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JPM | Forget Gold Palladium ETF Is Shining The Brightest | Precious metal investing is ina tug of war between geopolitical tensions and a hawkish Fed This is especially true for gold which is viewed as a safe haven asset read
Overall gold ETF SPDR Gold Shares V GLD lost about 0 3 in the last three months as of June 20 2017 Silver was even more battered with iShares Silver Trust NYSE SLV losing about 6 1 in this time frame However there is one metal that is hovering around a high and that is palladium ETFS Physical Palladium NYSE PALL advanced 10 8 in the last three months as of June 20 2017
The Fed has hiked interest rates twice this year and may go for another hike by the end of 2017 Ideally this should boost the greenback and hurt the metal s investing But while other metals reacted slightly to the June Fed hike palladium shrugged off Fed worries and stood tall
What s Behind the Rally
Going by an article published on the palladium market is witnessing a rising deficit as per UK chemicals multinational In fact in 2016 the palladium market saw five successive years of significant deficits And 2017 will possibly mark the sixth This is in contrast to its contemporary metal platinum which is seeing its first surplus in six years
Notably the automotive industry mainly catalytic converters for vehicles is a big driver of demand for palladium Palladium using petrol fueled cars are the primary type sold in the two largest markets of China and the US as per So increased usage of are contributing to the palladium price rally
In fact platinum using diesel fueled cars are actually experiencing market share loss amid an going by the above source And platinum s loss is turning out to be palladium s gain
Some analysts are now strongly expecting to see palladium prices breezing past platinum prices If this happens it would be the first time since 2001 that palladium is worth more and its relative strength is even more remarkable given that the gap averaged just over 1 000 an ounce between 2007 2012
In a nutshell the global supply outlook appears fragile at the current level making the metal an intriguing investment option Below we have highlighted the only pure play on the metal PALL in detail see
PALL in FocusFor a bullion backed approach to play palladium investors can look at ETF Securities Physical Palladium Shares or PALL The ETF holds the metal in the form of bullion or ingots The metal is stored in London and Zurich on behalf of the custodian JP Morgan Chase NYSE JPM Bank Investing through PALL in palladium is cost effective and most appropriate The transaction costs for buying and selling shares will be much lower than purchasing storing and insuring physical palladium for most investors This ETF is designed to track the spot price of Palladium bullion and has amassed about 209 9 million in assets The expense ratio of 60 basis points appears reasonable in the precious metals ETF space The fund trades in paltry volumes of about 40 000 shares on average daily basis The fund has a Zacks ETF Rank of 3 with a High risk outlook read
Can the Surge Continue
Though palladium prices are on the rise decelerating sales growth in the two key gasoline vehicle markets the U S and China may curb the rally The U S auto industry is in a tight spot this year with sales declining for the fifth successive month read
The relative strength index of the fund currently stands at 60 92 This means the fund is about to enter the overbought territory So investors with a greater risk appetite can tap this soaring ETF for some more time
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 | JPMorgan Euro Small Companies Finding Exciting Opportunities | JPMorgan NYSE JPM Euro Small Companies Trust Plc LON JESC aims to generate long term capital growth from a portfolio of European ex UK small cap equities Despite a period of underperformance versus the Euromoney Smaller Europe ex UK benchmark in 2016 due to conservative portfolio positioning JESC s longer term performance record remains intact It has outperformed the benchmark over three five and 10 years The managers believe that the European economic backdrop is favourable political risk has been reduced and they are finding plenty of investment opportunities across a range of industries including companies that are adapting in a period of rapid technological change
Investment strategy Value quality and momentum
There are three pillars to JESC s investment process value quality and momentum The trust s three highly experienced managers use a proprietary multi factor model to screen the 1 000 companies in the benchmark Potential investments then undergo thorough fundamental research with the managers seeking companies that are attractively valued high quality which may be assessed in terms of market leadership high returns or disciplined capital allocation and which have positive operating momentum The resulting portfolio of 50 75 stocks is diversified by sector and geography and the managers are unconstrained by benchmark allocations JESC may employ gearing or run a net cash position up to a maximum of 20
To read the entire report Please click on the pdf File Below |
MS | Prudential s Peters says risk reward for junk bonds not favorable | By Jennifer Ablan NEW YORK Reuters PGIM Fixed Income senior portfolio manager Greg Peters said on Thursday that he has been reducing his overweight position in junk bonds because the risk reward is just not favorable Peters who helps oversee more than 100 billion in multi sector fixed income portfolios at PGIM Fixed Income said after high yield s huge run up late last year and into 2017 junk bonds no longer offer ample value Even so I m not bearish per se of high yield but we have taken it down in our portfolios Peters said He said the group is taking on a defensive posture and holding on to double B credits because they have a really good carry component to it Investment grade investors who are reaching for yield buy the double B level credits while junk bond investors who no longer want to hold triple C credits in a weak market want to purchase the double B credits as well So you have this kind of unique characteristic in the double B market that allows you to do well in lots of different cycles Peters said Peters the former Morgan Stanley NYSE MS chief global asset strategist who sounded an early alarm about the 2008 financial crisis said he also is shorting German two year bonds also known as Schatz because they have become really really really rich At the top of Peters worry list is concern that Federal Reserve policymakers would hike us into recession given the U S central bank is looking to raise interest rates as well as reduce its balance sheet This week Boston Fed Bank President Eric Rosengren said winding down the Federal Reserve s balance sheet if started soon and done very gradually should not have much effect on the central bank s plans to raise interest rates
But Peters said the tightening cycle is in unchartered territory because of the challenge of never having to experience this before |
MS | China Mobile others approached for buying into Singapore telco M1 sources | By Anshuman Daga SINGAPORE Reuters Top shareholders in Singapore telecoms company M1 Ltd SI MONE have approached potential buyers China Mobile HK 0941 and global private equity firms among others to sell their combined majority stake in the firm sources familiar with the matter said The three main shareholders of Singapore s smallest listed telecoms player who own a combined 61 percent flagged a strategic review of their investments last month and jointly appointed Morgan Stanley NYSE MS as their financial adviser They did not give a reason behind the review of their stake in the S 1 9 billion 1 36 billion company The sources said the three shareholders Malaysia s Axiata Group KL AXIA Singapore Press Holdings SPH SI SPRM and Keppel Telecommunications Transportation SI KTEL had also reached out to other telecoms firms cash rich business groups in China and Japanese tech firms to gauge their interest First round bids for M1 long seen as a target due to its small size and diverse shareholding are expected in a few weeks the sources said They added that talks between the parties were still at an early stage and there was no certainty the process would succeed They did not provide details on how China Mobile or the other prospective bidders have responded to the approach When contacted for comments Keppel SPH and Axiata referred Reuters to their joint statement issued last month M1 referred the query to its shareholders China Mobile declined to comment The sources declined to be identified as they were not authorized to speak to the media The sale process comes as competition heats up in Singapore with Australia s TPG Telecom AX TPM set to launch its services next year after winning a license to become the city state s fourth telecom operator Analysts expect M1 to be the most vulnerable to new competition M1 s shares have nearly halved over the past two years due to its weak business performance amid increased competition But Singapore s well regulated telecoms market offers stable cash flows Some telecoms firms could also use the city state as a launch pad into a region that is still developing industry executives and analysts said It s actually a decent business for current owners or any new ones if you factor in the upsides said Rameez Ansar co founder of Singapore firm Circles Life which leases towers from M1 referring to weakness in M1 s share performance and Singapore s position as a tier one market and high user revenues M1 could also fit in a portfolio of other telecoms ventures M1 could become part of a portfolio of investments in telecom related assets Someone looking for financial returns could be interested if other portfolio companies could help to enhance M1 s overall value said Gregory Yap analyst at Maybank Kim Eng Securities Under Singapore s rules an acquirer of a 30 percent or more stake in a listed company is required to make an offer to buy out the rest of the shareholders Some of the sources said M1 s main shareholders would require a substantial control premium for the sale to get done State run China Mobile as well as local peers China Unicom Hong Kong Ltd HK 0762 and China Telecom Corp Ltd HK 0728 the country s big telecoms firms are pursuing expansion plans beyond their home market If China Mobile acquires M1 it would mark its biggest overseas foray The world s largest mobile operator bought an 18 percent stake in Thailand s True Corp BK TRUE in 2014 after buying Pakistan telecoms firm Paktel in 2007
1 1 3961 Singapore dollars |
MS | Groupon 3 as Morgan Stanley cuts to Underweight | Groupon NASDAQ GRPN is off 3 after a Morgan Stanley NYSE MS downgrade to Underweight on what it says is lackluster advertising demand The firm s cutting estimates for Groupon s EBITDA by 4 for each of 2017 and 2018 and noting other analysts are likely missing the company s need to spend on advertising for growth It s lowered its price target to 3 50 from 3 90 implying 9 8 downside from yesterday s close Now read Don t Get Squashed In The New Short Squeeze ETF |
JPM | Trump s Economy Depends on Powell s Excellence | Bloomberg Opinion President Donald Trump trampling on convention Nothing new there It s his target that s fresh
Upending decades of tradition Trump questioned the wisdom of the Federal Reserve s gradual and consistent increases in interest rates I don t like all of this work that we re putting into the economy and then I see rates going up he said Thursday But Powell does not take orders from the president and is unlikely to be swayed by his appeal And thank goodness for that Powell matters more to economic and financial stability and not just at home than Trump and is acting like it
This week offered a stark contrast in their respective approaches to the job and a possible explanation to the disconnect between the havoc in the White House and the robust condition of the world economy led by the U S
Testifying to Congress this week Powell was a study in consistency and professionalism He conveyed at length over two days that interest rates are still going up gradually but the Fed is probably getting close to a rate that neither stimulates nor restricts growth Investors responded by pushing the dollar higher and trading in Treasury notes barely skipped a beat There was a flutter in the aftermath of Trump s Fed comments
Compare that with the chaos that Trump sowed with his summit with President Vladimir Putin his dismissal of U S intelligence and the uproar that followed His efforts to calm nerves were astonishingly unconvincing
It s unclear whether the regrettable episode weakened Trump s political standing If Jay Powell were caught in a similar mess his career would be over and for good reason Over the past 18 months many have tried to reconcile political instability with markets and economies that remain above the fray The answer may be simple Trump actually isn t in charge of that Powell is
It s not just about Trump and the Fed The steady if imperfect hand of central banks smoothed edges from markets views of Brexit Italian populism and the cracks in German Chancellor Angela Merkel s coalition The People s Bank of China is tilting policy toward shoring up growth The Bank of Japan s task is focused on trying to get inflation up to 2 percent Japan hasn t had a recent political crackup
While global growth has probably peaked a recession isn t likely the International Monetary Fund forecast this week an expansion of 3 9 percent this year and next The fund wants people to know it s very worried and investors are way too complacent about risks including the impact of a trade war
That s where Powell ECB President Mario Draghi BOJ Governor Haruhiko Kuroda and BOE Governor Mark Carney come in I m going to set aside the PBOC for a minute as it isn t independent like the others Thanks to them there s an awful lot of cash still sloshing around to prop up assets and soften the instability created of elected officials My Bloomberg News colleagues reported last month that the combined balance sheets of the biggest central banks is 11 8 trillion higher than when Lehman Brothers Holdings Inc failed in September 2008 Interest rates in the developed world won t be above 1 5 percent by the middle of next year according to JPMorgan Chase Co NYSE JPM
This is far from saying that Trump s trade volleys and alliance damaging broadsides don t matter or that Brexit and the re emergence of the far right in Germany are meaningless It does mean that the fecklessness of the political class is countered for now by professional economic managers
There may well come a time when missteps by governments make a material dent in economic and financial life There s plenty that central banks can t and shouldn t do There s also merit to the argument that they have let elected officials off the hook
This much is clear as the Powell era begins in earnest Trump doesn t hold the reins of the global economy He s merely the elected leader of the free world |
JPM | Bitcoin Rises as South Korea Sets Up New Cryptocurrency Division | Investing com Bitcoin rose on Monday trading above the 7 600 mark as South Korea continued to adopt a cauitous yet positive approrach to the cryptocurrency industry
Bitcoin was trading at 7 640 6 by 12 31AM ET 04 31 GMT on the Bitfinex exchange up 3 0 in the last 24 hours
Ethereum the world s second largest cryptocurrency by market cap climbed 1 3 to 468 02 on the Bitifinex exchange
Ripple s XRP token traded 1 3 higher to 0 45863 on the Poloniex exchange
Litecoin on the other hand also gained 2 3
South Korea s Financial Services Commission FSC announced in a press release that it is setting up a Financial Innovation Bureasu as part of a organizational reshuffle
The organization which is expected to have a lifespan of two years would be tasked with responding to new developments and challenges such as cryptocurrencies the FSC said in the statement
Its responsibility would reach beyond just virtual coins with oversight on policy initiatives relating to FinTech and big data also being announced
Analysts believed the South Korean government has changed its position regarding cryptocurrencies in recent months and that the country now considers cryptocurrency exchanges as actual legal entities instead of just communication vendors
In other news JP Morgan released a report that listed multiple key areas central banks need to understand in order to adopt cryptocurrencies
The report discussed how the anoymity nature of the cryptocurrency industry presented a real threat to banks
Increased volatility in regards to regulations and technology are also major issues the investment bank said in the report adding that they believe that crypto does not function within the old definitions of money JPMorgan NYSE JPM further pointed out that in order for virtual currencies to be deemed real money they needs to become a unit of account a medium of exchange and a storage of value |
JPM | Ex JPMorgan Exec Blockchain May Be Key to Avoiding Next Global Financial Crisis | The former vice president of North American investment banking at JPMorgan Chase NYSE JPM has said that blockchain may be the key to avoiding the next global financial crisis the China Economic Times reports today July 23
Pang Huadong currently an honorary academic advisor of the Asian Blockchain Institute said that his experience at JPMorgan during the peak of the 2008 financial crash led him to think that blockchain could be the pivotal technology for establishing transparency and trust in the global economic system |
JPM | Jamie Dimon Tells CNN a Trade War Could Derail Economic Growth in U S | Bloomberg JPMorgan Chase Co NYSE JPM Chief Executive Officer Jamie Dimon said trade wars triggered by the Trump administration s tariff policies could stifle economic growth reiterating comments he made when the bank reported earnings earlier this month
If you do another 200 billion of tariffs and this national security thing about cars I think that you re getting pretty close to reversing some of the benefits you ve seen in the economy Dimon said Thursday in an interview published Monday on CNN s website
In other highlights
Dimon said many of the issues Trump has raised are accurate but Trump is trying to resolve them in the wrong way
It s too early to know the effect the tariffs will have on the economy according to Dimon but the reversal of growth is possible
Dimon said dragging out talks over the North American Free Trade Agreement negotiations isn t helpful We want NAFTA done he said To be torturing Mexico in this way in my opinion is dead wrong and it should be fixed |
MS | Binary Options Daily Analysis Stocks Gain on IMF Hopes Kodak Files for Bankruptcy | EquitiesAsian markets rallied to their highest level in more than a month following news the IMF is hoping to raise 600 billion in funding to help tackle the euro debt crisis The Nikkei gained 1 to 8640 the Kospi jumped 1 2 and the Hang Seng rallied 1 3 China s Shanghai Composite climbed 1 3 nearly erasing Wednesday s 1 4 drop Australia s ASX 200 lagged the region easing 1 as employment data showed an unexpected drop of 30K jobs in December France s CAC40 soared 2 to 3329 as European indexes traded higher following strong bond auctions in Spain and France The DAX gained 1 and the FTSE rose 7 as European banks rocketed up 7 4 on hopes the IMF will help address the ongoing debt crisis US stocks posted moderate gains thanks to positive economic and earnings news The Dow rose 45 points to 12624 the Nasdaq rallied 7 and the S P 500 gained 5 to 1314 50 Morgan Stanley shares jumped 5 4 after the company beat earnings forecasts even though the company reported a decline in revenue to a legal settlement Kodak filed for bankruptcy and the company said it had received a 950 million credit facility from Citigroup to keep the company operating CurrenciesEuropean currencies advanced as renewed hopes for a debt solution lifted the region The Euro and Swiss Franc gained 8 and the Pound rose 4 to 1 5484 The Yen fell 4 to 77 12 while the Australian Dollar closed down 1 to 1 0412 Economic OutlookWeekly unemployment claims dropped to 352K vastly exceeding analyst expectations of 387K CPI was flat while core CPI rose 1 in line with forecasts On a weaker note housing starts fell to 660K 30K short of forecasts |
MS | Binary Options Daily Analysis S P Due to Downgrade Several European Countries | EquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 JPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months |
MS | Bernanke Determined to Protect US Economy | Bullish US retail sales figures for January and hours worked stats for the last quarter encouraged further gains in stocks commodities yesterday The 82bn Glencore Xstrata merger and the chatter surrounding the Facebook IPO are also helping sentiment with many no doubt hoping that this is indicates it s business as usual at the financial markets Precious metals continue to benefit from the move away from the perceived safety of the US dollar with the gold price breaking above resistance at 1 750 and silver temporarily moving above 34 Not coincidentally the rise in gold and silver yesterday coincided with a press conference given by Federal Reserve Chairman Ben Bernanke who once again emphasised his determination to protect the US financial system and the economy from the problems in the eurozone Many will of course correctly interpret this as meaning that the Fed stands ready to inject more new money into the financial system in the event of trouble In an attempt to assuage critics who are worried about the possible inflationary consequences of current Fed policies However as GoldMoney s Alasdair Macleod argued in his last article the fact that the Fed is now targeting a 2 inflation rate on the Personal Consumption Expenditures Price Index an index which generally gives inflation readings a third below the Consumer Price Index would indicate that the Fed is in fact targeting higher inflation Many will also be interested to learn that as Barclays noted recently under the Fed s Operation Twist programme whereby the Fed buys long dated US government debt in exchange for sales of short dated US Treasury debt Remember this when you hear people talking about how US debt isn t a problem because people are still desperate to buy safe haven Treasuries In Morgan Stanley s view The relative expansion of the ECB s balance sheet is EUR bearish in our view the liquidity being generated by the ECB is to a large extent absorbed by the bank refinancing process hence the large deposits at the ECB Although there is clear evidence that some of the funds have been used in the peripheral bonds markets helping to stabilise sovereign yield spreads lending into the real economy remains constrained We believe that the relative performance of money multipliers will be a significant driving force for currency markets in the coming year We see the ECB liquidity as a negative for the EUR If the euro gets anywhere near 1 15 it s a racing certainty that the Fed will move to implement either QE3 or nominal GDP targeting In which case a 2 000 gold price is not far off |
MS | Fitch Warns of Potential Cataclysmic Euro Collapse | EquitiesAsian markets traded mixed on Wednesday Amongst the winners the Nikkei edged up 3 to 8448 the ASX 200 rallied 9 and the Hang Seng climbed 8 On the losing side the Kospi fell 4 and the Shanghai Composite slipped 4 In Europe stocks slipped pressured by remarks from Fitch saying the ECB must buy euro zone debt to prevent a collapse of the euro The FTSE declined 5 while the CAC40 and DAX eased 2 UniCredit shares rallied for a second session gaining 6 after its recent 75 loss in value In the US the Dow edged down 13 points to 12449 while the Nasdaq rose 3 The broader S P 500 closed flat CurrenciesEuropean currencies fell against the Dollar The Pound slumped 1 1 to 1 5319 and the Swiss Franc shed 5 to 1 0480 The Euro settled down 6 to 1 2706 after trading as low as 1 2662 earlier in the day The Yen and Australian Dollar both posted minor losses and the Canadian Dollar eased 3 to 1 0191 Economic OutlookOil inventories rose by 5 million barrels much more than the 9 million forecast Weekly mortgage applications rose encouraged by low interest rates Successful Debt Auctions in Spain and Italy Lift EuroEquitiesAsian markets traded mostly lower despite a report from China which showed inflation fell to 4 1 its lowest level in 15 months The Shanghai Composite eased fractionally settling at 2275 Hong Kong s Hang Send slid 3 rhe Nikkei lost 7 and the ASX 200 edged down 2 Bucking the downtrend South Korea s Kospi rallied 1 In Europe the ECB held rates steady and ECB chairman Mario Draghi said there are signs the region is stabilizing The FTSE and CAC40 declined 2 while the DAX rose 4 Auctions in short term debt in Spain and Italy were wildly successful but their ability to sell longer term debt may prove more challenging US stocks posted modest gains despite weak economic data The Dow inched up 22 points to 12471 the Nasdaq advanced 5 and the S P 500 rose 2 CurrenciesThe Euro rallied 9 to 1 2826 and the Swiss Franc gained 1 1 to 1 0595 as the successful bond auctions in Europe relieved some anxiety The Pound and Candian Dollar both rose 1 and the Australian Dollar settled up 3 at title EUR USD width 804 height 373 S P Due to Downgrade Several European CountriesEquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April |
C | Hong Kong s Surging Dollar Sends a Warning on the Housing Market | Bloomberg A shock jump in Hong Kong s currency is signaling a decade long liquidity party is coming to an end That may be bad news for the city s housing market
The Hong Kong dollar surged as much as 0 6 percent on Friday its biggest gain in 15 years and extended gains on Monday While traders gave differing reasons for the move the common theme was concern that the city s borrowing costs will catch up with those in the U S as the Federal Reserve continues to hike rates The chance of local banks raising the so called prime rate for the first time since 2006 is extremely high Financial Secretary Paul Chan said
