts and raise financing to import equipment and ingredients while the naira currency plunged But the three expatriate founders of Bature who want to turn a passion for home brewing into commercial success have been spurred on by an enthusiastic reception for their beers and encouraged by growth prospects in a nation of some 190 million Nigerians drink 16 million hectoliters of beer a year which is half as much as South Africans the continent s biggest beer market even though Nigeria has a population that is more than three times the size Having Nigerians taste our beer and say Wow this is really great we decided to go for it and try and build this first craft brewery here in Nigeria co founder Kevin Conroy told Reuters at their Abuja operation Conroy a Scot came to Nigeria like his two co founding colleagues to work in international development Tired of mass produced beers that they found bland the three brewed their own and soon found others liked it too Conroy still works in development alongside helping build the brewer His two colleagues James Turley and Andrew Seward have both quit their development jobs Bature pronounced ba tor ray and meaning white person or European in the Hausa language mainly spoken in northern Nigeria started production from its Abuja brewery in June It now aims to raise 15 000 pounds 19 500 via the Indiegogo crowdfunding site for a new equipment and a tap room where the public can try Bature brews on site The microbrewery s ambitions remain modest in the giant market Bature plans to produce 40 000 to 50 000 liters in the next 12 months But its premium price reflects confidence in a class of more affluent drinkers in Nigeria even when the oil producing nation s economy has been hammered by weak crude prices There is demand here some major hotel chains have asked to stock us said Conroy OUT OF REACH Bature s 330 ml bottles of beer can cost up to 2 000 naira 6 37 in a bar although the founders say a bottle costs 500 naira direct from the brewery That compares with Heineken the market s dominant player with a 69 percent share whose 600 ml bottles can sell for 800 to 1 200 naira each in bars while Nigeria s Star beer goes for 600 to 700 naira for 600 ml In a nation with annual gross national income per capita of 2 450 even the big brands let alone Bature s pricier offerings are out of reach of many in a country almost evenly split between Christians and Muslims And even major brewers have found it tough to expand as every day prices have surged with the naira s devaluation The consumer is under enormous duress with that 18 percent 19 percent inflation on the back of a naira devaluation and we are seeing disposable income dry up John O Keeffe the Africa president for drinks maker Diageo told a March conference call Nigeria is a major global market for Diageo s Guinness brand the dark extra stout whose local version comes with a hefty alcohol content of 7 5 percent But O Keeffe said cheaper value beers had risen to almost half the market from 26 percent in the past 2 1 2 years Last year Diageo scrapped plans to lift its stake in Guinness Nigeria due to tough economic conditions Bature is unperturbed In its effort to appeal to local palates and cut import costs the microbrewer has sought to use more local ingredients Its Independence Day Coffee Stout with 10 percent alcohol content is infused with Nigerian coffee and promises to make sure the caffeine kicks like a mule according to the firm s website Bature s dark Pepe Porter offers a spicey beer to match the popularity for peppery food in the West African nation Bature which also brews lighter ales uses Nigerian sorghum for malting mixed with imported hops Nigeria may offer a good long term punt for brewers Nigeria s per capita beer consumption is about 10 liters a year compared to a global average of 35 40 liters said Morgan Stanley NYSE MS analyst Olivier Nicolai If I was to take a bet over the next 20 years if the market grows or declines I would definitely say it is going to grow but it is volatile and at the moment you have massive headwinds Nicolai said |
MS | Banks hope to keep staff in London if soft Brexit deal struck | By Anjuli Davies and Andrew MacAskill LONDON Reuters Banks which are shifting operations to avoid disruption once Britain leaves the European Union hope only a handful of people will eventually have to leave London industry sources say Wall Street s Citigroup Inc N C and Morgan Stanley N MS as well as Britain s Barclays L BARC have all in the last week indicated they are finalizing plans to set up subsidiaries within the EU Along with other banks they are planning for a worst case scenario as they say they do not have time to wait to see how Britain s talks with Brussels unfold They are focused on ensuring they have the right legal and operational framework to do business in the EU if Britain fails to negotiate a favorable exit deal banking executives say But they are holding off on implementing plans to move a significant number of people cautious that some of their contingency plans may never need to be enacted A senior executive at one British bank told Reuters he was reluctantly spending a few hundred million pounds building a new EU base as cheaply and quickly as possible It s an insurance policy I just have to figure out what the cheapest insurance policy is in a perfect world we will just tear it up he said The timetable for setting up EU bases and operations is tight because it could take longer than eighteen months to arrange office space obtain licenses and build up capital And although Bank of England Governor