A currency peg with the U S open financial borders and a booming economy meant Hong Kong property was one of the greatest beneficiaries of ultra low lending costs in the wake of the global financial crisis Home prices rose more than 170 percent in the past decade making the city the world s least affordable Citigroup Inc NYSE C and CLSA Ltd are among those warning of a reversal on expectations that mortgage servicing costs will rise
The market has underestimated the pace of interest rate increases in Hong Kong said Kevin Lai chief economist for Asia ex Japan at Daiwa Capital Markets Hong Kong Ltd This will bring pressure to the property market and leveraged home buyers
After trading at the weak end of the band for months prompting repeated interventions by the city s de facto central bank the Hong Kong dollar rocketed into the stronger half of the spectrum on Friday The currency was 0 15 percent higher at 7 7998 per dollar at 9 07 a m local time
The three month interbank rate known as Hibor was last at 2 125 percent its highest level in almost a decade That s almost triple the 0 75 percent level it was a year ago A narrowing spread with U S Libor is making a previously profitable trade of selling Hong Kong dollars to buy higher yielding U S assets less appealing
The short Hong Kong dollar carry trade has come to an end said Ken Peng an investment strategist at Citi Private Bank in Hong Kong Friday s move suggests borrowing costs in Hong Kong have tightened a lot and will tighten further
The Hong Kong Monetary Authority said in emailed comments that while it didn t want to comment on Friday s movement in the currency market participants generally view the elevated interbank interest rates as a contributing factor
While residential prices in Hong Kong s secondary market have climbed 16 percent over the past 12 months according to Centaline Property Agency developers have begun to offer perks to accelerate sales Some are selling apartments at discounts and others aren t providing mortgages due to concern that rising borrowing costs may increase defaults Financial Secretary Paul Chan said this month he sees signs the market is cooling
Record Highs
Predicting declines in Hong Kong s property market hasn t been a profitable exercise in the past with a home price slump in 2015 2016 quickly followed by new record highs But a rising prime rate could change the dynamic of demand for the city s housing
We expect banks to hike prime rate twice this year by a total of 50 basis points as Hibor rises with a shrinking liquidity pool and Fed hikes said Frank Lee acting chief investment officer for North Asia at DBS Bank HK Ltd It will hurt property market sentiment |
C | Lira Gains on Hopes U S Pastor Held in Turkey Will Be Released | Bloomberg Turkey s lira gained the most among emerging markets amid speculation a detained American pastor could be released next month ending a dispute between the NATO allies that has wreaked havoc on the currency
A local court could free Andrew Brunson currently under house arrest in the coastal town of Izmir when he appears for a hearing on Oct 12 the Wall Street Journal reported citing Turkish officials it did not name The lira also rose on speculation some short positions in the currency got squeezed out
The U S imposed sanctions on Turkey in August over the pastor s detention and has threatened to follow suit with more punitive measures if he is not set free compounding a 40 percent depreciation in the lira this year Brunson was arrested in the wake of a 2016 coup attempt in Turkey and is being charged for aiding terrorist groups
There are somewhat promising signs from both U S and Turkish officials of late and the Oct 12 trial is now much more of a 50 50 probability event than has been the case ahead of previous hearings said Henrik Gullberg a strategist at Nomura International Plc in London who suggested that investors take a long position in the Turkish currency using a dollar lira put spread option strategy
The Turkish currency rallied as much as 1 6 percent to 6 1899 against the greenback before trimming gains to 6 2226 The yield on the nation s 10 year government bonds fell 21 basis points to 18 73 percent
Nomura recommended a two month dollar lira put at 6 00 5 75 as aggressive Turkey s central bank tightening favors positioning for downside in the cross The central bank this month raised its benchmark rate by 625 basis points to 24 percent
As funding approaches a substantial 30 percent it is going to be difficult to sustain outstanding TRY shorts Citigroup NYSE C strategists including Luis Costa wrote in a note to clients The extremely high negative carry continues to squeeze short TRY positions |
JPM | Tech Stock Overvalued Computer Says | DOW 92 21 328 record SPX 10 2440 record NAS 44 6220RUT NYSE IWM 6 1425 record 10 Y un 2 21 OIL 13 45 95GOLD 60 1267 10BITCOIN 1 48 2779 42ETHEREUM 1 97 387 89
The Dow Jones Industrial Average and the S P 500 Index ended at all time highs while the NASDAQ 100 bounced back from its biggest two day drop since September
European and emerging market equities advanced Sterling rose for the first time since the U K election Ten year Treasury yields held near 2 21 percent and the dollar slipped versus major peers before the Fed is projected to raise rates Wednesday
Tech stocks enjoyed a bit of a rebound but there are still concerns about valuations A found a record 44 percent of fund managers polled in a monthly survey see equities as overvalued up from 37 percent in May
The technology heavy Nasdaq Composite Index was named the most crowded trade with 57 percent of investors saying Internet stocks are expensive and 18 percent calling them bubble like In the ninth year of a bull market stocks are expensive
So what was behind the recent two day sell off in tech Did investors just get nervous Are tech stocks fundamentally overvalued No The quants were just rebalancing
According to a new report from JPMorgan NYSE JPM quantitative investing based on computer formulas and trading by machines directly are leaving the traditional stock picker in the dust and now dominating the equity markets The report estimates fundamental discretionary traders account for only about 10 percent of trading volume in stocks Passive and quantitative investing accounts for about 60 percent more than double its share a decade ago
Figures from market structure research firm TABB Group point to similar gains in machine driven trade volume while the overall number of shares traded has declined A subset of quantitative trading known as high frequency trading accounted for 52 percent of May s average daily trading volume
Crude tumbled in early trading on a report that at the same time as OPEC and its partners agreed last month on prolonging production cuts the group s output was climbing the most since November as members exempt from the deal restored lost supply amid estimates that U S supplies declined
The producer price index was flat last month following a sharp 0 5 increase in April Still inflation is more widespread after being largely invisible in 2016 The 12 month rate of wholesale inflation stood at a 2 4 in May up from zero a year earlier and just a notch below a five year high
The flat reading in wholesale inflation in May as expected was tied to falling prices for gas and fuels used to heat and cool homes The wholesale cost of gasoline sank 11 2 The wholesale cost of food also fell for the first time in six months Core wholesale costs slipped 0 1 in May when stripping out the volatile categories of energy food and retail trade margins
The core rate of inflation was up 2 1 over the past 12 months
shows home prices nationwide including distressed sales increased year over year by 6 9 percent in April 2017 compared with April 2016 and increased month over month by 1 6 percent in April 2017 compared with March 2017 Corelogic forecasts that home prices will increase by 5 1 percent on a year over year basis from April 2017 to April 2018
Arizona posted 6 year over year growth in home prices with 0 7 increase March to April Corelogic forecasts Arizona home prices will increase 6 3 over the next 12 months
The said its small business optimism index held steady at a seasonally adjusted 104 5 in May from the prior month In May five of the 10 index components gained four declined and one remained unchanged A net 28 of owners reported plans to make capital outlays well below historic levels
Duke University CFO Magazine conducted a survey of US chief financial officers The share of CFOs who are more optimistic about the economy is the lowest since before the presidential election A jump in sentiment about near term fixes to tax and health care policy has given way to increased doubt as Congress stays fixated on investigating Russia s role in the U S election
The Federal Open Market Committee met today Tomorrow they will conclude their meeting and issue a statement almost certainly announcing a 25 basis point increase in the fed funds target rate Fed officials have penciled in three rate hikes this year A rate hike tomorrow would be the second rate hike of the year
Fed officials have said they are not worried about the strength of the economy They view weak first quarter growth as transitory and believe inflation will resume rising toward the central bank s 2 target The interest rate decision is straightforward Monetary policy works with a lag so the Fed must think ahead
The big question is whether the central bank will start to shrink its in September or December assuming the economy stays on course The balance sheet decision is slightly more complicated It has three parts The Fed must choose when to start shrinking its holdings how quickly to shrink them once it has started and how small the balance sheet should be when the holdings are back to normal
When to start shrinking the balance sheet is partially dependent on the path of interest rate hikes Once interest rates are at more normal levels the Fed will likely begin to let its bond holdings mature and fall off the balance sheet based on a set timetable This coming policy shift isn t yet imminent because interest rates need to rise a bit more first But it s fast approaching and this week isn t too soon for the Fed to start being clearer about its intentions
offered an aggressive defense of his conduct surrounding the Russia investigation telling an open Senate hearing any allegations he had colluded with Moscow to undermine the election were an appalling and detestable lie Sessions recused himself from the Russia investigation in March citing his role as a key foreign policy adviser in the Trump campaign
His abstention came one day after The Washington Post reported Sessions during his Senate confirmation process had failed to disclose two meetings during the presidential campaign with the Russian ambassador to the United States
Meanwhile on the U S electoral system before Donald Trump s election was far more widespread than has been publicly revealed including incursions into voter databases and software systems in almost twice as many states as previously reported
In all the Russian hackers hit systems in a total of 39 states The new details seem to confirm a classified National Security Agency document recently disclosed by the Intercept
In November Steven Mnuchin pledged the wealthy would not see under the administration s developing tax plan That is whatever reduction in tax rates would be offset by fewer deductions so the net result would be the same for the wealthy During Mnuchin s confirmation hearing to become Treasury Secretary Mnuchin repeated his pledge earning the nickname The Mnuchin Rule
Today during a Senate Budget Committee hearing Mnuchin walked back the rule indicating tax reform might result in a windfall for the wealthy
Verizon NYSE VZ has completed its purchase of Yahoo NASDAQ YHOO internet business for 4 48 billion The acquisition which was first announced last July aims to combine Yahoo s operating business with AOL which it purchased in 2015 The merger will form Oath a division of Verizon that is expected to house more than 50 media and technology brands
Verizon plans to layoff more than 2 000 people or the equivalent of 15 percent of Oath s new workforce Tim Armstrong AOL s former chief executive will lead Oath as its CEO Marissa Mayer Yahoo s CEO is out
CEO Travis Kalanick will step away from the company for an unspecified period But that won t likely change the day to day lives of the more than 5 000 Uber employees as much as the changes the company is committing to make to their recruiting retention and workplace culture policies detailed in a report known as the Holder Report |
MS | Morgan Stanley Q1 earnings beat estimates | Investing com NYSE Morgan Stanley first quarter earnings beat estimates The U S bank Wednesday reported an 82 rise in diluted Q1 EPS to 1 0 vs estimate of 0 89 Revenues in the quarter rose 25 from a year earlier to 9 7 bn vs estimate of 9 3 bn Morgan Stanley s shares were 3 59 at 42 69 in pre market trade |
MS | Sell side mostly cheers Morgan Stanley s Q1 results | Solid as a rock says Nomura bull Steven Chubak reiterating his Buy rating and 49 price target He notes Q1 ROE excl tax benefit was 9 9 right in the middle of the bank s targeted range of 9 11 He expects positive EPS revisions and share outperformance Also a bull on the name UBS s Brennan Hawken says momentum on both sides of the franchise is intact with results particularly solid in light of Goldman s miss He s got a Buy rating with 49 price target Neutral on the stock Wells Fargo NYSE WFC s Matthew Burnell reminds of challenges like higher wealth management compensation rate and advisory fees below that of peers Morgan Stanley NYSE MS 2 6 to 42 32Source BloombergPreviously Morgan Stanley 2 2 after strong Q1 April 19 |
MS | Oil falls more than 3 percent S P 500 turns lower | By Caroline Valetkevitch NEW YORK Reuters Oil prices dropped more than 3 percent on Wednesday following a surprise increase in gasoline inventories and declines in energy shares weighed on U S stocks Graphic Global assets in 2017 Graphic Global currencies vs dollar Graphic Global bond dashboard The dollar recovered from recent weakness against the euro and the safe haven yen and sterling was off six month highs which it hit after Tuesday s calling of a snap UK election In the oil market the counter seasonal build of 1 5 million barrels in gasoline in the latest week along with an increase in U S production pressured prices Brent crude futures LCOc1 were down 3 6 percent at 52 89 while U S crude futures CLc1 fell 3 8 percent to settle at 50 44 The oil losses hurt shares of U S energy companies pushing the S P 500 energy index SPNY down 1 4 percent and helping the benchmark index to reverse earlier gains Crude broke 52 on WTI that is the strongest correlation we have right now away from the case by case earnings we have said Art Hogan chief market strategist at Wunderlich Securities in New York The Dow Jones Industrial Average DJI was down 104 72 points or 0 51 percent to 20 418 56 the S P 500 SPX lost 3 27 points or 0 14 percent to 2 338 92 and the Nasdaq Composite IXIC added 17 11 points or 0 29 percent to 5 866 58 Limiting losses were upbeat earnings from Morgan Stanley N MS and others Questions still hung over the reflation trades that had lifted markets since Donald Trump became U S president A run of disappointing U S economic data and doubts the Trump administration will progress with tax cuts have quelled expectations of faster inflation The pan European STOXX 600 index STOXX which hit a three week low on Tuesday ended up 0 2 percent while Britain s FTSE 100 FTSE index fell 0 5 percent British stocks are vulnerable to a rising pound because more than two thirds of FTSE 100 company earnings are derived from operations overseas Sterling was just off a six month peak against the dollar above 1 28 having surged when British Prime Minister Theresa May called an early general election for June 8 seeking to strengthen her party s majority ahead of Brexit negotiations The greenback was 0 3 percent higher against the yen and up 0 1 percent against the euro Four days before the first round of the presidential election in France just a few points separate the top four candidates including two who oppose the euro the far right s Marine Le Pen and the far left s Jean Luc Melenchon In the U S Treasury market 10 year notes US10YT RR were down 6 32 in price to yield 2 20 percent Gold slipped as the dollar gained with spot gold falling as low as 1 275 73 per ounce |
JPM | U S housing starts hit nine month low permits drop | By Lucia Mutikani WASHINGTON Reuters U S homebuilding fell to a nine month low in June and permits for future construction declined for a third straight month dealing a blow to the housing market as it struggles with a dearth of properties available for sale The bigger than expected decrease in housing starts and surprise drop in permits reported by the Commerce Department on Wednesday suggested homebuilding could be plateauing against the backdrop of more expensive lumber and land and labor shortages We re seeing pressure on both sides of the market from increasingly expensive inputs on the supply side to prices that are charging ahead of wage growth on the demand side and the result is that neither builders nor buyers can keep up said John Pataky executive vice president at TIAA Bank in Jacksonville Florida Housing starts tumbled 12 3 percent to a seasonally adjusted annual rate of 1 173 million units last month the lowest level since September 2017 the Commerce Department said The percent drop was the largest since November 2016 and both single and multi family home construction declined in June Data for May was revised down to show starts rising at a 1 337 million unit rate instead of the previously reported 1 350 million unit rate Starts fell in all four regions last month Building permits dropped 2 2 percent to a rate of 1 273 million units also the lowest level since September 2017 Economists polled by Reuters had forecast housing starts falling to a pace of 1 320 million units last month and permits rising to a rate of 1 330 million units The PHLX housing index HGX was trading lower underperforming a broadly firmer U S stock market The dollar rose against a basket of currencies while prices for U S Treasuries were mostly flat Single family homebuilding which accounts for the largest share of the housing market decreased 9 1 percent to a rate of 858 000 units in June Single family homebuilding has lost momentum since hitting a pace of 948 000 units last November which was the strongest in more than 10 years RISING MATERIAL COSTS A survey on Tuesday showed confidence among single family homebuilders unchanged in July with builders continuing to be burdened by rising construction material costs The Trump administration in April 2017 imposed anti subsidy duties on imports of Canadian softwood lumber which builders say have boosted the price of a new single family home further reducing affordability for many first time buyers Mortgage rates have also risen though they are still low by historic standards At the same time wage growth has been moderate Residential investment contracted in the first quarter June s sharp drop in homebuilding suggested housing was probably a drag on growth in the second quarter The housing market is lagging overall economic growth which appears to have accelerated in the second quarter after hitting a soft patch at the start of the year Growth estimates for the April June period are as high as a 5 3 percent annualized rate more than double the 2 0 percent pace in the first quarter The June report builds on what has been a soft run for many of the housing indicators through much of the year to date and it signals that residential investment will likely continue to look weak in the coming months said Daniel Silver an economist at JPMorgan NYSE JPM in New York While permits to build single family homes rose 0 8 percent in June to a pace of 850 000 units they continued to trail starts This suggests limited scope for a pick up in single family homebuilding in the months ahead Starts for the volatile multi family housing segment plunged 19 8 percent to a rate of 315 000 units in June Groundbreaking on buildings with five units or more fell to a 10 month low Permits for the construction of multi family homes dropped 7 6 percent to a pace of 423 000 units In another sign supply will remain tight housing completions were unchanged at a rate of 1 261 million units in June with single family units falling 2 3 percent Realtors estimate that housing starts and completion rates need to be in a range of 1 5 million to 1 6 million units per month to plug the inventory gap
The stock of housing under construction slipped 0 5 percent to 1 121 million units Single family homes under construction last month dipped 0 2 percent to 515 000 units |
JPM | JPMorgan Barclays Seek Blockchain Related Patents USPTO Files Show | The US Patent and Trademark Office USPTO published on Thursday three pending patent applications that were filed by two giant banking groups JPMorgan Chase NYSE JPM and Barclays LON BARC New York based JPMorgan wants to patent a system that leverages blockchain for the management of virtual receipts backed by assets or bonds Barclays has two applications which apply the distributed ledger technology for secure digital data operations and data validation and storage
Barclays
The UK based banking group filed a patent application for the following blockchain related systems Data Operations and and Storage Both inventions refer to systems and methods for storing and managing data that describes a person or company In addition the first invention also presents a system and apparatus for a digital currency system
The description section stresses that it is essential for separate parties to receive and securely store relevant data about each other especially when they use computer networks based on the Internet In this case the security of communication depends on the trustworthiness of the involved entities which has to rely on verification processes The technology that underpins Bitcoin and other cryptocurrencies would work well to ensure the required security level the documents note
Besides the storage of information the Secure Digital Data Operations proposes a system for peer to peer transfer of digital currencies based on the validation of data that describes either one or both entities
The patent applications were initially filed on January 8 2018
JPMorgan
JPMorgan s patent is titled systems and methods for management of asset or obligation backed virtual receipts on a distributed system The application was filed on January 12 2018 The invention proposes to leverage blockchain technology for the management of virtual receipts which can take the form of tokens According to the description
Virtual Depositary Receipts or Virtual Receipts are asset or obligation backed electronic tokens that may provide investors brokers custodians and clearing firms with a means to link an underlying asset or obligation with its digital representation on a distributed system for the purposes of ownership tracking and transfer transaction clearing and settlement asset origination distribution and securitization and other such marketplace processes that may be facilitated on a distributed system
Last month the USPTO a JPMorgan blockchain related patent application for systems and methods for privacy in distributed ledger transactions |
JPM | Powell Hints at New Read on Labor Force Justifying Gradual Hikes | Bloomberg Federal Reserve Chairman Jerome Powell may have dropped a clue this week about why he thinks unemployment can fall lower than many economists believe is advisable without triggering a spike in inflation
Based on a comment he made to lawmakers on Wednesday Powell may be exploring whether there is a cyclical nature to the concept of full employment one which lowers that important level at least temporarily during a jobs rich expansion
David Altig research director at the Atlanta Fed is a believer in that idea At the moment he said the job market is still finding available workers from outside the labor force people who are not counted as unemployed As long as that flow continues it may prevent inflation from accelerating even as unemployment falls further
What is sustainable in the near term can be different from what is sustainable in the longer term Altig said Just because we think you can t sustain 4 5 percent in the long term that doesn t mean 3 5 percent is a problem for a year or two
To be sure Powell hasn t endorsed this theory And even if he s leaning that way he s not backing away from the Fed s current path of interest rate hikes He repeated that view during both appearances before House and Senate committees this week when he said for now the best way forward is to keep gradually raising rates
Still it would help explain some of his remarks especially his assertion to lawmakers that the U S economy is close to full employment maybe not quite there
That sentence is striking because unemployment currently at 4 percent is already below every estimate submitted in June by Fed officials including Powell for full employment The range of estimates ran from 4 1 percent to 4 7 percent with the median at 4 5 percent
It s Contradictory
It s a little confusing because they say that the unemployment rate is a half point below their estimate of full employment said Michael Feroli chief U S economist at JPMorgan Chase Co NYSE JPM If you think you have more slack either lower your estimate or change what you re saying it s contradictory
To be fair Powell has said before that the Fed ultimately looks to a number of measures of labor utilization not just the headline unemployment rate when it gauges the level of full employment
But it s also true that when officials submit their estimates of full employment it s expressed as the longer run level of the jobless rate that s consistent with low and stable inflation
Economists generally agree this longer run level is linked to deep structural factors that tend not to shift with the business cycle That s why Eric Rosengren president of the Boston Fed hasn t moved his estimate of full employment much in recent years and why he s warning his colleagues against dropping their estimates in an attempt to square the circle of low unemployment and low inflation
Full employment Rosengren said in April should change as the workforce becomes better educated It should change as demographics change Those things are slow moving trends
But what if there is also a cyclical nature to full employment Economists recognize that in a severe shock like the 2007 09 recession the level moves up as people who are laid off and remain out of work for an extended time find it hard to get hired The question is whether this can operate in the other direction
If Powell is indeed open to this idea his comments on full employment make more sense as does his serene take on price pressures While he pronounced the risks around inflation to be roughly balanced he admitted to being slightly more worried about lower inflation
Embracing the idea of a lower shorter run level for full employment comes with risks according to William English a former director of the Fed s Division of Monetary Affairs and now a professor at Yale University
Potentially you undo some of the damage from the deep and protracted recession English said But if the Fed moves rates up too slowly and inflation takes off then you have to raise rates too quickly
That would not only end the flow of people back into the work force but send many back out again |
JPM | Bond Traders Hold the Fed s Line Against Trump | Bloomberg Opinion First President Donald Trump came for the sanctity of U S jobs data Now he s challenging the Federal Reserve Bond traders at least for now are taking the latest breach of executive tradition in stride
Treasuries barely budged Thursday from prevailing levels even after Trump said in a CNBC interview that he s not thrilled that Fed Chairman Jerome Powell is overseeing gradual interest rate increases Yields broadly remained near session lows and edged higher after the seemingly inevitable walk back from the White House that Trump respects the independence of the Fed and that he isn t interfering with its decisions Still he just made his view on interest rates clear
Here are the relevant parts about interest rates from his interview
I put a very good man in the Fed I don t necessarily agree with it because he s raising interest rates I m not saying I agree with it I must tell you I don t I m not thrilled because we go up and every time you go up they want to raise rates again I am not happy about it but at the same time I m letting them do what they feel is best
Now I m just saying the same thing that I would have said as a private citizen So somebody would say Oh maybe you shouldn t say that as a president I couldn t care less what they say because my views haven t changed I don t like all of this work we re putting into the economy and then I see rates going up
The lack of a move in Treasuries speaks to a few things about the bond market as a whole For one as Bloomberg News s Edward Bolingbroke pointed out investors are generally content about the current level of yields In fact the latest JPMorgan Chase Co NYSE JPM survey revealed that 100 percent of active clients reported neutral positions the first time they ve all been neutral since January 2011 That tends to reduce the prospect of volatile moves
It also speaks to the comfort that traders have with Powell now that he s settled into his role He just wrapped up two days of testimony in front of both House and Senate lawmakers and despite his plain spokenness he managed to get through it all without upsetting markets in the slightest He has confirmed time and again that the economy is strong and that the central bank will continue lifting rates gradually The only wrinkle was saying they would proceed for now
Trump for his part must hope that for now is a far shorter period than most traders anticipate The going assumption has been that Fed officials would continue to raise rates gradually say once a quarter until the data clearly showed they shouldn t Now with Trump s words ringing in their heads perhaps they ll become just a bit more sensitive to any data misses
It wasn t so long ago that the Fed seemed to look for any reason not to hike Lately policy makers have been marching on even with some imperfect data And that s to their credit normalizing under present conditions is the right course of action
Just as Trump belatedly inserted the word not into his Helsinki comments on Russian election meddling he may have just tried to add not back into the Fed s rate decisions again At least for now the markets are betting the central bank won t be swayed |
JPM | Trump s Economy Depends on Powell s Excellence | Bloomberg Opinion President Donald Trump trampling on convention Nothing new there It s his target that s fresh Upending decades of tradition Trump questioned the wisdom of the Federal Reserve s gradual and consistent increases in interest rates I don t like all of this work that we re putting into the economy and then I see rates going up he said Thursday But Powell does not take orders from the president and is unlikely to be swayed by his appeal And thank goodness for that Powell matters more to economic and financial stability and not just at home than Trump and is acting like it This week offered a stark contrast in their respective approaches to the job and a possible explanation to the disconnect between the havoc in the White House and the robust condition of the world economy led by the U S Testifying to Congress this week Powell was a study in consistency and professionalism He conveyed at length over two days that interest rates are still going up gradually but the Fed is probably getting close to a rate that neither stimulates nor restricts growth Investors responded by pushing the dollar higher and trading in Treasury notes barely skipped a beat There was a flutter in the aftermath of Trump s Fed comments
Compare that with the chaos that Trump sowed with his summit with President Vladimir Putin his dismissal of U S intelligence and the uproar that followed His efforts to calm nerves were astonishingly unconvincing
It s unclear whether the regrettable episode weakened Trump s political standing If Jay Powell was caught in a similar mess his career would be over and for good reason Over the past 18 months many have tried to reconcile political instability with markets and economies that remain above the fray The answer may be simple Trump actually isn t in charge of that Powell is
It s not just about Trump and the Fed The steady if imperfect hand of central banks smoothed edges from markets views of Brexit Italian populism and the cracks in German Chancellor Angela Merkel s coalition The People s Bank of China is tilting policy toward shoring up growth The Bank of Japan s task is focused on trying to get inflation up to 2 percent Japan hasn t had a recent political crackup
While global growth has probably peaked a recession isn t likely the International Monetary Fund forecast this week an expansion of 3 9 percent this year and next The fund wants people to know it s very worried and investors are way too complacent about risks including the impact of a trade war
That s where Powell ECB President Mario Draghi BOJ Governor Haruhiko Kuroda and BOE Governor Mark Carney come in I m going to set aside the PBOC for a minute as it isn t independent like the others Thanks to them there s an awful lot of cash still sloshing around to prop up assets and soften the instability created of elected officials My Bloomberg News colleagues reported last month that the combined balance sheets of the biggest central banks is 11 8 trillion higher than when Lehman Brothers Holdings Inc failed in September 2008 Interest rates in the developed world won t be above 1 5 percent by the middle of next year according to JPMorgan Chase Co NYSE JPM
This is far from saying that Trump s trade volleys and alliance damaging broadsides don t matter or that Brexit and the re emergence of the far right in Germany are meaningless It does mean that the fecklessness of the political class is countered for now by professional economic managers
There may well come a time when missteps by governments make a material dent in economic and financial life There s plenty that central banks can t and shouldn t do There s also merit to the argument that they have let elected officials off the hook This much is clear as the Powell era begins in earnest Trump doesn t hold the reins of the global economy He s merely the elected leader of the free world |
MS | S P Due to Downgrade Several European Countries | EquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April Housing Market Sentiment Soars to 4 5 Year HighEquitiesAsian markets traded mixed on Wednesday as doubts over Greece s debt burden clashed with Tuesday s cheer The Nikkei climbed 1 to 8551 lifted by a sharp 6 6 rally in Elpida Memory on news the company is seeking a deal with Micron Technology The Hang Seng rose 3 to 19687 while the Kospi and ASX 200 settled little changed The Shanghai Composite fell 1 4 to 2264 following Tuesday s powerful 4 2 rally the largest single day gain in more than 2 years European shares traded mixed as well The FTSE rose 2 the DAX gained 3 while the CAC40 eased 2 Societe Generale shares surged 6 as Greece resumed debt negotiations on hopes the bank s losses due to exposure to Greek debt will be less than feared Upbeat data and rumors of a possible Greek debt deal later in the week sent US stocks higher The Nasdaq led the advance climbing 1 5 The Dow rose 97 points to 12576 and the S P 500 gained 1 1 to 1308 Nasdaq Rallies 1 5 Goldman Sachs surged 6 8 after beating earnings estimates while Bank of NY Mellon sank 4 6 after reporting weak earnings CurrenciesThe Euro surged 1 6 as hopes for a solution to Greek s debt woes lifted the single currency The Australian Dollar rallied 1 2 to 1 0430 the Swiss Franc advance 1 to 1 0654 and the Pound climbed 8 to 1 5441 The Canadian Dollar posted a smaller 4 gain to 1 0112 and the Yen inched up fractionally to 76 99 Economic OutlookThe NAHB housing market index jumped to 25 from last month s reading of 21 blowing past analyst estimates of a rise to 22 Industrial production rose by 4 slightly less than forecast and PPI slipped 1 following last month s 3 gain Stocks Gain on IMF Hopes Kodak Files for BankruptcyEquitiesAsian markets rallied to their highest level in more than a month following news the IMF is hoping to raise 600 billion in funding to help tackle the euro debt crisis The Nikkei gained 1 to 8640 the Kospi jumped 1 2 and the Hang Seng rallied 1 3 China s Shanghai Composite climbed 1 3 nearly erasing Wednesday s 1 4 drop Australia s ASX 200 lagged the region easing 1 as employment data showed an unexpected drop of 30K jobs in December France s CAC40 soared 2 to 3329 as European indexes traded higher following strong bond auctions in Spain and France The DAX gained 1 and the FTSE rose 7 as European banks rocketed up 7 4 on hopes the IMF will help address the ongoing debt crisis US stocks posted moderate gains thanks to positive economic and earnings news The Dow rose 45 points to 12624 the Nasdaq rallied 7 and the S P 500 gained 5 to 1314 50 CurrenciesEuropean currencies advanced as renewed hopes for a debt solution lifted the region The Euro and Swiss Franc gained 8 and the Pound rose 4 to 1 5484 The Yen fell 4 to 77 12 while the Australian Dollar closed down 1 to 1 0412 Economic OutlookWeekly unemployment claims dropped to 352K vastly exceeding analyst expectations of 387K CPI was flat while core CPI rose 1 in line with forecasts On a weaker note housing starts fell to 660K 30K short of forecasts |
MS | Fitch Warns of Potential Cataclysmic Euro Collapse | EquitiesAsian markets traded mixed on Wednesday Amongst the winners the Nikkei edged up 3 to 8448 the ASX 200 rallied 9 and the Hang Seng climbed 8 On the losing side the Kospi fell 4 and the Shanghai Composite slipped 4 In Europe stocks slipped pressured by remarks from Fitch saying the ECB must buy euro zone debt to prevent a collapse of the euro The FTSE declined 5 while the CAC40 and DAX eased 2 UniCredit shares rallied for a second session gaining 6 after its recent 75 loss in value In the US the Dow edged down 13 points to 12449 while the Nasdaq rose 3 The broader S P 500 closed flat CurrenciesEuropean currencies fell against the Dollar The Pound slumped 1 1 to 1 5319 and the Swiss Franc shed 5 to 1 0480 The Euro settled down 6 to 1 2706 after trading as low as 1 2662 earlier in the day The Yen and Australian Dollar both posted minor losses and the Canadian Dollar eased 3 to 1 0191 Economic OutlookOil inventories rose by 5 million barrels much more than the 9 million forecast Weekly mortgage applications rose encouraged by low interest rates Successful Debt Auctions in Spain and Italy Lift EuroEquitiesAsian markets traded mostly lower despite a report from China which showed inflation fell to 4 1 its lowest level in 15 months The Shanghai Composite eased fractionally settling at 2275 Hong Kong s Hang Send slid 3 rhe Nikkei lost 7 and the ASX 200 edged down 2 Bucking the downtrend South Korea s Kospi rallied 1 In Europe the ECB held rates steady and ECB chairman Mario Draghi said there are signs the region is stabilizing The FTSE and CAC40 declined 2 while the DAX rose 4 Auctions in short term debt in Spain and Italy were wildly successful but their ability to sell longer term debt may prove more challenging US stocks posted modest gains despite weak economic data The Dow inched up 22 points to 12471 the Nasdaq advanced 5 and the S P 500 rose 2 CurrenciesThe Euro rallied 9 to 1 2826 and the Swiss Franc gained 1 1 to 1 0595 as the successful bond auctions in Europe relieved some anxiety The Pound and Candian Dollar both rose 1 and the Australian Dollar settled up 3 at title EUR USD width 804 height 373 Economic OutlookWeekly unemployment claims jumped by 24K to 399K hitting their highest level in 6 weeks S P Due to Downgrade Several European CountriesEquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April |
MS | Moving Averages Month End Update | Valid until the market close on February 29 2012The S P 500 closed January with a gain of 4 36 from the December close All three index signals indicated an invested position See the specifics The Ivy PortfolioThe table below shows the current 10 month simple moving average SMA signal for each of the five ETFs featured in I ve also included a table of 12 month SMAs for the same ETFs for this popular alternative strategy Backtesting Moving AveragesMonthly Close Signals Over the past few years I ve used Excel to track the performance of various moving average timing strategies But now I use the backtesting tools available on the website Anyone who is interested in market timing with ETFs should have a look at this website Here are the two tools I most frequently use requires a paid subscription Background on Moving AveragesBuying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets In essence when the monthly close of the index is above the moving average value you hold the index When the index closes below you move to cash The disadvantage is that it never gets you out at the precise top or back in at the very bottom Also it can produce the occasional whipsaw short term buy or sell signal such as we ve experienced this summer Nevertheless a chart of the since 1995 shows that a 10 or 12 month simple moving average SMA strategy would have insured participation in most of the upside price movement while dramatically reducing losses The 10 month EMA is a slight variant on the simple moving average This version mathematically increases the weighting of newer data in the 10 month sequence Since 1995 it has produced fewer whipsaws than the equivalent simple moving average although it was a month slower to signal a sell after these two market tops A look back at the 10 and 12 month moving averages in the Dow during the shows the effectiveness of these strategies during those dangerous times The Psychology of Momentum SignalsTiming works because of a basic human trait People imitate successful behavior When they hear of others making money in the market they buy in Eventually the trend reverses It may be merely the normal expansions and contractions of the business cycle Sometimes the cause is more dramatic an asset bubble a major war a pandemic or an unexpected financial shock When the trend reverses successful investors sell early The imitation of success gradually turns the previous buying momentum into selling momentum Implementing the StrategyOur illustrations from the S P 500 are just that illustrations I use the S P because of the extensive historical data that s readily available However followers of a moving average strategy should make buy sell decisions on the signals for the each specific investment not a broad index Even if you re investing in a fund that tracks the S P 500 e g Vanguard s VFINX or the SPY ETF the moving average signals for the funds will occasionally differ from the underlying index because of dividend reinvestment The S P 500 numbers in our illustrations exclude dividends The strategy is most effective in a tax advantaged account with a low cost brokerage service You want the gains for yourself not your broker or your Uncle Sam Note For anyone who would like to see the 10 and 12 month simple moving averages in the S P 500 and the equity versus cash positions since 1950 here s an xls format of the data My source for the monthly closes Column B is Yahoo Finance Columns D and F shows the positions signaled by the month end close for the two SMA strategies Recommended ReadingThe Ivy Portfolio In the past we ve recommended Mebane Faber s thoughtful article The article has now been updated and expanded as Part Three Active Management his book coauthored with Eric Richardson This is a must read for anyone contemplating the use of a timing signal for investment decisions The book analyzes the application of moving averages the S P 500 and four additional asset classes the Morgan Stanley Capital International EAFE Index MSCI EAFE Goldman Sachs Commodity Index GSCI National Association of Real Estate Investment Trusts Index NAREIT and United States government 10 year Treasury bonds As a regular feature of this website I try to update the signals at the end of each month See my review of The Ivy Portfolio Footnote on calculating monthly moving averages If you re making your own calculations of moving averages for dividend paying stocks or ETFs you will occasionally get different results if you don t adjust for dividends For example VNQ triggered a buy signal in December based on adjusted monthly closes but there was no signal if you ignored dividend adjustments See the comparison If you use data from Yahoo Finance for dividend paying assets you would use the right column of adjusted closes in calculating the monthly moving averages Here is the link for Because the data for earlier months will change when dividends are paid each month you must update the data for all the months in the calculation This will be the case for any dividend paying stocks or funds For a visual representation of the VNQ signal at the December 30 close here is chart from Stockcharts com |
MS | Successful Debt Auctions in Spain and Italy Lift Euro | EquitiesAsian markets traded mostly lower despite a report from China which showed inflation fell to 4 1 its lowest level in 15 months The Shanghai Composite eased fractionally settling at 2275 Hong Kong s Hang Send slid 3 rhe Nikkei lost 7 and the ASX 200 edged down 2 Bucking the downtrend South Korea s Kospi rallied 1 In Europe the ECB held rates steady and ECB chairman Mario Draghi said there are signs the region is stabilizing The FTSE and CAC40 declined 2 while the DAX rose 4 Auctions in short term debt in Spain and Italy were wildly successful but their ability to sell longer term debt may prove more challenging US stocks posted modest gains despite weak economic data The Dow inched up 22 points to 12471 the Nasdaq advanced 5 and the S P 500 rose 2 CurrenciesThe Euro rallied 9 to 1 2826 and the Swiss Franc gained 1 1 to 1 0595 as the successful bond auctions in Europe relieved some anxiety The Pound and Candian Dollar both rose 1 and the Australian Dollar settled up 3 at title EUR USD width 804 height 373 Economic OutlookWeekly unemployment claims jumped by 24K to 399K hitting their highest level in 6 weeks Retail sales rose a mere 1 last month a sharp drop from November s 4 rise S P Due to Downgrade Several European CountriesEquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April Housing Market Sentiment Soars to 4 5 Year HighEquitiesAsian markets traded mixed on Wednesday as doubts over Greece s debt burden clashed with Tuesday s cheer The Nikkei climbed 1 to 8551 lifted by a sharp 6 6 rally in Elpida Memory on news the company is seeking a deal with Micron Technology The Hang Seng rose 3 to 19687 while the Kospi and ASX 200 settled little changed The Shanghai Composite fell 1 4 to 2264 following Tuesday s powerful 4 2 rally the largest single day gain in more than 2 years European shares traded mixed as well The FTSE rose 2 the DAX gained 3 while the CAC40 eased 2 Societe Generale shares surged 6 as Greece resumed debt negotiations on hopes the bank s losses due to exposure to Greek debt will be less than feared Upbeat data and rumors of a possible Greek debt deal later in the week sent US stocks higher The Nasdaq led the advance climbing 1 5 The Dow rose 97 points to 12576 and the S P 500 gained 1 1 to 1308 Nasdaq Rallies 1 5 Goldman Sachs surged 6 8 after beating earnings estimates while Bank of NY Mellon sank 4 6 after reporting weak earnings CurrenciesThe Euro surged 1 6 as hopes for a solution to Greek s debt woes lifted the single currency The Australian Dollar rallied 1 2 to 1 0430 the Swiss Franc advance 1 to 1 0654 and the Pound climbed 8 to 1 5441 The Canadian Dollar posted a smaller 4 gain to 1 0112 and the Yen inched up fractionally to 76 99 Economic OutlookThe NAHB housing market index jumped to 25 from last month s reading of 21 blowing past analyst estimates of a rise to 22 Industrial production rose by 4 slightly less than forecast and PPI slipped 1 following last month s 3 gain |
MS | Manufacturing Prompts Rally in the Markets | Manufacturing strength around the globe from has prompted a rally in the markets as investor focus was diverted from the European debt focus Manufacturing data in the US grew at the fastest rate in seven months while manufacturing in the United Kingdom rose to an eight month high Gauges of manufacturing in China also improved and manufacturing in Eu rope contracted less than expected Manufacturing in China showed a modest expansion beating market expectations of a contraction The USD weakened across the board and Treasuries stopped a five day rise with The EUR gained to trade at 1 3160 while the GBP is currently trading at 1 5835Further aiding the positive market sentiment is the expectation that the Greek private sector debt swap deal and the nation s second financing deal will be completed in the next few days The strongest performers overnight were the risk currencies The Australian dollar has surged past 1 0700 while the Canadian dollar is once again trading above parity against the USD Equity markets powered ahead spurred by signs of manufacturing strength globally The S P 500 has closed 0 9 higher at 1 394 with financial and commodity stocks leading the gains Morgan Stanley rose more than 5 on news that it had won the lead manager role for the upcoming Facebook initial public offering The appliance maker Whirlpool rose almost 20 as it projected higher than expected earnings Earlier in Europe bourses closed almost 2 higher on the global manufactur ing outlook Commodity prices moved lower yesterday with the CRB index losing 0 78 points to 311 53 with strength in the equity mar kets failing to spark a larger rally WTI Crude fell more than 0 8 to 97 60 six week lows after the US Energy Department reported higher than expected inventories and gasoline demand fell to a 10 year low Precious metals consolidated with gold rising 0 4 to 1 748 while silver has gained 1 57 to 33 80 Soft commodities were mixed with cocoa losing more than 3 Copper has risen 1 1 overnight Today we have the release of the high impact Australia building approvals and trade balance UK Construction PMI US unemployment claims and testimony by Federal Reserve Chairman Bernanke GOLD continues to show strong price consolidation to gain slightly to hold above 1 740 The range yesterday was 1 733 to 1 751 As we had expected gold had an attempt at the 1 750 resistance level a couple of times before easing back slightly to 1 743 this morning The market is eyeing critical resistance just above 1 800 before a charge towards the all time high just above 1 900 Our end of second quarter target of USD2 000 on gold remains firmly in play Gold is showing good price consolidation at the moment and a break out appears imminent Nothing has happened overnight so we maintain our strongly bullish stance on gold in both the short and medium term We continue to hear of central bank diversification into the metal which continues to support and drive the price higher Today there will more than likely be a lull in liquidity and tightening of trading ranges as the market awaits tomorrow s release of the US non farm payrolls was the big winner on the back of the better than expected data over the last 24 hours with equity markets preforming well also The break above 1 635 top during early Europe trigger weak stops which gave enough fuel to the fire for the price to bounce and takeout the recent 1 0685 resistance The buoyant markets and the love of AUD on better risk sentiment took the price above the 1 0700 level briefly with the pair topping out at 1 0740 US afternoon profit taking and position squaring as we lead into the quiet period before Fridays US non farm Payrolls has seen the price move back to 1 0700 to close out the eventful day Building Approval and Trade Balance data will make for an interesting morning with both expected to be below the previous The current level of the AUD will find early morning covering from Australian Importers and with the price already likely to be below 1 0700 the weaker data could see it return to 1 0600 or below quickly |