Mark Carney asked them to show by July 14 how they can avoid clients being cut off after Brexit banks are treading carefully enacting two stage contingency plans to avoid losing nervous London based staff and potentially unnecessary expenses The first phase involves moving relatively small numbers to make sure the licenses technology and infrastructure are in place while the next requires longer term thinking on what their European business will look like in the future If an exit deal is signed that allows for example euro denominated trades to be booked at subsidiaries in the EU but executed from London then the number of people who move in total could be fairly low All banks will start from where they have the entity It may not be where they end up This has a 2nd or 3rd or 4th phase but you have to be ready by March 2019 another senior banking source at an international bank said REVERSIBLE MOVES The largest global banks in London had indicated about 9 600 jobs could go to the continent in the next two years public statements and information from sources shows accounting for just over 2 percent of finance jobs in the City of London JP Morgan N JPM CEO Jamie Dimon said before the Brexit vote last year that his bank alone might move as many as 4000 jobs if Britain left the EU but so far banks have indicated only a fraction of that number are likely to go Citigroup executive Jim Cowles said in a memo to staff on Thursday that the bank may need to create around 150 jobs in the EU as a result of Brexit but that was only in certain circumstances and depended on the outcome or timing of talks Sources at several large investment banks in London say no staff have as yet been moved while some financial firms are contemplating how they can reverse any such decisions The point of no return is sooner the larger and more complex the institution while customer and staff transfers are also key Rachel Kent partner at law firm Hogan Lovells said Some firms I ve spoken to have explicitly said if there is a favorable deal they would reverse that Kent added One such example is Lloyd s of London the world s largest specialty insurance market which said in March that it had chosen Brussels as its EU subsidiary But Lloyd s which declined to comment could reverse any changes should a good Brexit deal be struck a source familiar with the matter said And Andrew Bailey chief executive of the UK s Financial Conduct Authority told Reuters in July that Britain and the EU are in a position to preserve free trade for financial services meaning such moves need not happen However Bob Jenkins who served on the Bank of England s Financial Policy Committee warned many banks are using the threat or promise of moving to wrangle tax and rule changes
They will play this for all its worth Jenkins said |
MS | Snap under pressure as Wall Street eyes share lock up expirations | By Noel Randewich SAN FRANCISCO Reuters A potential flood of newly available Snap shares is weighing on Wall Street s already shaky support for the owner of the Snapchat social media app Snap s N SNAP shares fell as much as 1 7 percent on Thursday as analysts focused on the expiry of lock up periods starting at the end of July when insiders and employees will be allowed to sell shares for the first time since a 3 4 billion initial public offer in March Everyone knows about these lock up expirations but nobody really discusses it until it s really close said King Lip chief investment officer at Baker Avenue Asset Management in San Francisco Lip sees the looming availability of additional Snap shares as a potential trading opportunity but he recommends steering clear of Snap as a long term investment Snap has been under pressure since its IPO in March Last week its stock sank below its 17 initial sale price as investors worried about its slowing growth and competition from Facebook NASDAQ FB MoffettNathanson on Thursday cut its price target to 9 from 11 In a report analyst Michael Nathanson warned that the lock up expiry will pressure Snap s shares and he also said some advertisers see Snapchat as too pricey While advertisers continue to slowly ramp their spend there remains a lot of pushback that Snap still costs too much and returns too little relative to Facebook Nathanson wrote On July 31 early investors will be able to sell up to 400 million shares with employees allowed to sell another 782 million on Aug 14 four days after Snap reports its quarterly results JPMorgan NYSE JPM analyst Doug Anmuth wrote in a note on Thursday Snap Chief Executive Evan Spiegel and co founder Robert Murphy each own 211 million shares All told 97 percent of Snap will be potentially available on the stock market by the end of August up from just 13 percent now according to Anmuth Snapchat is popular with users under 30 but many on Wall Street are critical of Snap s lofty valuation and slowing growth The company has warned it may never be profitable
Last week two of Snap s IPO underwriters Morgan Stanley NYSE MS and Cowen and Co reduced their price targets pushing the median target down to 19 from 24 in mid April according to Thomson Reuters data That does not include MoffettNathanson s reduction |