MS | S P Due to Downgrade Several European Countries | EquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April Housing Market Sentiment Soars to 4 5 Year HighEquitiesAsian markets traded mixed on Wednesday as doubts over Greece s debt burden clashed with Tuesday s cheer The Nikkei climbed 1 to 8551 lifted by a sharp 6 6 rally in Elpida Memory on news the company is seeking a deal with Micron Technology The Hang Seng rose 3 to 19687 while the Kospi and ASX 200 settled little changed The Shanghai Composite fell 1 4 to 2264 following Tuesday s powerful 4 2 rally the largest single day gain in more than 2 years European shares traded mixed as well The FTSE rose 2 the DAX gained 3 while the CAC40 eased 2 Societe Generale shares surged 6 as Greece resumed debt negotiations on hopes the bank s losses due to exposure to Greek debt will be less than feared Upbeat data and rumors of a possible Greek debt deal later in the week sent US stocks higher The Nasdaq led the advance climbing 1 5 The Dow rose 97 points to 12576 and the S P 500 gained 1 1 to 1308 Nasdaq Rallies 1 5 Goldman Sachs surged 6 8 after beating earnings estimates while Bank of NY Mellon sank 4 6 after reporting weak earnings CurrenciesThe Euro surged 1 6 as hopes for a solution to Greek s debt woes lifted the single currency The Australian Dollar rallied 1 2 to 1 0430 the Swiss Franc advance 1 to 1 0654 and the Pound climbed 8 to 1 5441 The Canadian Dollar posted a smaller 4 gain to 1 0112 and the Yen inched up fractionally to 76 99 Economic OutlookThe NAHB housing market index jumped to 25 from last month s reading of 21 blowing past analyst estimates of a rise to 22 Industrial production rose by 4 slightly less than forecast and PPI slipped 1 following last month s 3 gain Stocks Gain on IMF Hopes Kodak Files for BankruptcyEquitiesAsian markets rallied to their highest level in more than a month following news the IMF is hoping to raise 600 billion in funding to help tackle the euro debt crisis The Nikkei gained 1 to 8640 the Kospi jumped 1 2 and the Hang Seng rallied 1 3 China s Shanghai Composite climbed 1 3 nearly erasing Wednesday s 1 4 drop Australia s ASX 200 lagged the region easing 1 as employment data showed an unexpected drop of 30K jobs in December France s CAC40 soared 2 to 3329 as European indexes traded higher following strong bond auctions in Spain and France The DAX gained 1 and the FTSE rose 7 as European banks rocketed up 7 4 on hopes the IMF will help address the ongoing debt crisis US stocks posted moderate gains thanks to positive economic and earnings news The Dow rose 45 points to 12624 the Nasdaq rallied 7 and the S P 500 gained 5 to 1314 50 CurrenciesEuropean currencies advanced as renewed hopes for a debt solution lifted the region The Euro and Swiss Franc gained 8 and the Pound rose 4 to 1 5484 The Yen fell 4 to 77 12 while the Australian Dollar closed down 1 to 1 0412 Economic OutlookWeekly unemployment claims dropped to 352K vastly exceeding analyst expectations of 387K CPI was flat while core CPI rose 1 in line with forecasts On a weaker note housing starts fell to 660K 30K short of forecasts |
C | Exclusive Saudi Arabia to auction detained tycoon s real estate assets sources | By Marwa Rashad and Stephen Kalin RIYADH Reuters Saudi Arabia will auction real estate owned by indebted billionaire Maan al Sanea and his company starting next month to help repay billions of riyals due to creditors sources familiar with the matter told Reuters Sanea ranked by Forbes in 2007 as one of the world s 100 richest people was detained last year for unpaid debts dating back to 2009 when his company Saad Group defaulted His case is separate from the scores of Saudi businessmen and prominent figures who were held on corruption charges last year at Riyadh s Ritz Carlton hotel although it touches on similar investor concerns about corporate governance In what was Saudi Arabia s longest running debt dispute creditors have spent the past nine years pursuing Saad Group which is based in the Eastern Province for debt repayment Etqaan Alliance the consortium appointed late last year by a three judge tribunal to resolve Saad s debt dispute will sell the assets over five months at auctions in the Eastern Province Riyadh and Jeddah according to two sources familiar with the matter The first auction of undeveloped and commercial land plots a farm and income generating residential buildings in Eastern Province s Khobar and Dammam will take place in late October the sources added One source estimated sale proceeds at one to two billion riyals 267 533 million A creditor source said the auction had been delayed because of weakness in the local property market In March Etqaan launched the first phase of the auction with around 900 vehicles owned by Saad Group including trucks buses diggers forklift trucks and golf carts That auction raised around 125 million riyals which went to repay some creditors including unpaid workers Proceeds from upcoming auctions will go to 34 creditors mostly banks the sources said It is unclear whether Sanea who remains in detention will be released after his assets are sold Saad Group with interests spanning banking to healthcare defaulted together with Ahmad Hamad al Gosaibi and Brothers AHAB in 2009 leaving banks with unpaid debt of about 22 billion in what was Saudi Arabia s biggest financial meltdown Earlier this year Reemas a financial consultancy advising al Sanea reached out to some creditors to try to agree to a settlement that could involve swapping creditor debts for real estate assets but the terms are still under negotiation Local regional and international banks eligible for a settlement have claims totaling 16 billion riyals with international banks such as BNP Paribas PA BNPP and Citi N C and regional lenders such as Mashreq having claims of over 1 billion riyals each sources told Reuters previously Some observers estimate Saad s total debt to be between 40 billion and 60 billion riyals
1 3 75 Saudi Riyals |
C | Gloom Lifts From Emerging Currencies After Rate Hikes EM Review | Bloomberg Emerging market assets gained last week as Russia unexpectedly raised interest rates and Turkey hiked its one week repo rate by more than forecast
Highlights for the week ended Sept 14
Turkey s lira was the best performer among 22 emerging market currencies tracked by Bloomberg policy makers defied President Recep Tayyip Erdogan by jacking up rates more than expected to bolster the flagging lira lifting rates by 625 basis points to 24 percent the decision came just after Erdogan said the nation should cut this high interest rate
Russia s ruble flipped to gains from losses on Friday after the central bank unexpectedly raised interest rates for the first time since 2014 inflation risks have been mounting with a slumping currency and threats of U S sanctions
President Donald Trump is said to have instructed aides to proceed with tariffs on about 200 billion of Chinese products even as Treasury Secretary Steve Mnuchin proposed another round of trade talks with Beijing
China s economic momentum weakened a notch in August with a continued slowdown in investment overshadowing solid retail sales and industrial production data
The White House sent contradictory messages to North Korea announcing it s ready to start planning a second meeting with Kim Jong Un just hours after President Trump s top national security adviser said nuclear talks were stalled
Asia
The onshore and offshore Chinese yuan both declined for a third week more than 60 percent of U S businesses operating in China were hurt by the initial round of tariffs between the Chinese and U S governments with 74 percent foreseeing harm from future U S tariffs and 68 from potential Chinese retaliatory duties according to a survey of more than 430 American companies
S P Global Ratings lowered its credit ratings on seven Chinese local government financing vehicles by one notch
South Korean won strengthened the country s jobless rate rose to 4 2 percent in August the highest since January 2010 and up from 3 8 percent in July it will be difficult for the country s job situation to improve in the short term
Prime Minister Lee Nak yon said it is time to start thinking about rate increases
Demand side inflationary pressure remains tepid and it s dangerous to take preemptive monetary measures at this stage Bank of Korea board member Shin In seok said
The economy is continuing to recover led by exports and domestic consumption the finance ministry said in its monthly green book report
President Moon Jae in asked heads of the country s four biggest conglomerates Samsung KS 005930 Hyundai Motor SK and LG to join his visit to Pyongyang to participate in the inter Korean summit with North Korean leader Kim Jong Un next week Chosun Ilbo reported
India s rupee dropped to a record low before trimming the week s loss the government unveiled measures to prop up the sagging currency including steps to facilitate bond issuance by local companies and possible curbs on imports
Officials from the finance ministry have asked the Reserve Bank of India to do more to maintain adequate liquidity in the banking system people with knowledge of the matter said
The nation s inflation eased below 4 percent for the first time in 10 months
The Indonesian rupiah posted its first weekly gain in five Finance Minister Sri Mulyani Indrawati said authorities want to tighten some rules on exporters and are seeking a fair share of export earnings to be retained in the country
Thailand s SET Index of stocks rallied as King Maha Vajiralongkorn approved two laws one for the election of members of parliament and the other for the selection of senators according to an announcement in the Royal Gazette
Thailand has no need to raise the key interest rate now as the nation s inflation remains benign Finance Minister Apisak Tantivorawong said
The government plans to borrow 1 16 trillion baht 36 billion in fiscal year 2019
The Malaysian ringgit rose halting a 12 week losing streak the trade war may benefit Malaysia over the next year or so especially in electronics and steel industries in the long term U S China trade conflicts would be negative for the country Finance Minister Lim Guan Eng said
Lim said Malaysia is paring expectations for how much money it can recoup from the 1MDB sovereign wealth fund and the country would be very lucky to get back just half
Recouping all funds lost through 1MDB may not be possible as the government wouldn t be able to sell assets at the purchase price and some funds have been squandered Anwar Ibrahim president elect of ruling People s Justice Party said
Police are investigating bond sales and transactions by institutions linked to 1MDB according to Deputy Inspector General Noor Rashid Ibrahim
The Philippine peso weakened a fifth straight week prompting the central bank to have reactivated a hedging program first introduced during the 1997 Asian Financial Crisis to support the peso the program offers currency forward contracts to bank clients with foreign exchange obligations of at least 50 000
President Rodrigo Duterte agreed to nine measures to contain inflation and a corresponding executive order to implement them immediately Economic Planning Secretary Ernesto Pernia said
First half current account deficit came in at 3 1 billion compared with a 130 million shortfall a year ago
EMEA
Turkish lira advanced a second week President Erdogan appointed himself chairman of Turkey s sovereign wealth fund and got rid of the entire management staff that had presided over two years of inaction
Gross domestic product rose 5 2 percent during the three months through June from a year earlier
Russia s ruble halted a 3 week slump as policy makers said they ll consider the necessity of further increases after lifting their benchmark to 7 5 percent a level last seen in March from 7 25 percent
Governor Elvira Nabiullina who first broached the possibility of a rate hike earlier this month said easing may not resume for more than a year
The two Russians accused by the U K of carrying out a nerve agent attack on a former spy denied the charges in an interview with RT state television
Russia s economy expanded faster than was earlier estimated in the second quarter
South Africa s rand strengthened the country s stable ratings outlook means there s little chance of a change in its assessment soon Moody s Investors Service said
Business confidence declined to the lowest level this year as industries raised concern about policy uncertainty
South Africa may collect less revenue than forecast and trim its growth prediction for the year after the economy fell into a recession Finance Minister Nhlanhla Nene said
The Hungarian forint rose the European Parliament adopted a recommendation to punish the country for the perceived erosion of the rule of law a process that is still unlikely to yield concrete sanctions
Prime Minister Viktor Orban received an unprecedented EU censure as European lawmakers called for his government to face possible sanctions for eroding democratic standards
Ukraine was given a boost in its fight with Russia over a defaulted 3 billion bond after the U K Court of Appeal ordered a full blown trial
Polish zloty climbed the country s Monetary Policy Council kept FX intervention as an option while maintaining a floating exchange rate according to its policy guidelines for 2019 published on the parliament s website
Saudi Arabia is said to be raising about 2 billion from the sale of Islamic bonds
The nation s sovereign wealth fund will sign an 11 billion loan marking its first ever borrowing people familiar with the matter said
Ghana s long term foreign currency debt rating was upgraded to B from B by Standard Poor s
Latin America
The Brazilian real was the second worst performer right wing presidential front runner Jair Bolsonaro underwent more surgery Wednesday evening after being stabbed on Sept 6 Bolsonaro s son said he is not in shape for the first round campaigning
Luiz Inacio Lula da Silva endorsed his running mate Fernando Haddad as the Workers Party s candidate after electoral officials barred the imprisoned former president from running in the October vote
The latest XP Ipespe poll published Friday showed Bolsonaro leading the pack with 26 support in a 1st round scenario rising from 23 in prior survey the former Ceara state Governor Ciro Gomes secured 12 percent while Fernando Haddad captured 10 percent voter support
Argentina s peso was the worst EM performer setting a new record low on a closing basis as the IMF said it would delay a 3b disbursement to the nation until talks finish
The government is aiming to save 196 billion pesos 4 9 billion through spending cuts next year as it attempts to reach a fiscal balance according to a report by La Nacion newspaper
August national consumer price index increased 3 9 percent in the month
The Mexican peso was the best performer in Latin America mostly tracking gains across emerging market peers Mexico is open to moving ahead with a bilateral trade pact with the U S if Canada can t reach a deal on Nafta with the Trump administration FT reported
President elect Andres Manuel Lopez Obrador s chief of staff Alfonso Romo said the new government will respect oil contracts and work with companies that already have contracts to achieve success comments are reassuring to the market according to a client note from Citigroup NYSE C
Upcoming data |
C | Pakistan auctions cars in austerity drive PM commutes by helicopter | By Asif Shahzad ISLAMABAD Reuters Pakistan s new government on Monday began auctioning off about 100 government owned vehicles as part of new Prime Minister Imran Khan s highly publicized cost cutting drive which has drawn mixed reviews Auction official Mohammad Asif told Reuters the vehicles could bring in about 2 billion rupees 16 million to the cash strapped government s coffers although that estimate depends on finding buyers for four bullet proof Mercedes estimated in value together at 1 billion rupees The auction has been billed as part of Khan s drive to give the nation s wealth to its rightful owners though critics say most of the new government s cost cutting measures are more symbolism than significant savings Former cricket star Khan 65 took office last month after a populist election campaign in which he railed against what he denounced as the corruption and waste of the two main political parties that have traded power for more than 50 years in between periods of military rule Khan has promised to cut costs including trimming the motorcades of government officials and selling public land It is a change of mindset Khan said in a speech on Friday I will be counting every single rupee I have to spend on me Khan s austerity vows however have been undercut by his near daily helicopter commute from his home in the hills above Islamabad Critics say the cost cutting has been mostly cosmetic There is nothing new in the current austerity drive said political commentator Raza Rumi Auctions of aging government vehicles for example have taken place for years though not so publicized The 36 Mercedes and BMW vehicles was a larger number than at previous auctions and the sale offered bullet proof luxury sedans estimated to be worth 250 million rupees about 2 million each Still nearly three quarters of the 101 vehicles on offer were more than 10 years old some noticeably knocked about Two were 32 year old Toyota Corollas IDEAS Even if the auction were to bring in its projected 2 billion rupees that is a drop in the bucket compared with the government s 5 9 trillion rupee 48 19 billion budget which projects a 1 7 trillion rupees in deficit spending Still Khan s information minister Fawad Chaudhry said even symbolic steps were important for building national unity Public morale may be important in the coming year as Pakistan could face painful conditions for foreign financing possibly an International Monetary Fund bailout to address dwindling foreign currency reserves and a ballooning current account deficit Chaudhry argued that small cutbacks can add up If you try to see its effect on the GDP it is small but in numbers it is not small Chaudhry told Reuters Still public reaction to the austerity drive has been mixed When the new foreign minister Shah Mehmood Qureshi announced he would not fly first class only business class when traveling abroad many pointed out that this was already the case under the previous government Other early ideas including Khan s vow to cut more than 500 staff from Prime Minister House and establishing a six day work week for civil servants were shelved as unworkable In particular Khan has been mocked by some for taking a helicopter into Islamabad most days after publicly declaring he would eschew motorcades and declining to live in the official prime minister s residence Information Minister Chaudhry said the helicopter commute used less fuel than a motorcade at one point arguing that it cost only 50 rupees 40 cents per kilometer That calculation provoked fresh ridicule Why don t you stop metro bus service and instead let people enjoy the cheap helicopter rides quipped a TV host In fact the eight seat helicopter Khan uses costs about 200 000 rupees 1 633 per hour factoring in fuel crew maintenance and safety inspections according to Syed Naseem Ahmad president of the Society of Air Safety Investigation Pakistan TWO CENTS Optics aside analysts say Pakistan will have to take more painful steps such as raising fuel prices to make a real dent In a nutshell there is no indication yet that Prime Minister Khan has a concrete plan to cut Pakistan s mounting debt and government spending said Yousuf Nazar former head of Global Emerging Markets Investments Citigroup NYSE C An indication of cost cutting policy is likely to come on Tuesday when Finance Minister Asad Umar announces revisions to the budget In the meantime some of the about 500 attendees at Monday s auction said they would be happy to take the vehicles off the government s hands Nawab Gul bought a 2005 Toyota Altas for 1 25 million rupees 10 000 They are saying the national coffers are empty So here have my two cents Gul said Another bidder Taufeeq Nawab said he would like to buy one of the older cheaper vehicles for his family I can say that I have a Prime Minister House car My kids will feel good riding in it |
C | Citigroup hires three software investment bankers | By Liana B Baker Reuters Citigroup Inc N C has hired three investment bankers for its technology investment banking group focused on software in the United States and in Europe according to a memo published internally at the bank and confirmed by a spokeswoman on Monday Technology and non technology companies alike have been acquiring software companies to help modernize a range of various industries from retail to industrials Citigroup s move shows how bankers specializing in the sector have become sought after on Wall Street Brian Marshall will join Citigroup from Credit Suisse Group AG S CSGN in San Francisco the memo said Marshall was a former research analyst and also worked as head of corporate development at analytics software company Hortonworks O HDP Marshall will be the bank s co head of software alongside Sam Kumar who joined the bank in 2015 and covers Softbank Group Corp T 9984 Citigroup has also appointed Jim Mackey a former executive at Canada s Blackberry Ltd TO BB to be chairman of software based in San Francisco Mackey had also worked at Canadian software company Open Text Corp TO OTEX and German technology company SAP SE DE SAPG where he helped lead SAP s acquisitions of Sybase Business Objects and SuccessFactors
Jim s senior relationships sector knowledge and deal experience will help accelerate our momentum in the Software sector Citigroup s global head of technology investment banking Herb Yeh said in the memo Yishai Fransis a managing director will join Citigroup s London Office from Deutsche Bank AG DE DBKGn in October as the head of European Middle East and Africa EMEA Technology |
C | Metal Prices Mostly Higher as Dollar s Dash Lower Eases Trade Concerns | Investing com Copper prices edged higher as a weaker greenback helped alleviate selling pressure brought on by expectations the U S is set to pull the trigger on a fresh round of tariffs against China
Copper prices gained 0 26 to 2 65 zinc prices rose 0 69 to 2 325 75 and Nickel fell 1 09 to 12 277 50
U S President Donald Trump was expected to announce new 10 tariffs on 200 billion in Chinese goods as soon as Monday Some took solace in the fact that the tariffs were less harsh than originally proposed
The new 10 tariffs are below an original figure of 25 floated by the administration earlier The Wall Street Journal reported The fresh round of levies comes just a week ahead of new trade talks between the U S and China
Still the prospect of further tariffs on China the world s largest commodity consumer has fueled fears that demand could falter as the U S China trade war has exacerbated China s economic woes
Citigroup NYSE C forecast another tariff by the U S on 200 billion of Chinese goods would knock a full 1 off Chinese real GDP growth
A weaker dollar however helped stifle downside momentum in metal prices
The U S dollar index which measures the greenback against a trade weighted basket of six major currencies fell 0 47 to 94 06
Dollar denominated assets are sensitive to moves in the dollar A fall in the dollar makes commodities cheaper for holders of foreign currency boosting demand
Alumiium prices fell 0 06 to 2 0355 50 but losses were limited by easing fears of a supply shortage after the Treasury Department said it would allow customers of Russian producer Rusal to negotiate some new contracts
In precious metals gains in gold prices were limited by an ongoing rise in U S bond yields as the U S 10 year Treasury yield hovered around the psychologically important 3 level
Gold futures for December delivery on the Comex division of the New York Mercantile Exchange rose by 4 80 or 0 40 to 1 205 40 troy ounce
A rise in U S rates lifts the opportunity cost of holding gold as it pays no interest
Silver futures rose 0 55 to 14 22 a troy ounce while platinum futures rose 0 28 to 800 80 |
JPM | Behind Rise Of Smart Beta Bond ETFs | There has been a steady shift in fixed income ETF launches in the last few months The tactics of plain vanilla bond ETFs do not seem to be working anymore and issuers are focusing more and more on active and smart beta bond ETFs
And why not Since the financial crisis almost a decade ago tendencies of central banks of the developed world appear to be changing Though many of these are still practicing heightened accommodative polices and quantitative easing the U S is doing the opposite
Japan and the Euro zone are still following easy money policies just because these started QE later than the U S and if the economic momentum holds ground for longer sooner or later we will likely see the unwinding of Euro zone and Japanese QE This is because years of such practice have now put the global economy on a decent ground inflationary expectations have been rising and bond yields have been on an uptrend
Plus the inflationary outlook in the U S got a boost since when Donald Trump won the election Trump s proposed spending plan and expected slash in personal and corporate taxes injected fresh optimism in the otherwise decent U S inflation read
Inside the Growing Popularity of Smart Beta Bond ETFs
As per an article published on less than a decade ago Morningstar a data provider had only registered two non traditional bond ETFs with assets of about 200m managed by Invesco s PowerShares while Morningstar now tracks 23 non traditional bond ETFs with total assets of about 10 billion
The article went on to elaborate that BlackRock has totaled 25 smart beta bond ETFs and Rob Nestor head of BlackRock s US iShares smart beta team indicated that 25 additional have been filed and are eyeing approval
As per there are close to 290 fixed income ETFs with an aggregate market cap of about 490 billion Among them about 65 funds are actively managed and about 31 ETFs follow an enhanced strategy But lately there has been a surge of fixed income ETFs with smart and innovative strategies
As said above the bond market is in doldrums Signs of a great rotation or a shift from bonds to stocks is palpable The popular bond ETF iShares 20 Year Treasury Bond NASDAQ TLT ETF V TLT has lost about 5 8 in the last one year as of June 5 2017
Though expectations of an end to the bond bull market seem to be overstated the plain vanilla fixed income segment is expected to remain subdued over the long run on rising rate prospects As a result issuers are turning smart in their product launches read
Some New Smart or Active Bond ETFs
Hartford Corporate Bond ETF First Trust TCW Opportunistic Fxd Inc ETF and JPMorgan NYSE JPM Global Bond Opportunities ETF are active funds having entered the market this year IQ S P High Yield Low Volatility Bond ETF is an example of smart beta bond ETF that entered the market in February
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 | Mothercare Plc Stock Rating Upgraded By Berenberg Bank | Mothercare LON MTC was upgraded by equities research analysts at Berenberg Bank to a hold rating in a note issued to investors on Thursday MarketBeat com reports
The brokerage currently has a GBX 130 1 68 price objective on the stock up from their prior price objective of GBX 100 1 29 Berenberg Bank s price objective would suggest a potential upside of 5 48 from the company s current price
A number of other equities research analysts also recently issued reports on MTC JPMorgan Chase Co NYSE JPM reduced their price objective on shares of Mothercare plc from GBX 160 2 07 to GBX 149 1 93 and set an overweight rating for the company in a research report on Wednesday March 1st Numis Securities Ltd reaffirmed a buy rating and issued a GBX 150 1 94 price objective on shares of Mothercare plc in a research report on Thursday April 6th
Finally Canaccord Genuity upped their price objective on shares of Mothercare plc from GBX 81 1 05 to GBX 106 1 37 and gave the stock a sell rating in a research report on Friday April 7th One analyst has rated the stock with a sell rating one has assigned a hold rating and three have given a buy rating to the stock The company has an average rating of Hold and a consensus price target of GBX 135 20 1 75
Mothercare plc opened at 122 50 on Thursday MarketBeat com reports The stock s market cap is GBX 208 49 million Mothercare plc has a 52 week low of GBX 102 25 and a 52 week high of GBX 145 00 The firm has a 50 day moving average price of GBX 125 29 and a 200 day moving average price of GBX 117 33
TRADEMARK VIOLATION NOTICE This piece of content was first reported by site and is the sole property of of site If you are viewing this piece of content on another domain it was illegally stolen and reposted in violation of United States and international copyright trademark laws The legal version of this piece of content can be read at permalink
In related news insider Tea Colaianni bought 40 000 shares of Mothercare plc stock in a transaction dated Wednesday May 31st The stock was purchased at an average cost of GBX 121 1 56 per share with a total value of 48 400 62 540 38
About Mothercare plc
Mothercare plc is a retailer for parents and young children The principal activity of the Company is to operate as a specialist omni channel retailer franchisor and wholesaler of products for mothers to be babies and children under the Mothercare and Early Learning Centre brands The Company s operating segments include the UK business and the International business |
JPM | The Investing Public Is Still All In | With the markets breaking out to new highs it is not surprising to see a continued stream of analysis grappling for bits of data to support the bullish mantra As you know I have increased equity allocations in models with the breakout but this is a tactical position only as the fundamentals simply do not support the rising risk levels currently
However despite 8 years of a bull market advance one of the prevailing myths just won t die is that of cash on the sidelines To wit
Underpinning gains in both stocks and bonds is 5 trillion of capital that is sitting on the sidelines and serving as a reservoir for buying on weakness This excess cash acts as a backstop for financial assets both bonds and equities because any correction is quickly reversed by investors deploying their excess cash to buy the dip Nikolaos Panigirtzoglou the managing director of global market strategy at JPMorgan NYSE JPM wrote in a client note
This is the age old excuse why the current bull market rally is set to continue into the indefinite future The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets However the reality is if they haven t done it by now after 3 consecutive rounds of Q E in the U S a 200 advance in the markets and ongoing global Q E exactly what will that catalyst be
However Clifford Asness previously wrote
There are no sidelines Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return But they always ignore that this seller sold to somebody who presumably moved a precisely equal amount of cash off the sidelines
Every transaction in the market requires both a buyer and a seller with the only differentiating factor being at what PRICE the transaction occurs Since this must be the case for there to be equilibrium to the markets there can be no sidelines
Furthermore despite this very salient point a look at the stock to cash ratios also suggests there is very little available buying power for investors current
Each month the Investment Company Institute releases information related to the mutual fund industry Included in this data is the total amount of assets invested in mutual funds ETFs and money market funds As a rough measure of investor sentiment this indicator looks at the total assets invested in equity mutual funds and ETFs and compares it to the total assets invested in the safety of money market funds
The higher the ratio the more comfortable investors have become holding stocks the lower the ratio the more uncertainty there is in the market Currently with the ratio at the highest level on record there is little fear of holding stocks
Negative free cash balances also suggest the same as investors have piled on the highest levels of leverage in market history
Furthermore with investors once again fully invested in equities it is not surprising to see cash and bond allocations near historic lows
Cash on the sidelines Not really
Everyone all in the boat Absolutely
Historical outcomes from such situations Not Great |
JPM | Emini Bull Leg In Big Trading Range | Monthly S P 500 Emini futures candlestick chart Buy climax is more important than Trump Comey and May
The monthly S P500 Emini futures candlestick chart has been in a strong bull trend for 18 months Furthermore there is an 8 bar bull micro channel no pullbacks
The monthly S P500 Emini futures candlestick chart had a High 1 bull flag in April Yet it was after a 4 month buy climax In addition it was at a measured move up from the 2014 2015 trading range A breakout above High 1 bull flag after a buy climax at resistance usually only lasts a few bars This is the 2nd month Then the chart typically pulls back for a few bars That would be a few months on the monthly chart
Because the 18 month bull channel is tight the 1st reversal down will likely be minor Therefore bulls will probably buy a 2 3 bar pullback A 3 month pullback on the monthly chart could fall 150 points from the high While this would be a bear trend on the daily chart it would simply be a bull flag on the monthly chart
Some minor reversals lead to major opposite trends However most traders want to see either a very strong reversal down or a series of 3 or more bear bars before they will believe that the bears have taken control Most tops typically need at least a micro double top Therefore bulls will buy the 1st reversal down confident that the bears will not sell aggressively at least until there is a rally back up to test the old high
Weekly S P500 Emini futures candlestick chart Extreme buy climax
The weekly S P500 Emini futures candlestick chart had a bear doji bar this week That is therefore weak follow through after 2 strong bull bars While there is no top yet this rally is forming a small parabolic wedge since the March 27 low
The weekly S P500 Emini futures candlestick chart has been in a tight bull channel for 18 months Yet there have been 3 small pushes up from the March 27 low Hence this is a potential parabolic wedge top However this week is not a strong sell signal bar While it had a bear body it had a prominent tail below Because the context is good for a reversal down to the weekly moving average traders should be ready for a selloff Furthermore it might have begun on Friday
Extreme buy climax
This was the 30th consecutive week above the 20 week exponential moving average This is the longest stretch in the 8 year bull trend and therefore extreme Furthermore it is the 2nd longest stretch in the 18 year history of the Emini
The longest one was about 50 weeks That was in 2003 and on a reversal up after a 50 collapse A rally in that environment is often extremely strong Yet the current rally is late in a bull trend When there is exceptional strength late in a trend it is more likely exhaustive
Since a trend can last much longer than what seems logical it is too early to be looking for shorts However because a correction down to the weekly moving average will likely begin soon buying here is risky for traders A trader is someone looking to take profits within a week or two They are buying because the momentum up is strong on the daily chart However they can only buy here if they are comfortable managing their trades if there is a sharp reversal down
Daily S P500 Emini futures candlestick chart Probable bull leg in trading range
The daily S P500 Emini futures candlestick chart formed a big outside down day on Friday Yet it closed far above its low and back in the 5 day tight trading range However it has had 3 legs up from the March 27 low This is therefore a wedge rally Furthermore it is nested This is because there are 3 smaller legs up since the May 18 low
The daily S P500 Emini futures candlestick chart has a nested wedge rally In addition the March April trading range is a potential Final Bull Flag While there is no clear sign of a top the odds are that the upside is small from here
While Friday was an outside down bar it had prominent tails Furthermore it is in a 5 day tight trading range Therefore the bears need more before traders will believe that the bears have taken control Yet the context is good for a selloff beginning anytime
The rally from the March 27 low is probably a bull leg in what will become a trading range Therefore the odds are that the Emini will soon begin a bear leg down to the bottom of the trading range Since that is the March 27 low of 2315 75 that would be a 100 point correction
This rally is similar to the one in the bank stocks that ended on March 1 It was followed by a selloff to the bottom of the January Final Bull Flag The odds are that the rally in the Emini will lead to a similar selloff over the next several months
The wedge rally to the high on the daily chart of JPMorgan Chase Co NYSE JPM is similar to the current rally in the S P500 and Emini The odds are that the Emini will follow the same path down to the bottom of its final bull flag over the next several months |
MS | Italy orders Vivendi to cut stake in either Telecom Italia or Mediaset | By Giulia Segreti MILAN Reuters An Italian regulator ordered French media group Vivendi PA VIV on Tuesday to cut its stake in either Telecom Italia MI TLIT or broadcaster Mediaset IT MS within a year ruling it was in breach of rules designed to prevent a concentration of power Vivendi which aims to build a media empire in southern Europe is the biggest single shareholder in Italy s main telecoms firm with 24 percent and recently acquired 28 8 percent of Mediaset the country s biggest private broadcaster In its ruling communications authority AGCOM found Vivendi exercised significant influence over both firms and was therefore in breach of the anti trust rules It threatened to fine Vivendi an amount equal to between 2 and 5 percent of its revenues unless it complied with the divestment The authority did not say how much Vivendi would need to divest in either company but ordered the French group to present it with a specific plan of action within 60 days AGCOM said the links between Vivendi Telecom Italia and Mediaset risked producing a negative effect on the existing level of competition in the markets involved and on the degree of pluralism in the media system Vivendi said it was surprised by the decision and reserved the right to take any appropriate legal action including an appeal and a formal complaint to the European Commission for breach of EU law It did not elaborate Italy s media laws grew partly out of parliamentary concerns in the 1990s over the combined political and business power of then prime minister and media tycoon Silvio Berlusconi who remains the largest shareholder of Mediaset Now the laws appear to be working in Berlusconi s favor Vivendi drew regulatory scrutiny after building an unwelcome stake in Mediaset becoming its second largest investor That angered Berlusconi and raised concerns in Rome about Vivendi chairman Vincent Bollore s influence over corporate Italy Bollore is also a key shareholder in influential Italian investment bank Mediobanca MI MDBI which controls insurer Generali MI GASI Mediaset said it was satisfied with the regulator s decision which came late on Tuesday and was waiting to read the full ruling before deciding on any future action In relation to Mediaset AGCOM said Vivendi s influence could be expressed through its voting rights its potential to nominate its own representatives to the board and block any decisions of an extraordinary nature AGCOM opened the investigation into Vivendi on Dec 21 after Mediaset filed a complaint
Mediaset and Vivendi are battling each other in court over the decision by the French group to pull out of an 800 million euros 860 million contract to buy the Italian group s pay TV unit Premium |
MS | KKR led group ups ante in bidding war for Australia s Tatts lotto | By Jamie Freed SYDNEY Reuters A group backed by private equity firm KKR Co N KKR on Wednesday said it had made a revised A 6 15 billion 4 65 billion offer for Australia s biggest lottery operator Tatts Group Ltd AX TTS upping the ante in a bidding war against Tabcorp Holdings Ltd AX TAH Both proposals are valued at less than Tatts trading price and shareholders are divided over whether the board should favor the KKR led all cash bid over Tabcorp s cash and scrip offer and allow the U S firm to do due diligence KKR backed Pacific Consortium s bid of A 4 21 a share compares with the A 4 209 offered by Tabcorp based on its closing price on Tuesday Tatts shares were trading A 0 03 higher at A 4 38 on Wednesday We would like to see Tatts grant due diligence Gabriel Radzyminski managing director of activist investor Sandon Capital said Not because we like the Pacific Consortium offer at the moment but because we want to see if they can increase it Tatts is a prized asset given the lucrative and reliable earnings from its lotteries business which benefits from monopoly licenses It also owns a smaller wagering business that competes against Tabcorp the nation s largest betting operator Australia offers the likes of KKR a rare opportunity to own this type of business as in most countries lotteries remain in government hands Charlie Green a director at Hunter Green Institutional Broking which owns Tatts shares said the board had enough grounds to reject the consortium bid as inferior to the Tabcorp offer Tatts rejected an earlier offer from the group in December It is all cash so there is no capital gains tax roll over relief he said of the Pacific Consortium offer There are no synergies available for Tatts shareholders The great advantage of the Tabcorp bid is that Tatts shareholders get to share in the upside PROS AND CONS Brisbane based Tatts said it was assessing whether Pacific Consortium s bid was superior to the Tabcorp deal agreed in October which Tatts and Tabcorp touted as having A 130 million a year in synergies A Tatts Tabcorp merger would form a gambling powerhouse that would help both companies fend off a challenge from overseas online rivals such as Britain s William Hill PLC L WMH and Ireland s Paddy Power Betfair PLC I PPB that have made huge strides into Australian wagering in recent years Pacific Consortium also includes Macquarie Group Ltd AX MQG Morgan Stanley NYSE MS Infrastructure and First State Superannuation Scheme The group said it had obtained indicative equity commitments of A 4 6 billion and conditional debt financing for the remainder The proposal is subject to the unanimous recommendation of the Tatts board Pacific Consortium Chairwoman Kerry Schott said the all cash proposal provided greater certainty for investors and was free of competition issues The Tatts Tabcorp merger has yet to be approved by the Australian Competition Tribunal
A Tabcorp spokesman declined to comment |
MS | Top 5 things to watch today | Investing com FTSE 100 struggles to hold gains for 2017 as U K prepares general elections Earnings in focus as NYSE Morgan Stanley among those to report Beige Book to provide Fed with view on U S economy Oil pulls back from two week low ahead of EIA inventories Global stocks mixed as equities attempt to stage recovery |
JPM | China s Home Prices Rose in June at Fastest Pace in 21 Months | Bloomberg China s home prices rose at the fastest pace in 21 months in June even as the government stepped up a campaign against property speculation
New home prices in 70 cities tracked by the government gained 1 1 percent from the previous month according to Bloomberg calculations based on data from the National Bureau of Statistics released Tuesday That compared with a 0 8 percent increase in May It was the fourth straight monthly acceleration
Price gains are picking up pace even as officials maintain a two year campaign to cool the housing market and roll out an array of extra tightening measures that have helped send developers shares tumbling In late June the authorities announced a six month campaign against property speculation in 30 cities tightened approvals for loans for shanty town redevelopments and looked into further restricting developers sales of offshore debt
Home prices will still rise this year while full year sales will likely be slightly down from last year JPMorgan Chase Co NYSE JPM property analyst Ryan Li said before the data release
Home prices increased in 63 of the 70 cities in June compared with 61 in May
To contact Bloomberg News staff for this story Emma Dong in Shanghai at edong10 bloomberg net
To contact the editors responsible for this story Sree Vidya Bhaktavatsalam at sbhaktavatsa bloomberg net Paul Panckhurst Peter Vercoe
2018 Bloomberg L P |
JPM | Tame UK inflation knocks BoE rate hike expectations | By Andy Bruce and Kate Holton LONDON Reuters British inflation unexpectedly held steady last month denting market confidence about a Bank of England interest rate hike next month and sending sterling to a 10 month low against the dollar The pound tumbled towards 1 30 and 10 year British government bond yields GB10YT RR fell to their lowest since the end of May following the data which also showed weakening in an underlying measure of inflation Despite motor fuel prices rising to their highest since 2014 annual consumer price inflation held in June at 2 4 percent the Office for National Statistics ONS said Economists polled by Reuters had on average expected to see the first increase this year to 2 6 percent Britain s economy appears to be picking up after a slow first three months of the year when unusually heavy snow hurt demand While the central bank worries that growth is close to the modest pace at which it will start to push up inflation Wednesday s data brought little sign of this Core inflation which strips out energy food alcohol and tobacco prices fell to 1 9 percent from 2 1 percent in May below all forecasts and the weakest reading since March 2017 The large downside surprise adds more uncertainty around what had until now appeared a near certain August rate hike JPMorgan NYSE JPM economist Allan Monks said Comments from BoE officials over the next week could be a game changer Monks said drawing parallels with May when a spate of poor data thwarted a widely expected rate hike One measure of financial market pricing after Wednesday s figures showed a roughly 70 percent chance of a move next month compared with nearly 80 percent before PRESSURE IN THE PIPELINE On Tuesday data showed British workers wages rose at the slowest rate in six months during the three months to May despite a record number of people in jobs challenging the BoE as it considers raising rates next month A Reuters poll of economists published on Tuesday showed 47 out of 75 thought the BoE would raise rates to a new post financial crisis high of 0 75 percent in August The remainder thought it would stay on hold BOE INT Some economists said the weakness in June s inflation data was driven by volatile components such as clothing computer games and air fares which could soon rebound The ONS reported the biggest month on month drop in clothing prices for any June since 2012 as shops slashed prices for the summer sales Wednesday s data suggested rising pressure in the pipeline for consumer prices however Manufacturers increased the prices they charged by 3 1 percent in June compared with 3 0 percent in May While a slightly weaker increase than expected it marked the strongest rise this year The cost of raw materials many of them imported was 10 2 percent higher than in June 2017 the strongest rise in a year The continued pick up in producer prices suggests that inflation may rise a little in the short term as the recent oil price increases pass through supply chains said Suren Thiru head of economics at the British Chambers of Commerce
But any period of rising price growth was likely to be temporary he added |
MS | Will the Fed Announcement Bring Clarity or Confusion | This coming Wednesday between 12 30 and 2PM we will get a ton of new information to digest and analyze The Federal Reserve will make a series of statements while unveiling its new communication effort A portion of the new information will be contained in the revised Summary of Economic Projections SEP The Fed has worked long and hard on its new communication policy The question is What will people think and how will the markets react I believe that there is a very good possibility that the Fed s plan will add to uncertainties regarding monetary policy Contrary to its objectives the new openness and clarity may end up causing the confusion The Fed will provide information regarding member s thinking on the future size of the Fed s balance sheet BS This is critical We might see a consensus view that the Fed s balance sheet will grow another 25 over the next 18 months That would bring this headline Fed Signals Another 1T Of QEStocks rise sharply Oil copper gold see largest one day rise in two yearsTIPs spreads widen to 2 5 We could just as easily get a consensus opinion that the Fed s BS will remain unchanged for the foreseeable future That would also be a shocker Fed Forecasts End of QEGlobal stocks in broad retreat Next move is to tighten The Fed will provide information regarding its thinking on GDP inflation and the timing of an increase in the Federal Funds rate new info This is all potentially explosive data The Fed s most recent read November on the economy painted a somewhat upbeat picture Almost all of the data since then has been on the positive side While I doubt the Fed will signal that happy days are here again it would appear likely that a 2 0 growth forecast for GDP is in the cards How is the Fed going to square this relatively upbeat economic assessment with a loose monetary policy that is currently at biblical historic levels The answer is It can t Fed Predicts Improvement To Keep Monetary Pedal on the Metal Global Central Bankers Critical OECD head says Reckless Dollar in rout Gold rises 65 For the Fed to continue ZIRPing Twisting and QEing it has to support the policy with a bleak assessment on the economy A negative outlook is the only scenario that justifies maintaining let alone expanding the existing emergency monetary measures I think the Fed will hint that monetary contraction is in our future about a year away if not sooner To me the only circumstance that would avoid this conclusion is if the Fed were to come out with some decidedly disappointing expectations for growth and unemployment for the next 36 months This too would make for headlines Fed Downgrades ExpectationsThree More Years of Sub par GrowthA downbeat assessment would influence the Congressional Budget Office CBO On January 30 the CBO will release its ten year economic outlook This is what they said a year ago The CBO forecasts for 2011 were off the mark I think they will have to significantly downgrade their expectations for 2012 and 2013 The CBO numbers are the basis upon which long term estimates for future deficits and the financial status of Social Security and other big entitlement programs are made The Office of Management and Budget OMB uses these numbers to craft legislation for the White House I find it interesting that the forecast that would best serve Ben Bernanke s desire to maintain and expand monetary policy is exactly the opposite forecast that the CBO wants to use in evaluating America s macro economic outlook On Friday Morgan Stanley s David Greenlaw commented on prospects for the Fed s announcements this week In sum there seems to be some risk of significant market confusion next week At the end of the day we re concerned that market confusion next week could lead to an unintended tightening of financial conditions Mr Greenlaw is assuming that the Fed will produce an economic forecast that will force a conclusion that further easing is off the table We may get that The alternative is that the Fed downgrades its collective assessment for growth inflation and interest rates Should it do that the folks at the CBO will have to either scramble to adjust their own expectations or face severe criticism for presenting a rosy view of the future while the Fed is singing a different tune |