JPM | Oil stocks and banks help European shares steady above six month low | MILAN Reuters European shares steadied in early trading on Tuesday as Chinese equities stabilized after a heavy sell off and immediate worries over a stand off between Rome and Brussels over Italy s spending plans appeared to ease Strength in oil stocks on higher crude prices and a rise in banking stocks on rising global yields helped drive the pan European STOXX 600 index STOXX up 0 05 percent by 0719 GMT just above the 6 month closing low hit on Monday Germany s DAX GDAXI and Britain s FTSE 100 FTSE were flat The oil and gas index SXEP rose 1 1 percent while basic resources stocks SXDP were also in demand up 1 3 percent as metal and crude prices rose MET L O R Banks added 0 5 percent with Italian lenders leading the way up 1 percent after a report that the Italian government was planning investor roadshows to support the bond market German lender Commerzbank DE CBKG rose 2 8 percent after an upgrade to overweight from JPMorgan NYSE JPM RPC Group L RPC rose 4 6 percent after the plastic packaging maker gave two private equity firms that are considering rival takeover offers more time to make bids Defensives were broadly lower keeping a lid on gains while Sage Group L SGE led fallers on the STOXX 600 down 5 8 percent after a downgrade from Barclays LON BARC |
JPM | European stocks find footing after Asia drops to 17 month low | By Marc Jones
LONDON Reuters Europe battled to fend off a four day losing streak for world stocks on Tuesday after weary investors had seen Asia stumble to a 17 month low and bond markets hit by a fresh bout of selling
Strength in oil stocks on higher crude prices and a rise in banking stocks on increased global borrowing had initially lifted Europe s STOXX 600 index but it was back near a 6 month low as the early momentum faded
Italy s benchmark 10 year government bond yield also moved toward a 4 1 2 year high as Economy Minister Giovanni Tria struck a resolute tone on his controversial budget plans in Rome s parliament
There was plenty more to keep the stress levels elevated
The International Monetary Fund downgraded its global growth forecast on Monday for the first time since 2016
Asian shares had then fallen to their lows after China briefly allowed its currency to slip past a psychological bulwark Pakistan s rupee slumped about 5 percent in an apparent devaluation ahead of what looks likely to be another IMF program
It all feels like it s quite nervous here over whether things going to break out of ranges or not said Saxo Bank s head of FX Strategy John Hardy
He pointed to the rising U S and Japanese government bond yields which tend to set the bar for borrowing costs globally as well as the latest pressure on China s yuan
China s central bank fixed its yuan rate at 6 9019 per dollar on Tuesday so breaching the 6 9000 barrier and leading speculators to push the dollar up to 6 9120 in the spot market
The drop should be a positive for exporters and did help Shanghai blue chips edge up 0 3 percent Yet that followed a 4 3 percent slide on Monday which was the largest daily fall since early 2016
Japan s Nikkei fell 1 3 percent hurt in part by a rise in the safe harbor yen and as yields on Tokyo s government bonds tested the 0 15 percent cap JP10YTN JBTC the Bank of Japan effectively has on them
Risk sentiment is in a foul mood and stocks are sinking everywhere JPMorgan NYSE JPM analysts said in a note
With Chinese economic momentum continuing to weaken alongside increasing pressure from the United States currency weakness is the obvious release valve they warned A lurch through the 7 0 level by year end is possible
A senior U S Treasury official on Monday expressed concern at the fall in the yuan adding that it was unclear whether Treasury Secretary Steven Mnuchin would meet with Chinese officials this week
On Wall Street futures were pointing lower again The tech heavy Nasdaq had fallen for the third straight day on Monday and growth stocks were pressured by worries rising bond yields might ultimately hobble the economy
NO SAFETY NET
Yields on 10 year Treasury paper notched a new seven year top on Tuesday at 3 252 percent
Treasuries have had a sort of safety net up to now as rising yields tend to dampen stocks and threaten the economic outlook thus putting pressure on the Federal Reserve to go slow on policy tightening
Yet recently the Fed has sounded so bullish on the economy and so hawkish on rates that the net has become frayed
The size and speed of the bearish bond impulse would suggest a collective shift in market thinking about the US growth prospects and policy projections said Damien McColough Westpac s head of rates strategy
The Fed s expected 2019 profile has moved from just below 2 hikes to 2 5 hikes being factored in
That shift has underpinned the dollar against a basket of currencies where it stood up 0 15 percent at 95 88 from a low of 93 814 a couple of weeks ago
The dollar had less luck on the safe haven yen pulling back to 113 16 from a 114 54 peak last week
The euro was undermined by political troubles in Italy and loitered at 1 1476 well off September s 1 1815 top
Italy s borrowing costs have surged as a war of words between Rome and the European Union over the country s budget plans escalated
The yield on Italian government 10 year bonds hovered at 3 615 percent just off February 2014 highs while Italy s FTSE MIB clawed up 0 3 percent having hit its weakest since April 2017 on Monday
In commodity markets gold got a modest safety bid at 1 191 10 having fallen 1 4 percent overnight Industrial bellwethers copper and nickel jumped 1 4 and 2 percent
Oil prices also rose as more evidence emerged that crude exports from Iran OPEC s third largest producer are declining in the run up to the re imposition of U S sanctions and as a hurricane moved across the Gulf of Mexico
Brent crude added 50 cents to 84 41 a barrel and U S crude firmed 41 cents to 74 70 |
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