MS | Fitch Warns of Potential Cataclysmic Euro Collapse | EquitiesAsian markets traded mixed on Wednesday Amongst the winners the Nikkei edged up 3 to 8448 the ASX 200 rallied 9 and the Hang Seng climbed 8 On the losing side the Kospi fell 4 and the Shanghai Composite slipped 4 In Europe stocks slipped pressured by remarks from Fitch saying the ECB must buy euro zone debt to prevent a collapse of the euro The FTSE declined 5 while the CAC40 and DAX eased 2 UniCredit shares rallied for a second session gaining 6 after its recent 75 loss in value In the US the Dow edged down 13 points to 12449 while the Nasdaq rose 3 The broader S P 500 closed flat CurrenciesEuropean currencies fell against the Dollar The Pound slumped 1 1 to 1 5319 and the Swiss Franc shed 5 to 1 0480 The Euro settled down 6 to 1 2706 after trading as low as 1 2662 earlier in the day The Yen and Australian Dollar both posted minor losses and the Canadian Dollar eased 3 to 1 0191 Economic OutlookOil inventories rose by 5 million barrels much more than the 9 million forecast Weekly mortgage applications rose encouraged by low interest rates Successful Debt Auctions in Spain and Italy Lift EuroEquitiesAsian markets traded mostly lower despite a report from China which showed inflation fell to 4 1 its lowest level in 15 months The Shanghai Composite eased fractionally settling at 2275 Hong Kong s Hang Send slid 3 rhe Nikkei lost 7 and the ASX 200 edged down 2 Bucking the downtrend South Korea s Kospi rallied 1 In Europe the ECB held rates steady and ECB chairman Mario Draghi said there are signs the region is stabilizing The FTSE and CAC40 declined 2 while the DAX rose 4 Auctions in short term debt in Spain and Italy were wildly successful but their ability to sell longer term debt may prove more challenging US stocks posted modest gains despite weak economic data The Dow inched up 22 points to 12471 the Nasdaq advanced 5 and the S P 500 rose 2 CurrenciesThe Euro rallied 9 to 1 2826 and the Swiss Franc gained 1 1 to 1 0595 as the successful bond auctions in Europe relieved some anxiety The Pound and Candian Dollar both rose 1 and the Australian Dollar settled up 3 at title EUR USD width 804 height 373 Economic OutlookWeekly unemployment claims jumped by 24K to 399K hitting their highest level in 6 weeks S P Due to Downgrade Several European CountriesEquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April |
MS | Housing Market Sentiment Soars to 4 5 Year High | EquitiesAsian markets traded mixed on Wednesday as doubts over Greece s debt burden clashed with Tuesday s cheer The Nikkei climbed 1 to 8551 lifted by a sharp 6 6 rally in Elpida Memory on news the company is seeking a deal with Micron Technology The Hang Seng rose 3 to 19687 while the Kospi and ASX 200 settled little changed The Shanghai Composite fell 1 4 to 2264 following Tuesday s powerful 4 2 rally the largest single day gain in more than 2 years European shares traded mixed as well The FTSE rose 2 the DAX gained 3 while the CAC40 eased 2 Societe Generale shares surged 6 as Greece resumed debt negotiations on hopes the bank s losses due to exposure to Greek debt will be less than feared Upbeat data and rumors of a possible Greek debt deal later in the week sent US stocks higher The Nasdaq led the advance climbing 1 5 The Dow rose 97 points to 12576 and the S P 500 gained 1 1 to 1308 Nasdaq Rallies 1 5 Goldman Sachs surged 6 8 after beating earnings estimates while Bank of NY Mellon sank 4 6 after reporting weak earnings CurrenciesThe Euro surged 1 6 as hopes for a solution to Greek s debt woes lifted the single currency The Australian Dollar rallied 1 2 to 1 0430 the Swiss Franc advance 1 to 1 0654 and the Pound climbed 8 to 1 5441 The Canadian Dollar posted a smaller 4 gain to 1 0112 and the Yen inched up fractionally to 76 99 Economic OutlookThe NAHB housing market index jumped to 25 from last month s reading of 21 blowing past analyst estimates of a rise to 22 Industrial production rose by 4 slightly less than forecast and PPI slipped 1 following last month s 3 gain Stocks Gain on IMF Hopes Kodak Files for BankruptcyEquitiesAsian markets rallied to their highest level in more than a month following news the IMF is hoping to raise 600 billion in funding to help tackle the euro debt crisis The Nikkei gained 1 to 8640 the Kospi jumped 1 2 and the Hang Seng rallied 1 3 China s Shanghai Composite climbed 1 3 nearly erasing Wednesday s 1 4 drop Australia s ASX 200 lagged the region easing 1 as employment data showed an unexpected drop of 30K jobs in December France s CAC40 soared 2 to 3329 as European indexes traded higher following strong bond auctions in Spain and France The DAX gained 1 and the FTSE rose 7 as European banks rocketed up 7 4 on hopes the IMF will help address the ongoing debt crisis US stocks posted moderate gains thanks to positive economic and earnings news The Dow rose 45 points to 12624 the Nasdaq rallied 7 and the S P 500 gained 5 to 1314 50 Morgan Stanley shares jumped 5 4 after the company beat earnings forecasts even though the company reported a decline in revenue to a legal settlement Kodak filed for bankruptcy and the company said it had received a 950 million credit facility from Citigroup to keep the company operating CurrenciesEuropean currencies advanced as renewed hopes for a debt solution lifted the region The Euro and Swiss Franc gained 8 and the Pound rose 4 to 1 5484 The Yen fell 4 to 77 12 while the Australian Dollar closed down 1 to 1 0412 Economic OutlookWeekly unemployment claims dropped to 352K vastly exceeding analyst expectations of 387K CPI was flat while core CPI rose 1 in line with forecasts On a weaker note housing starts fell to 660K 30K short of forecasts Asia Rallies Western Markets end MixedEquitiesAsian markets advanced on Friday shrugging off a weak PMI report from China The Nikkei rallied 1 5 to 8766 and the Kospi surged 1 8 both settling at their highest close in months The Shanghai Composite climbed 1 to 2319 and the Hang Seng gained 8 to 20110 reaching a 3 5 month high as it crossed back above the 20000 mark Australia s ASX 200 lagged slightly behind rising 6 In Europe stocks closed slightly lower but closed higher for the week The FTSE DAX and CAC40 all eased 2 US stocks ended mixed as investors reacted to a heavy dose of earnings news The Dow rallied 97 points to 12720 the S P 500 gained 1 while the Nasdaq closed down fractionally The VIX tumbled 8 to 18 28 Dow Rallies 97 Points on Strong Earnings NewsGoogle shares tumbled 8 4 to 586 after falling short of analyst estimates The company had beaten estimates on revenue for 8 straight quarters CurrenciesThe Pound advanced 6 to 1 5574 thanks to upbeat retails sales data which showed a gain of 6 after last month s 5 decline The Australian Dollar rallied 7 to 1 0494 The Euro slipped 3 to 1 2935 settling in the middle of its daily range while the Yen ticked up 1 to 77 03 Economic OutlookExisting home sales rose by 5 to an annualized rate of 4 61M up from last month s 4 39M reading but fell slightly short of analyst forecasts Dollar Slips on Greek Debt HopesEquitiesMany Asian markets were closed on Monday for the Lunar New Year In Japan the Nikkei closed flat at 8766 and Australia s ASX 200 slipped 3 as miners fell European markets advanced on news that Greece was close to reaching a deal with debt holders The FTSE climbed 9 while the CAC40 and DAX gained 5 The European banking index surged 3 9 amid rumors that France and Germany were calling for a relaxation of capital requirements US markets closed mixed in light trading The Dow and Nasdaq declined 1 while the S P 500 edged up fractionally CurrenciesThe Euro crossed back above 1 30 to 1 3031 up 7 amid hopes for a Greece debt deal Similarly the Swiss Franc gained 8 to 1 0792 Both the Australian and Canadian Dollar rose 5 while the Yen and Pound settle little changed Economic OutlookTuesday s lone report is the Richmond manufacturing index which is expected to rise from 3 to 6 The Fed will begin their 2 day meeting on Tuesday European Officials Reject Greek Debt DealEquitiesIn Asia markets in Korea China and Hong Kong remained closed for the Lunar New Year The Nikkei rose 3 to 8985 as Elpida Memory soared 4 on hopes for a successful merger with Micron Technology The ASX 200 closed flat surrendering earlier gains European shares declined as hopes for a Greek debt deal began to fade after finance ministers rejected an offer from private debt holders The FTSE and CAC40 fell 5 and the DAX eased 3 despite an upbeat PMI report which rose to its highest level in 4 months In the US the major indexes closed mixed The S P 500 snapped its 5 day winning streak slipping 1 while the Dow ticked down 33 points to 12676 The Nasdaq posted a modest 1 rise CurrenciesThe Dollar traded mixed against world currencies as traders paid little mind to the disappointing news from Greece The Yen slumped 1 to 77 72 against the dollar and the Australian dollar declined d 5 to 1 0477 while the Pound rose 3 to 1 5616 The Euro inched up 7 pips to 1 3026 and the Canadian Dollar edged up 1 to 1 0100 Economic OutlookThe Richmond manufacturing index blew past forecasts surging to 12 from last month s reading of 3 Analysts had expected the index to rise to 6 |
MS | Successful Debt Auctions in Spain and Italy Lift Euro | EquitiesAsian markets traded mostly lower despite a report from China which showed inflation fell to 4 1 its lowest level in 15 months The Shanghai Composite eased fractionally settling at 2275 Hong Kong s Hang Send slid 3 rhe Nikkei lost 7 and the ASX 200 edged down 2 Bucking the downtrend South Korea s Kospi rallied 1 In Europe the ECB held rates steady and ECB chairman Mario Draghi said there are signs the region is stabilizing The FTSE and CAC40 declined 2 while the DAX rose 4 Auctions in short term debt in Spain and Italy were wildly successful but their ability to sell longer term debt may prove more challenging US stocks posted modest gains despite weak economic data The Dow inched up 22 points to 12471 the Nasdaq advanced 5 and the S P 500 rose 2 CurrenciesThe Euro rallied 9 to 1 2826 and the Swiss Franc gained 1 1 to 1 0595 as the successful bond auctions in Europe relieved some anxiety The Pound and Candian Dollar both rose 1 and the Australian Dollar settled up 3 at 1 0340 Economic OutlookWeekly unemployment claims jumped by 24K to 399K hitting their highest level in 6 weeks S P Due to Downgrade Several European CountriesEquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April Housing Market Sentiment Soars to 4 5 Year HighEquitiesAsian markets traded mixed on Wednesday as doubts over Greece s debt burden clashed with Tuesday s cheer The Nikkei climbed 1 to 8551 lifted by a sharp 6 6 rally in Elpida Memory on news the company is seeking a deal with Micron Technology The Hang Seng rose 3 to 19687 while the Kospi and ASX 200 settled little changed The Shanghai Composite fell 1 4 to 2264 following Tuesday s powerful 4 2 rally the largest single day gain in more than 2 years European shares traded mixed as well The FTSE rose 2 the DAX gained 3 while the CAC40 eased 2 Societe Generale shares surged 6 as Greece resumed debt negotiations on hopes the bank s losses due to exposure to Greek debt will be less than feared Upbeat data and rumors of a possible Greek debt deal later in the week sent US stocks higher The Nasdaq led the advance climbing 1 5 The Dow rose 97 points to 12576 and the S P 500 gained 1 1 to 1308 Nasdaq Rallies 1 5 Goldman Sachs surged 6 8 after beating earnings estimates while Bank of NY Mellon sank 4 6 after reporting weak earnings CurrenciesThe Euro surged 1 6 as hopes for a solution to Greek s debt woes lifted the single currency The Australian Dollar rallied 1 2 to 1 0430 the Swiss Franc advance 1 to 1 0654 and the Pound climbed 8 to 1 5441 The Canadian Dollar posted a smaller 4 gain to 1 0112 and the Yen inched up fractionally to 76 99 Economic OutlookThe NAHB housing market index jumped to 25 from last month s reading of 21 blowing past analyst estimates of a rise to 22 Industrial production rose by 4 slightly less than forecast and PPI slipped 1 following last month s 3 gain |
MS | The Fed Cannot Move Without a Crisis And One is Coming | Well the Fed disappointed as I stated it would How anyone could be surprised by this is beyond me The Fed was admitting that the consequences of QE rendered it less attractive as an option as far back as May 2011 Moreover the last six months have shown the Fed to be relying heavily on verbal intervention rather than direct monetary intervention Every FOMC meeting and any time the market takes a dive some Fed official steps forward and promises that the Fed stands ready to help if needed The reasons for this are three fold 1 Why bother with monetary intervention when you can get the same effect from verbal intervention 2 The Fed is too politically toxic now to simply unveil a massive new monetary scheme without a Crisis hitting first 3 The Fed is well aware of the consequences of QE higher food and gas prices and while it focuses on CPI as the measure of inflation the political pressure engendered by higher costs of living are certainly on the Fed s radar In plain terms the bar for more QE is set much much higher than the vast majority of analysts realize The reason is that the Fed can no longer simply prime up the printing presses if the economy takes a dip We ve seen this clearly in the last two Fed FOMC statements in which the Fed downgraded its view of the US economy to posting modest growth Fed speak for next to none and then offered a highly accommodative stance Fed speak for we re out of ideas but can always hit the print button as way of dealing with this Let s cut the BS here The Fed has maintained a more than highly accommodative stance for three years now and U 16 unemployment food stamp usage home prices and virtually every other economic metric indicate that they ve done little to boost the US economy in any meaningful way QE has and always will be about boosting asset prices in the hope that the Fed can stimulate a recovery by getting the S P 500 to some level The only problem with this is that people don t engage in financial speculation to pay their bills Incomes have and always will be the single most important metric for gauging consumer strength And as the below chart from Morgan Stanley shows the Fed s policies of the last few years have done nothing to boost incomes unless you work on Wall Street This chart goes a long way towards explaining the current political environment in which the Fed is about as popular as the bubonic plague If you read headlines stating Fed Gave Trillions to Banks and you ve been laid off and are living off food stamps your blood pressure might tend to rise And you might tend to vote based on that Folks the reality is that the Fed s hands are tied That s why they keep issuing these innocuous policies keeping interest rates low until 5056 or some insane future date without actually doing anything They know that additional easing means inflation soaring which makes the Fed that much more a target of popular outrage So if you re counting on the Fed propping the market up throughout 2012 as it did in 2011 you may be in for a rude awakening in the coming months Every day that we get closer to the 2012 Presidential election the bar for more QE goes higher and higher Truly unless we get some kind of major Crisis the Fed won t be doing much of anything So let the traders run their end of the month games this week But don t be surprised if stocks start to take a dive in early February |
C | Emerging Markets Moment of Calm Broken by Brazil Inside EM | Bloomberg Emerging markets were enjoying a respite from weeks of turmoil until Brazil s real started trading Tuesday Its plunge at the open dragged down an index that tracks currencies across developing nations
The real and Brazil s benchmark stock index were the worst performers among emerging market peers after a poll showed left wing candidates gaining support while backing for those favored by investors stalled less than a month before the vote MSCI Inc s index of currencies fell as much as 0 2 percent while stocks retreated as much as 1 1 percent
With about four weeks left before the first round vote in Brazil s election the outlook for the race remains uncertain The political drama which has included the stabbing of one candidate and an appeal against the jail sentence of another has exacerbated the negative sentiment toward risky assets against a backdrop of a rising dollar the rollback of stimulus packages and escalating trade tensions
Emerging markets which were the darlings of 2017 have also been hit by a raft of idiosyncratic risks including Argentina s fiscal woes and Turkey s twin deficits
Turkey s central bank signaled last week that higher rates are in the offing while Russia s Governor Elvira Nabiullina surprised markets by saying the first rate hike since 2014 could be discussed when policy makers next meet The new head of the monetary policy department at the Russian central bank Alexey Zabotkin subsequently offered a less hawkish message
Investors are waiting for monetary policy meetings with the largest focus this week being Turkey s said Toru Nishihama a Tokyo based emerging market economist at Dai ichi Life Research Institute Inc The EM sell off is probably not over yet We ve still got the Fed s rate hike in the horizon after this week as well
Upcoming Wednesday
European Commission President Jean Claude Juncker delivers the state of the union address in Strasbourg
Hungarian Prime Minister Viktor Orban may speak to his ruling party Fidesz to outline his agenda through the end of the year in Velence central Hungary
Mexico Central Bank Governor Alejandro Diaz de Leon and Economy Minister Ildefonso Guajardo speak at the IIF Mexico Economic Forum in Mexico City
Czech Central Bank Governor Jiri Rusnok meets with business leaders to discuss monetary policy and exchange rates
St Louis Fed President James Bullard will speak to the CFA Society Chicago
OPEC releases Monthly Oil Market Report
EIA crude oil inventory report
South Africa business confidence retail sales
Ghana CPI
South Korea employment
EARNINGS For a list of the day s biggest releases click here
Latin America
BRAZIL
Candidates on the left who investors fear would reverse efforts to shore up fiscal accounts were the only ones who gained support at a rate that exceeded the margin of error in a Datafolha poll released last night
Right wing candidate Bolsonaro only saw his backing edge higher
Datafolha frustrated expectations that Bolsonaro would grow and his rejection would fall said David Cohen a partner at Paineiras Investimentos in Rio de Janeiro
MEXICO
Mexico is open to moving ahead with a bilateral trade pact with the U S if Canada cannot reach a deal on Nafta FT
Mexico July Industrial Production rose 1 3 Y y Est 1 0
ARGENTINA
Argentina central bank expected to hold its key interest rate at 60 percent the world s highest Bloomberg survey
Still Too Early for Argentina Stocks After Drop Citigroup NYSE C Says
Click for market news on ARGENTINA and ANDES
EMEA
TURKEY
Central bank may boost the one week repo rate by 300 basis points at a review on Thursday Bloomberg survey
Surge in Turkish lira swap rates has Deutsche Bank DE DBKGn recommending investors to position for a pullback
RUSSIA
President Vladimir Putin s government is wading back into central banking for a second week as the prospect of higher interest rates tests its patience
Russia skips this week s regular sale of ruble bonds amid expectations for deeper U S sanctions
SOUTH AFRICA
Business confidence declined to the lowest level this year as industries raised concern about policy uncertainty
Land Seizure Talks Have Hit South Africa s Farming Industry
Click for market news on POLAND and HUNGARY
ASIA
CHINA
PBOC weakens daily reference rate by 0 14 to 6 8488 the lowest in two weeks and skips open market operations
Early indicators for China s economy point to further weakening in August
Chinese bond traders ramped up their leverage to a record high in August and that could be catching the central bank s attention
INDIA
Officials from the finance ministry have asked Reserve Bank of India to do more open market operations to maintain adequate liquidity in the banking system people with knowledge of the matter said
India s Sensex Drops for a Second Day as Rupee Pressure Persists
Click for more on markets in ASIA |
C | Citigroup boosts guidance to reflect improved tax outlook | By Imani Moise Reuters Citigroup Inc NYSE C s chief financial officer said on Wednesday the bank expects to exceed its previous targets for returns on shareholder equity and cost savings helped in part by tax reform Speaking at a conference John Gerspach said the bank now expects return on average tangible common shareholders equity to be 13 5 percent by 2020 and 16 percent long term up from previous guidance of about 11 percent The bank also raised its cost savings estimate by 300 million to 2 8 billion by 2020 and said it expects a new tax rate of below 24 percent over time For the current quarter Gerspach said total fixed income and trading revenue will likely be flat to slightly higher while investment banking revenue will be slightly lower to reflect volumes and transactions that may close in the fourth quarter |
C | SEC orders Citigroup to pay more than 12M over misleading dark pool investors | The SEC orders Citigroup C 0 8 and its Global Market affiliate to pay more than 12M in disgorgement and penalties for misleading users of its dark pool Citi Match The regulator says Citi failed to disclose that almost 50 of the orders over a 2 year period were routed to and executed in other trading venues including other dark pools and exchanges that did not offer the same level of premium features at Citi Match while the trade confirmations stated that the trades were executed on Citi Match Now read |
C | Citigroup pays 12 million to settle dark pool probe | Reuters Citigroup Inc NYSE C on Friday was ordered to pay more than 12 million by U S regulators after it was found that the bank s investment banking and financial advisory unit misled users of a dark pool operated by one of its affiliates The bank will pay a penalty of 6 5 million and disgorgement and prejudgment interest totaling 5 4 million while its affiliate Citi Order Routing and Execution CORE will pay a penalty of 1 million the U S Securities and Exchange Commission SEC said in a statement Dark pools allow institutional investors to anonymously trade large blocks of shares without the market moving against them The SEC found Citigroup Global Markets Inc misled users with assurances that high frequency traders were not allowed to trade on Citi Match a premium priced dark pool platform operated by CORE when two of its most active users reasonably qualified as such traders and had executed more than 9 billion of orders through the pool The regulator also found that Citigroup Global did not disclose that over a period of more than two years nearly half of its dark pool orders were routed to and executed on other trading venues that did not offer the same premium features as Citi s Citigroup Global also sent trade confirmation messages to certain users that indicated their orders had been executed on Citi s own platform when in fact those orders were executed on an outside venue the SEC said
A Citigroup spokesman said the matter has been resolved |
JPM | US Payrolls Rise Less Than Forecast 1 Year Gain Ticks Up | Employment at US companies increased 147 000 in May in seasonally adjusted terms according to this morning s update from the Labor Department The rise is below expectations based on Econoday com s consensus forecast for a 173 500 jump in payrolls The advance also represents a downshift from April s 173 000 increase But the softer monthly comparison was offset by a slightly stronger year over year change On balance today s release suggests that the labor market remains on track for moderate if unspectacular growth in the near term
The weaker monthly increase is a bit disappointing but monthly data is noisy On several occasions in recent years we ve seen big changes up and down that appeared to break with the trend inspiring a major rethink on the outlook for the labor market With the benefit of hindsight however the lesson is that one or even two dramatic shifts in the month to month comparisons tend to be unreliable benchmarks for macro analytics
By contrast the annual trend offers more dependability and on that score today s results imply that moderate growth remains intact Private payrolls increased 1 77 in May vs the year earlier level up slightly from April s 1 66 advance
Looking at the latest annual change in context with recent history suggests that the labor market is stabilizing at a rate that while lower than a few years ago is still healthy and arguably sustainable for the near term As I ve been discussing for much of the past year the decelerating annual rate of growth in payrolls has been worrisome if it continued Based on today s report it s tempting to conclude that the downshift has run its course at least for now
Job growth is a little disappointing but enough to continue tightening the labor market says Michael Feroli chief US economist at JPMorgan Chase NYSE JPM This doesn t change the overall story of an economy that generally seems to be growing above trend and reducing slack
Indeed several indicators point to an expanding labor market including yesterday s weekly update on initial jobless claims which is considered a leading indicator for payrolls and for the economy overall Although new filings for unemployment benefits jumped more than forecast rising 13 000 to a seasonally adjusted 248 000 that s still close to a multi decade low Also note that the ADP Employment report for May reflected a much stronger rate of expansion a net change of 253 000 which translates to a 2 1 year over year increase the best rate in a year
Again one number good or bad should be viewed cautiously But when you consider all the updates on the labor market released this week the general take away is that a moderate growth trend remains intact
Add to that the evidence that recession risk remains low based on a broad set of indicators and it s clear that the US economy is still expanding at a healthy pace
That doesn t mean that everything is perfect far from it Wage growth is still weak and there is elevated political risk courtesy of a radical realignment of US policy objectives via the Trump administration But if we focus on the numbers in hand at the moment the labor market and the economy overall still look poised to expand at a respectable rate
Generally speaking the labor market remains healthy and even with today s report it s still well ahead of what we need to generate as far as job growth just to keep with demographics concludes Russell Price senior economist at Amerprise Financial Services |
JPM | Why Palladium ETF Is Soaring | Palladium price is on a tear lately and is once again on its way to attain the two year high The pure play palladium ETF ETFS Palladium Trust is up over 23 so far this year as ofJune 2 2017 The impressive rally came on the heels of growing global demand and stagnating supply
Going by an article published on the palladium market is witnessing a rising deficit as per UK chemicals multinational In fact in 2016 the palladium market saw five successive years of significant deficits This is in contrast to its contemporary metal platinum which is seeing its first surplus in six years
Notably the automotive industry mainly catalytic converters for vehicles is a big driver of demand for palladium Palladium using petrol fueled cars are the primary type sold in the two largest markets of China and the US as per So increased usage of are contributing to the palladium price rally
In fact platinum using diesel fueled cars are actually experiencing market share loss amid an going by the above source And platinum s loss is turning out to be palladium s gain
Some analysts are now strongly expecting to see palladium prices breezing past platinum prices If this happens it would be the first time since 2001 that palladium is worth more and its relative strength is even more remarkable given that the gap averaged just over 1 000 an ounce between 2007 2012
In a nutshell the global supply outlook appears fragile at the current level making the metal an intriguing investment option Below we have highlighted the only pure play on the metal PALL in detail see
PALL in FocusFor a bullion backed approach to play palladium investors can look at ETF Securities Physical Palladium Shares or PALL The ETF holds the metal in the form of bullion or ingots The metal is stored in London and Zurich on behalf of the custodian JP Morgan Chase NYSE JPM Bank Investing through PALL in palladium represents a cost effective and suitable mode for investors The transaction costs for buying and selling shares will be much lower than purchasing storing and insuring physical palladium for most investors This ETF is designed to track the spot price of Palladium bullion and has amassed about 202 4 million in assets The expense ratio of 60 basis points appears reasonable in the precious metals ETF space The fund trades in paltry volumes of about 30 000 shares on average daily basis The fund has a Zacks ETF Rank of 3 with a High risk outlook read
Can the Surge Continue
Though palladium prices are on the rise the dwindling auto industry of the U S may pose threats to the space The auto industry has been in a tight spot this year with sales declining for the fifth successive month read
Still investors with a greater risk appetite can exercise this soaring ETF for some more time The fund has a A positive weighted alpha hints at more gains As a result there is definitely still some promise for investors who want to ride on this surging ETF
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 | Corporate pension funds about to plow back into fixed income | via BloombergHelped by a booming stock market corporate retirement plans have been digging themselves out of their holds now 82 funded on average vs 75 a few months ago according to Morgan Stanley NYSE MS Once pensions hit the roughly 80 funded level says the team they tend to cut back on stocks and boost fixed income holdings particularly long dated investment grade paper With 1 8T in assets even small allocation changes at pension funds can affect equity and bond prices ETFs LQD CORP CSI CRED QLTA COBO FCOR CBND IGIH CWAI WFIG |
MS | Turkey s referendum unlikely to kickstart long stalled reforms | By Nevzat Devranoglu and David Dolan ANKARA ISTANBUL Reuters Turkey s government says the passage of constitutional reforms on April 16 would make it easier to deliver on long promised market reforms But investors aren t so sure seeing the possibility of more policy gridlock and further elections Turks go to the polls on Sunday to vote on whether to change the constitution and create an executive presidency that would give President Tayyip Erdogan sweeping powers The ruling AK Party says the referendum will allow it to speed up lawmaking and roll out a package of tax and investment reforms long sought by investors particularly foreigners Once regarded as one of the world s most promising emerging markets Turkey has been hammered by a sell off in its lira currency on concerns about the erosion of institutions and Erdogan s tightening grip on power Tens of thousands of people have been arrested in a crackdown that followed last year s failed coup The government has been on a push to win back confidence but investors remain skeptical saying sweeping structural reforms are necessary to boost productivity liberalize the labor market and increase output of value added exports Turkey s long term outlook will turn positive after the referendum removes political uncertainty Deputy Prime Minister Mehmet Simsek said in an interview with state broadcaster TRT Haber on Monday We have prepared the reforms but we haven t had the chance to implement them systematically we will accelerate the reforms starting May 2017 These will include improvement of the investment environment and tax and judicial reforms He said the changes would put Turkey on course for 6 percent annual growth The economy grew 2 9 percent in 2016 hit by the failed putsch Ratings agency Moody s has predicted 2 6 percent growth for this year Certain parts of the government talk about things will improve after the vote and foreign investors will return to the country and structural reforms will start But we ve seen these arguments made before said William Jackson of Capital Economics in London We ve never really seen it happen at least over the past six or seven years I m not very optimistic on that front FOCUS ON AFTERMATH Polls suggest the vote will be close The proposed changes will replace the current parliamentary system with an executive presidential one with similarities to France or the United States Erdogan says the move is necessary to avoid the fragile coalition governments of the past His critics fear it will consolidate too much power in his hands While some investors appear to be positioning themselves for a victory of the yes camp the immediate reaction is likely to be short lived with markets soon turning their attention on what will happen next What happens after the referendum will actually have medium term implications on Turkey and we think that after a short and quick market reaction to the referendum outcome market players will focus on the aftermath Ozgur Altug chief economist at BGC Partners said in a note to clients That aftermath may well see reforms get delayed especially as early elections remain a distinct possibility whichever side wins meaning the government would be focused again on a campaign rather than policy EARLY ELECTIONS Turkey is due to hold both presidential and parliamentary elections in 2019 If the no camp wins the referendum there is a possibility that Erdogan calls for an early election to strengthen the ruling AKP in parliament at a time when the opposition pro Kurdish Peoples Democratic Party HDP has been weakened by the crackdown and the opposition Nationalist Movement Party MHP hobbled by in fighting If the yes camp wins Erdogan could call early polls in order to assume the expanded powers of the presidency Under the terms of the proposed constitutional change the president would only assume the new powers after the next jointly held presidential and parliamentary elections So far AKP officials have said early elections are not on the cards but some investors have their doubts The ruling party may consider getting a vote of confidence by going to the polls early according to some investors Morgan Stanley NYSE MS said in a recent note Although the level of our conviction has fallen recently we still think that early elections are less likely in the yes scenario Even without early elections more policy gridlock is likely particularly in the case of a yes victory forcing lawmakers to focus on harmonizing laws and the legal system with the new executive presidency rather than on policy reforms One should not forget the fact that until the next elections AKP parliament needs to complete the transformation of Turkey s legal system and laws in accordance with the executive presidency Altug of BGC Partners said
So parliament s schedule could be busy again with politics in the short term |
MS | Under Connect scheme Chinese stock speculation spreads to Hong Kong | SHANGHAI Reuters Recent wild rides by China companies listed in Hong Kong show that the Connect schemes which move funds from mainland markets to Hong Kong s can also carry in a different investor culture Last week the staid Hong Kong exchange got a dose of the kind of speculative pump and dump sometimes associated with China s retail driven markets Hong Kong listed shares of BBMG HK 2009 a Beijing based developer and cement maker jumped as much as 63 percent after China said it will build a major economic zone near the Chinese capital Amid the surge a Morgan Stanley NYSE MS downgrade knocked more than 10 percent off the stock s price Mainland Chinese money was largely responsible for the share s rocketing exchange data showed as investors took advantage of the Connect schemes letting them buy Hong Kong shares The BBMG case underscores mainland investors growing influence in the Hong Kong market which could increase pressure on regulators to protect small investors from getting hurt by speculative inflows The Hong Kong Stock Exchange HK 0388 maintains it can deal with any issues LOTS OF TOOLS The market has some new participants and market dynamics may reflect that from time to time a HKEx spokesman said Hong Kong has a sound regulatory regime Regulators of the Hong Kong and Mainland markets have a lot of tools and will take action if they suspect rule violations Ashley Alder chief executive of the Securities and Futures Commission Hong Kong s markets regulator said in November it had stepped up coordination with the China Securities Regulatory Commission Cross border supervision and investigation will become even more essential to contain risks to our respective markets as they experience even larger cross border flows Alder told a Thomson Reuters conference The official Shanghai Securities News last month said Shanghai Shenzhen and Hong Kong exchanges are coordinating supervision over illegal trading activities conducted via the connect schemes Linus Yip Hong Kong based chief strategist at First Shanghai Securities said he is incorporating the growing southbound flows from the mainland into his analysis The market landscape is changing Mainland investment style and preference is being increasingly felt Yip said Hong Hao chief strategist at BOCOM International said there are concerns about market manipulation schemes He described BBMG s surge as speculative Hong Kong shares typically trade at discounts to their mainland counterparts Unlike Shanghai and Shenzhen listed stocks they are not subject to daily limits and can be more easily shorted FORGET FUNDAMENTALS On April 5 when BBMG hit a two year high in Hong Kong it was the most actively traded stock by Chinese investors under the Connect launched in 2014 The next day BBMG was the second most actively traded stock trailing only giant HSBC Holdings HK 0005 In 2015 mainland investors accounted for 22 percent of stock trading among overseas investors in Hong Kong compared with 5 percent a decade ago Chinese investors have spent HK 104 billion 13 4 billion on Hong Kong stocks via the Connect this year about 65 percent more than the 55 7 billion yuan 8 07 billion that moved in the other direction according to exchange data BBMG wasn t the first Connect driven surge of Hong Kong share Chinese selfie app maker Meitu Inc HK 1357 and a maker of Chinese spicy stewed duck neck Zhou Hei Ya International HK 1458 saw dramatic swings last month Shanghai based fund manager Shen Weizheng said he bought into BBMG not based on fundamentals but confidence he could resell the shares at a higher price to other mainland investors 1 Chinese yuan 1 1263 Hong Kong dollars 1 7 7698 Hong Kong dollars
1 6 9020 Chinese yuan |
MS | Oil majors reserves are shrinking and investors don t mind | By Ron Bousso LONDON Reuters As crude prices recover oil majors face a dilemma how quickly should they seek to replenish reserves It s the same question the cyclical oil industry has tackled many times before go too fast and risk spending too much for little reward go too slowly and your rivals will be better positioned to grab market share should oil prices rise New data revealed by a Reuters analysis shows the oil and gas reserves of global majors have fallen sharply Reserve life the number of years that a company can keep production stable with its reserves has decreased for Exxon Mobil NYSE XOM Shell LON RDSa Total and Statoil OL STL according to the Reuters analysis of the firms annual reports BP LON BP and Italy s Eni saw a slight increase In the case of Exxon the world s top publicly listed oil company reserve life dropped in 2016 to 13 years the lowest since 1997 after it wrote down Canadian oil sands Shell has its lowest reserve life since 2008 despite buying rival BG last year In the past the trend may have caused alarm among investors But focused on stock market returns investors have clear advice be cautious do not overspend That they say is because the rise of oil production from shale and the growth of renewable energy mean oil majors should actively avoid storing volumes of oil underground they would have held in previous cycles Rohan Murphy energy analyst at Allianz DE ALVG Global Investors which holds shares in Shell BP Total and Statoil sees a reserve life of eight to 10 years as quite a healthy level I don t think these companies should have a reserve life much above eight to 10 years especially when we are trying to get to grips with what oil demand will be in 10 years from now PEAK DEMAND The global transition away from fossil fuels to renewable sources of energy in coming decades further reduces the need for a larger reserve life said Murphy That contrasts sharply with fears about peak supply so widespread only a decade ago when investors were eagerly watching for news about majors reserve replacement Over the past decade the world has changed so much that Saudi Arabia now plans to list its national champion Saudi Aramco in what is widely seen by the market as an attempt to cash in on the country s huge reserves before demand peaks Oil companies are required to report their reserves every year based on an annual average oil price With an average 2016 price of around 44 a barrel the lowest in over a decade firms were forced to remove reserves from high cost projects Jonathan Waghorn energy fund co manager at Guinness Asset Management which holds shares in a number of oil majors says lower reserves are not his big concern at the moment The focus is on cutting costs and living within cash flows so that they survive for the future To offset the shrinkage companies could opt to acquire other oil firms or sign production sharing deals with countries that hold large reserves similar to what BP and Total did with Abu Dhabi last year Morgan Stanley NYSE MS analyst Martijn Rats said Companies have also taken advantage of the rout to buy acreage for future exploration such as Total s investment in Brazil and Uganda and BP s buy into Eni s Egyptian field Zohr It has never been cheaper to buy reserves or find them yourself it is very much a buyers market if you want to replace reserves Allianz s Murphy said LOOMING SUPPLY SHORTFALL The drop in reserves comes not only as oil prices fell but also because companies sharply cut spending in recent years shelving many expensive large scale developments We may be starting to witness the effect of significant capex cuts The oil market is becoming increasingly undersupplied which should move the oil price higher said Kirill Pyshkin from Mirabaud who has Shell in his portfolio Last year 10 billion barrels of oil were discovered around one third of global consumption including well appraisal activity according to Per Magnus Nysveen head of analysis at Oslo based consultancy Rystad Energy Oil majors have made only a handful of large discoveries in recent years including Zohr Exxon s Liza field in Guyana and BP s Tortue discovery in west Mauritania and Senegal Since 2010 less than 2 billion barrels of oil has been discovered by majors per year and most of this in existing fields Nysveen said The shortcoming of oil replacement by the drillbit has been quite drastic Discoveries are not keeping up with production said Nysveen adding that supply could fall short by up to 2 million barrels per day within seven to eight years |
MS | Wall Street firms see gains for Pinnacle Foods | Jefferies rates Pinnacle Foods NYSE PF at Buy as it launches coverage on the food stock The investment firm assigns a price target of 67 to Pinnacle Yesterday Morgan Stanley NYSE MS upgraded Pinnacle to Overweight on a rosy outlook for its growth potential Overall 14 out of 15 Wall Street firms covering the stock have a bullish view Pinnacle Foods closed at 58 79 yesterday vs a 52 week trading range of 41 47 to 59 11 |
MS | Forex Yen steady in early Asia on Japan core machinery orders | Investing com The yen gained slightly in early Asia on Wednesday as data on machinery orders provided a lift in sentiment and demand was supported by safe haven buying linked to increased tensions onthe Korean peninsula
In Japan core machinery orders jumped 5 6 year on year in February beating a 2 5 gain seen though the month on month figure rose 1 5 missing the 3 7 gain expected At the same time PPI producer prices in Japan rose 1 4 year on year in March a tad faster than the 1 3 rise seen USD JPY changed hands at 109 62 flat AUD USD traded at 0 7504 up 0 07
Ahead China reports CPI for March with a decline of 0 3 seen month on month and a rise of 1 0 year on year PPI in China is expected to post a 7 6 rise off a low base year on year for March
The U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies dipped 0 31 to 100 63
Overnight the dollar slumped against a basket of major currencies on Tuesday as the flight to safety sentiment began to set in for investors amid rising geopolitical tensions
In the absence of top tier market moving economic data on Tuesday rising geopolitical events remained front and center as investors poured into safe haven assets after expectations grew the U S may take military action against North Korea
The U S decided to move a Navy strike group toward the Korean peninsula amid continued missile tests by North Korea
Meanwhile President Donald Trump tweeted on Tuesday North Korea is looking for trouble and signalled that the U S is prepared to solve the problem on its own should China decline to offer assistance
Elsewhere further signs of a flight to safety surfaced Tuesday after demand for U S treasuries soared which further suppressed yields the U S 10 Year fell to a session low of 2 293
The slump in the dollar reflected some analysts commentary on the short term trend for the greenback after Morgan Stanley NYSE MS noted in a research report to clients that USD positioning is short but warned that sentiment has improved in recent trading sessions |
MS | Forex Dollar index edges up in Asia as Korean Peninsula tensions mount | Investing com The yen gained slightly in early Asia on Wednesday as data on machinery orders provided a lift in sentiment and demand was supported by safe haven buying linked to increased tensions on the Korean peninsula with Chinese President Xi Jinping holding a telephone call with U S President Donald Trump over the issue
In Japan core machinery orders jumped 5 6 year on year in February beating a 2 5 gain seen though the month on month figure rose 1 5 missing the 3 7 gain expected At the same time PPI producer prices in Japan rose 1 4 year on year in March a tad faster than the 1 3 rise seen USD JPY changed hands at 109 51 down 0 10 AUD USD traded at 0 7495 down 0 05
China reported CPI for March fell 0 3 as expected month on month and a rose 0 9 year on year a tick less than seen PPI in China irose 7 6 as expected
The U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies drose 0 02 to 100 63 Overnight the dollar slumped against a basket of major currencies on Tuesday as the flight to safety sentiment began to set in for investors amid rising geopolitical tensions
In the absence of top tier market moving economic data on Tuesday rising geopolitical events remained front and center as investors poured into safe haven assets after expectations grew the U S may take military action against North Korea
The U S decided to move a Navy strike group toward the Korean peninsula amid continued missile tests by North Korea
Meanwhile President Donald Trump tweeted on Tuesday North Korea is looking for trouble and signalled that the U S is prepared to solve the problem on its own should China decline to offer assistance
Elsewhere further signs of a flight to safety surfaced Tuesday after demand for U S treasuries soared which further suppressed yields the U S 10 Year fell to a session low of 2 293
The slump in the dollar reflected some analysts commentary on the short term trend for the greenback after Morgan Stanley NYSE MS noted in a research report to clients that USD positioning is short but warned that sentiment has improved in recent trading sessions |
MS | Japan s Nomura targets younger generation as demographic crunch looms | By Thomas Wilson and Emi Emoto TOKYO Reuters Japan s Nomura Holdings Inc T 8604 aims to leverage its access to about 1 6 million members of employee stock ownership plans to tap a new generation of customers as its client base grays The country s largest brokerage is administrator for about 60 percent of people in such plans at listed companies and can do more to engage with them Nomura Securities President Toshio Morita told Reuters in an interview Nomura aims to recruit younger plan members by boosting web and phone access to information on its products Morita said That could help it secure long term clients manage more assets and generate stabler revenue sources Until now we ve relied on these people coming to us after retirement or visiting our branches said Morita Nomura Securities chief from this month We ll connect with them by phone and online enriching the way we provide information Thirty and forty somethings are crucial for Nomura and peers including Daiwa Securities Group Inc T 8601 and SMBC Nikko Securities Inc to build a new generation of clients as Japan s population shrinks Younger generations are often tech savvy but lack investment experience and tend to choose low cost internet securities firms like SBI Holdings Inc T 8473 online brokerages said As of March last year 2 6 million people owned shares worth 4 7 trillion yen 43 2 billion through employee stock ownership plans Tokyo Stock Exchange data showed Nomura is administrator for 1 6 million people according to Reuters calculations based on a 60 percent share Nomura s domestic focused retail arm has suffered since 2014 as investor optimism at government reflationary policies was replaced by concern over negative interest rates and the failure to end deflation In April December Nomura s pretax profit plummeted nearly 60 percent year on year compounding a one third decline from 2014 through 2016 In the same periods Daiwa s profit fell 63 percent and 40 percent respectively The gloomy results come as Nomura shifts its focus to earning recurring revenue via consulting services and managing assets rather than commission from securities The brokerage aims to cover 50 percent of costs via recurring revenue by 2020 Analyst Hideyasu Ban at Morgan Stanley NYSE MS MUFG Securities said cuts to the retail division s cost base may be necessary to complete the transformation As of December Nomura employed some 16 450 people in Japan It had 158 branches unchanged since 2013 Morita however said he intends to boost resilience to stock market swings through the new business model I m always thinking of how to reduce costs he said But I m not thinking of cuts to staff numbers
1 108 8200 yen |
MS | U S labor market tightening inflation trending higher | By Lucia Mutikani WASHINGTON Reuters The number of Americans filing for unemployment aid unexpectedly fell last week and consumer sentiment rose early this month amid continued optimism over household finances suggesting a sharp slowdown in job growth in March was an aberration While other data on Thursday showed producer prices falling in March for the first time in seven months prices recorded their biggest year on year increase in five years The reports pointed to a steadily firming economy and could encourage the Federal Reserve to increase interest rates again in June Today s reports are generally consistent with the Fed s narrative that the economy is close to full employment and some inflationary pressures are building said Ryan Sweet senior economist at Moody s Analytics in West Chester Pennsylvania Initial claims for state unemployment benefits slipped 1 000to a seasonally adjusted 234 000 for the week ended April 8 the Labor Department said That was the third straight weekly decline in claims and left them near a 44 year low of 227 000 hit in February Claims have now been below 300 000 a threshold associated with a healthy labor market for 110 straight weeks That is the longest such stretch since 1970 when the labor market was smaller The labor market is close to full employment with the unemployment rate at a near 10 year low of 4 5 percent Economists had forecast first time applications for jobless benefits rising to 245 000 last week The low level of claims suggests that a sharp slowdown in job growth in March was a blip and the labor market is tightening Nonfarm payrolls increased by 98 000 jobs last month the fewest since last May Temporarily higher mid March readings probably in large part reflected weather drags that were apparent in the March employment report and much stronger results in the first half of April are pointing to a reacceleration in payrolls in April said Ted Wieseman an economist at Morgan Stanley NYSE MS in New York A separate survey from the University of Michigan showed its consumer sentiment index rising to a reading of 98 0 early this month from 96 9 in March The survey s current economic conditions index jumped to its highest level since 2000 with an increase in the share of households reporting an improvement in their finances SPENDING MAY ACCELERATE Strong consumer sentiment could suggest an acceleration in consumer spending in the second quarter after an apparent slowdown at the start of the year A surge in confidence in late 2016 and early this year failed to translate into stronger spending The dollar fell against a basket of currencies as investors assessed comments by President Donald Trump to the Wall Street Journal late on Wednesday that the dollar was getting too strong and that he liked a low interest rate policy U S Treasury yields briefly fell to a five month low while stocks on Wall Street were little changed The Fed raised its benchmark overnight interest rate by a quarter of a percentage point last month and has said it expected to increase borrowing costs at least twice more this year In another report on Thursday the Labor Department said its producer price index for final demand slipped 0 1 percent last month the first decline since August The PPI gained 0 3 percent in February Despite last month s dip in prices the PPI shot up 2 3 percent in the 12 months through March That was the biggest increase since March 2012 and followed a 2 2 percent jump in February A 0 1 percent dip in prices for final demand services accounted for three quarters of the drop in the PPI in March Energy prices fell 2 9 percent the first decline since August with the cost of gasoline tumbling 8 3 percent With oil prices rising in recent days and recovering nearly all of March s losses monthly producer prices are likely to resume their upward trend The dollar s 2 8 percent drop this year against the currencies of the United States main trading partners is also keeping the underlying trend in producer prices elevated Final demand goods less food and energy increased 0 4 percent last month after edging up 0 1 percent in February |
MS | Signs of Global Economic Healing Beginning to Appear | I ve been pretty bearish in the last few months but it may be time to change my outlook Last week the moved from a deflation to a neutral reading As a confirmation of this trend my review of the charts shows a picture of global healing after the trauma last year of a near banking crisis meltdown in Europe Is LTRO the Draghi Put Most notable is the performance of the banks The relative performance of the Banking Index shows a pattern of a rally through a relative downtrend The ECB s LTRO program of providing unlimited liquidity for up to three years to eurozone banks has bought the politicians time and created the perception of a Draghi Put for the market The recent relative performance of the BKX the bank sector index which is heavily weighted with the large TBTF banks is reflective of this relief Similarly the performance of the Euro STOXX Index shows a pattern of global healing Despite all of the financial stress evident in the eurozone this index formed a wedge and the wedge resolved itself to the upside In addition we have been seeing positive European price action in the face of bad news which is bullish I that have been testing a key support but that level has been holding up despite all of the bad news in the last few months which are a key measure of investor confidence has stayed below the important 7 level in the face of the downgrades Inter market analysis confirms the turnaround Sectorally I am seeing signs that the market expects a cyclical rebound at least in the US The chart below shows the relative performance of the Morgan Stanley Cyclical Index against the market which has been rallying and is now in the process of testing a relative resistance level The Industrials are also showing a similar pattern of relative strength as the sector began a relative uptrend in October So has the Materials sector which shows the familiar pattern of rallying through a relative downtrend while defensive sectors such as Utilities have lagged the market and are now in the process of testing a relative support level Constructive on commoditiesCommodity prices are also showing signs of global healing The chart below of the CRB Index shows that commodities have rallied through a minor downtrend and it tested the longer term major downtrend which remains intact The commodity heavy Canadian market is also showing a similar pattern of rallying through a short term downtrend though the longer term major downtrend remains intact Regular readers know that I am a long term commodity bull These charts indicate a constructive outlook on the commodity complex Mary Ann Bartels of BoA Merrill Lynch recently showed that large speculators read hedge funds have unwound their crowded long in commodities and readings have retreated to a level where previous bull phases have begun in the past Positive breadth divergence Tom McLellan writing at has confirmed my observation of a market turnaround He wrote that the Ratio Adjusted Summation Index is showing strength So all of this leads us to the current RASI reading which at 618 2 is above the 500 level but still below the peak of 763 seen on Nov 15 2011 So it is a divergent lower high but it is still high enough to say that the uptrend which started in October 2011 is not over There can be ordinary pullbacks along the way but the message of the RASI is that the final highs of this current new uptrend have not yet been seen Not out of the woods yet To be sure it s not up up and away here for stocks and numerous risks remain as talks with creditors appeared to have broken down The and has the Just because there is a Draghi Put in the market doesn t mean that investors are immune from losses but I would encourage investors to think of the Draghi Put as an insurance policy with a deductible where you have to incur the first X in losses In addition China isn t out of the woods While the Chinese leadership is the and it is unclear whether the authorities can achieve a soft landing The Shanghai Composite has been rallying in line with global equity markets but the index remains in a downtrend The one silver lining for the bulls is that there appears to be a turn of year effect in Chinese equities The current rally is consistent with the pattern of market updrafts seen starting at about the time of past Lunar New Years Since China s economy remains a major engine of growth in a growth starved world this is one indicator to watch carefully The bulls can also take solace in the Hong Kong market which formed a wedge that resolved itself to the upside recently In addition believes that Chinese real estate may be in the process of forming a bottom The firm s analysts pointed to a positive divergence between land purchased by property developers and new construction activity Cautious short term constructive medium term Putting it all together what does this all mean My inner trader tells me that in the short term the rally looks overdone Over the next few weeks continue the strategy of Indeed confirms a high risk level for equities by pointing out that AAII sentiment is at a bullish extreme which is contrarian bearish With US equities now testing a resistance level expect some short term weakness but be prepared to buy the dips Longer term my inner investor tells me to expect a period of sideways consolidation likely followed by a bull phase in equities with an expected return of 5 15 in 2012 assuming that there are no accidents |
MS | Successful Debt Auctions in Spain and Italy Lift Euro | EquitiesAsian markets traded mostly lower despite a report from China which showed inflation fell to 4 1 its lowest level in 15 months The Shanghai Composite eased fractionally settling at 2275 Hong Kong s Hang Send slid 3 rhe Nikkei lost 7 and the ASX 200 edged down 2 Bucking the downtrend South Korea s Kospi rallied 1 In Europe the ECB held rates steady and ECB chairman Mario Draghi said there are signs the region is stabilizing The FTSE and CAC40 declined 2 while the DAX rose 4 Auctions in short term debt in Spain and Italy were wildly successful but their ability to sell longer term debt may prove more challenging US stocks posted modest gains despite weak economic data The Dow inched up 22 points to 12471 the Nasdaq advanced 5 and the S P 500 rose 2 CurrenciesThe Euro rallied 9 to 1 2826 and the Swiss Franc gained 1 1 to 1 0595 as the successful bond auctions in Europe relieved some anxiety The Pound and Candian Dollar both rose 1 and the Australian Dollar settled up 3 at title EUR USD width 804 height 373 Economic OutlookWeekly unemployment claims jumped by 24K to 399K hitting their highest level in 6 weeks S P Due to Downgrade Several European CountriesEquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April Housing Market Sentiment Soars to 4 5 Year HighEquitiesAsian markets traded mixed on Wednesday as doubts over Greece s debt burden clashed with Tuesday s cheer The Nikkei climbed 1 to 8551 lifted by a sharp 6 6 rally in Elpida Memory on news the company is seeking a deal with Micron Technology The Hang Seng rose 3 to 19687 while the Kospi and ASX 200 settled little changed The Shanghai Composite fell 1 4 to 2264 following Tuesday s powerful 4 2 rally the largest single day gain in more than 2 years European shares traded mixed as well The FTSE rose 2 the DAX gained 3 while the CAC40 eased 2 Societe Generale shares surged 6 as Greece resumed debt negotiations on hopes the bank s losses due to exposure to Greek debt will be less than feared Upbeat data and rumors of a possible Greek debt deal later in the week sent US stocks higher The Nasdaq led the advance climbing 1 5 The Dow rose 97 points to 12576 and the S P 500 gained 1 1 to 1308 |
C | Citigroup to overhaul its investment bank | Reuters Citigroup Inc NYSE C is set to restructure its investment banking operations and merge it with the bank s capital markets origination unit according to an internal memo The restructuring will also involve top executives taking on new roles Ray McGuire the global head of corporate and investment banking will chair the new merged unit which will be called banking capital markets and advisory In addition to McGuire s appointment the bank also named Tyler Dickson and Manolo Falco the global co heads of the new unit
Citigroup on Tuesday said its Chief Financial Officer John Gerspach will retire from his role in March and will be replaced by the CFO of institutional clients Mark Mason |
C | Citigroup to Let Investors Trade Custodian Held Cryptocurrency Sources Claim | U S multinational bank Citigroup NYSE C is developing a cryptocurrency product to give institutional investors access to crypto markets without owning cryptoassets directly anonymous sources told Business Insider September 9
Citigroup which had previously taken a centralized approach to cryptocurrency will reportedly use a revamped version of the American Depositary Receipts ADR a type of security issued since the 1920s that represents securities of a non U S company to let investors indirectly trade crypto |
C | Citigroup has Invented a New Crypto Investment Option with Reduced Risk | Citigroup NYSE C has come up with a new less risky way of investing in cryptocurrencies without actually owning them the New York based bank s new investment instrument is called Digital Asset Receipt DAR and would place cryptocurrencies within existing regulatory frames
The structure provides Wall Street investors such as asset managers and hedge funds with a safer way of investing in the digital assets market and can prove to be a game changer for cryptocurrency trading DAR operates on the same principle as the American Depository Receipt ADR a negotiable certificate that allows US investors to own a specified number of shares in foreign stocks not otherwise listed on US exchanges |
JPM | Euro Stoxx 50 Technicals | Higher political risks in Europe
The European stocks decline in price for the 4th consecutive day amid higher political risks in Italy Greece and the United Kingdom Will the decrease in the Euro Stoxx 50 index continue
Early parliamentary elections are expected in Italy They can be held simultaneously with the German elections in September this year Greece again faces the default risk on government debts after postponing the negotiations with the IMF to mid June In Britain the gap between the Conservative and Labor parties has narrowed ahead of the parliamentary elections next week The STOXX 50 index rose for the fourth month in a row in May updating a nearly 2 year high Deutsche Bank DE DBKGn lowered its recommendations on the European banks shares on this background while JPMorgan NYSE JPM lowered its recommendations on automakers stocks The current P E ratio of STOXX 50 index is 21 8 This is markedly above the historical average of 14 High P E ratio may indicate an overestimation of the index
On the daily timeframe EU50 D1 broke down through the support line of the rising channel and is trying to correct down The further price decrease is possible in case of the publication of weak economic data in the Eurozone negative corporate reports and higher political risks
The Parabolic indicator gives a bearish signal
The Bollinger bands have narrowed which means lower volatility
The RSI is below 50 No divergence
The MACD gives a bearish signal
The bearish momentum may develop in case EU50 drops below the last fractal low at 3520 This level may serve as the entry point The initial stop loss may be placed above the 3 last fractal highs the 2 year high the Parabolic signal and the upper Bollinger band at 3690 After opening the pending order we shall move the stop to the next fractal high following the Bollinger and Parabolic signals Thus we are changing the potential profit loss to the breakeven point More risk averse traders may switch to the 4 hour chart after the trade and place there a stop loss moving it in the direction of the trade If the price meets the stop level at 3690 without reaching the order at 3520 we recommend cancelling the position the market sustains internal changes that were not taken into account
Summary of technical analysis
Position Sell
Sell stop below 3520
Stop loss above 3690 |
JPM | Buy 6 Growth Mutual Funds As Q1 GDP Strengthens | Despite a sluggish start to the year recently released data has shown that the U S economy expanded in the first quarter In its second estimate economic growth for the first quarter witnessed an upward revision an upward revision also highlighted an increase in consumer spending and a rise in business investment With the domestic economy witnessing stable expansion growth mutual funds could be prudent investment options Q1 GDP Advanced in Second Estimate In its second estimate GDP increased to 1 2 from the previous estimate of 0 7 It also beat analysts estimate of 0 9 and was an improvement over Q1 s gain of 0 8 Moreover corporate profits increased 3 7 year over year in the first three months of 2017 despite falling 1 9 from the fourth quarter of last year Additionally after a temporary pullback both consumer spending and business investment gained traction Consumer spending which accounts for a bulk of U S economic output was revised upward from the preliminary reading of 0 3 to 0 6 in the second estimate Also business investment rose 11 9 in the first quarter which is better than the previous estimate of 9 4 Why Choose Growth Mutual Funds With the U S economy registering steady growth in recent times growth funds have become a natural choice for investors who prefer capital appreciation over the long term to dividend payouts These funds generally invest in the assets of those companies that carry an above average growth potential Here we have selected growth funds with varying market caps a nice mix of which makes a portfolio profitable Small cap funds generally have a higher risk exposure but are good choices for investors seeking diversification across different sectors Small cap companies have lesser international exposure and are most likely to benefit from the recent economic expansion Mid cap funds are not highly susceptible to volatility in broader markets thus being ideal investments Large cap funds are perfect investment options for those in the pursuit of high returns that come with lower risk than small cap and mid cap funds Buy These 6 Growth Mutual FundsFollowing these improvements in the economy investors may consider growth mutual funds According to Morningstar the large cap mid cap and small cap growth mutual funds had one year annualized return of 18 2 16 5 and 20 2 respectively Here we have selected two growth mutual funds from each of the three categories large cap mid cap and small cap that have a Zacks Mutual Fund Rank 1 Strong Buy Moreover these funds have encouraging year to date YTD and one year annualized returns They also have minimum initial investment within 5000 and low expense ratios We expect these funds to outperform their peers in the future Remember the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers Unlike most of the fund rating systems the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund Large Cap Growth FundsVanguard US Growth Investor invests primarily in securities of companies located in the U S VWUSX focuses on acquiring common stocks of companies having large cap market capitalization VWUSX considers companies with strong earnings growth prospects and favorable valuation for potential investment VWUSX has an annual expense ratio of 0 46 lower than the category average of 1 07 The fund has YTD and one year annualized returns of 15 7 and 16 3 respectively JPMorgan NYSE JPM Intrepid Growth R5 invests the majority of its assets in equity securities of large and mid cap companies JGIRX seeks capital growth over the long run The fund generally invests in those securities that are expected to have strong momentum high quality and attractive valuations JGIRX has an annual expense ratio of 0 47 lower than the category average of 1 07 The fund has YTD and one year annualized returns of 14 6 and 21 4 respectively Mid Cap Growth FundsCommerce MidCap Growth seeks growth of capital for the long run CFAGX invests the lion s share of its assets in common stocks of mid cap companies which are included in the Russell Midcap Growth Index CFAGX has an annual expense ratio of 0 87 lower than the category average of 1 17 The fund has YTD and one year annualized returns of 10 5 and 15 4 respectively Principal MidCap A invests a large part of its assets in equity securities of mid cap companies whose market cap falls within the range of the Russell Midcap Index PEMGX seeks capital appreciation for the long run The fund invests in both U S and non U S companies PEMGX has an annual expense ratio of 0 99 lower than the category average of 1 17 The fund has YTD and one year annualized returns of 12 6 and 18 9 respectively Small Cap Growth FundsTCM Small Cap Growth invests a huge share of its assets in small cap companies having market capitalization similar to those listed on the Russell 2000 Index TCMSX seeks growth of capital for the long run TCMSX has an annual expense ratio of 0 95 lower than the category average of 1 07 The fund has YTD and one year annualized returns of 9 9 and 27 3 respectively Franklin Small Cap Growth Advisor seeks growth of capital for the long run FSSAX invests mainly in common stocks of small cap companies whose market cap is either similar to the highest range of the Russell 2000 Index or around 1 5 billion whichever is higher at the time of purchase FSSAX has an annual expense ratio of 0 86 lower than the category average of 1 07 The fund has YTD and one year annualized returns of 4 7 and 17 5 respectively Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
MS | Traders bet their oil storage assets that OPEC cuts will work | By Julia Payne LONDON Reuters The jury is still out on whether OPEC can rein in a global oil glut but top commodity traders are betting it can by selling stakes in storage tank businesses that profited from oversupply Since January Glencore LON GLEN Vitol and Gunvor have completed or have been seeking to sell parts of their holdings in storage firms Vitol s deal was agreed in October before the Nov 30 announcement by the Organization of the Petroleum Exporting Countries that it would cut output from Jan 1 Vitol s deal was completed in January and others have lined up sales since The traders picked the right time to sell Jean Fran ois Lambert of Lambert Commodities consultancy said adding an oil price recovery and prospects for a more balanced market were partly behind the timing alongside factors such as freeing up cash to trade If you have an opportunity to sell assets to lighten your balance sheet without losing control then you do it he said The five top traders who also include Mercuria and Trafigura expect OPEC to extend output cuts into the second half of 2017 which would help draw down global inventories When inventories are plentiful the oil price for future delivery tends to be above the price for prompt delivery a state known as contango when it pays to be in the storage business taking fees and selling stored oil forward at a profit This has been the situation since mid 2014 At times the prompt price was more than 1 less than a barrel for delivery a month later With an abundance of crude supplies trading houses could book easy profits by buying crude and storing it after selling it forward Contango is a very basic play It s lazy Trafigura s co head of risk Ben Luckock said speaking during a commodities conference But I think you ve seen contango has come out of the market As stockpiles draw down the oil price for prompt delivery tends to trade above future prices a condition known as backwardation At this point oil cannot be sold forward at a quick profit and the storage business loses its luster Till now there have been few clear signs that OPEC and non OPEC cuts of 1 8 million barrels per day bpd were working with global stockpiles stubbornly high according to U S data and International Energy Agency IEA figures MARKET MOMENTUM But some analysts are starting to see a shift Examining less visible but still reported inventories shows about a 72 million barrel of total oil draws globally since end January We expect this to gain momentum Morgan Stanley NYSE MS said in a research note last week Oil trader Pierre Andurand of Andurand Capital Management speaking to CNBC last week went further saying he expected sustainable backwardation by late summer The oil futures market was in backwardation almost continuously from early 2011 to mid 2014 Then it switched into contango as Brent crude tumbled from more than 100 a barrel By the start of 2016 it had fallen below 30 Capitalizing on this market price structure in mid 2015 Vitol bought its partner s 50 percent stake in infrastructure and storage firm VTTI for 830 million Then in October 2016 it agreed to sell 50 percent to Buckeye Partners for 1 15 billion completing that deal in January The oil futures market has yet to slip into backwardation since OPEC began its cuts But it came close in February when the price for the front month Brent was 56 66 a barrel settled at 16 cents less than the contract for delivery seven months later The spread has since widened again to about 80 cents between the front month contract and seven month Brent That could change if as some OPEC officials suggest cuts by the group and its non OPEC partners are extended beyond June and prices climb If it does Glencore s sale of a 51 percent stake in its global oil products storage business for 775 million to Chinese conglomerate HNA last week would look prescient Gunvor meanwhile is selling a share in a Rotterdam storage facility while Trafigura is working on its IPO in privately owned Puma Energy a venture with Angola s state run Sonangol Holdings LDA and investment company Cochan Holdings But not everyone is convinced a return to backwardation will be sustained as U S shale oil producers have ramped up output filling some of the gap left by OPEC and its partners
While over the next couple of months backwardation may temporarily come back we see a strong comeback of U S shale supplies joining in on many long planned supply additions in the Atlantic Basin David Wech of JBC Energy consultancy said |
MS | Gold spikes to 5 month highs as US launches missile strikes on Syria | Investing com Gold spiked to five month peaks Friday in Asia after the U S military launched cruise missile strikes against a Syrian air base controlled by President Bashar al Assad s forces
Gold for April delivery on the Comex division of the New York Mercantile Exchange rose 0 93 to 1 265 00 a troy ounce Copper dipped 0 04 to 2 658 a pound The missile strike came after President Donald Trump hosted Chinese President Xi Jinping in Florida for a summit that is expected to focus in major part on North Korea
Overnight gold prices traded higher on Thursday despite increased expectations of a June rate hike after the release of a better than expected initial jobless claims report
Gold futures eased from a session high 1 260 65 after the U S Department of Labor reported that initial jobless claims decreased by 25 000 to 234 000 in the week ending April 1 from the previous week s revised total of 259 000
Analysts had expected jobless claims to drop by 8 000 to 250 000 last week Meanwhile expectations of June rate hike grew after the Federal Reserve released the minutes from its March meeting on Wednesday
The Federal Reserve said that it would start to unwind its 4 5 trillion balance sheet later this year and maintained its view rate hikes would be gradual Some analysts supported the idea that the Federal Reserve is poised to increase interest rates in June
We have expressed a strong conviction that unless the data deteriorate or financial conditions ratchet tighter the Fed will next hike rates at its June meeting Morgan Stanley NYSE MS noted in a research report to clients
According to investing com s Fed rate monitor tool 58 of traders expect a rate hike in June compared to 50 of traders prior to the release of the Fed minutes
Gold is sensitive to moves in U S rates which lift the opportunity cost of holding non yielding assets such as bullion
Meanwhile a two day summit between U S President Donald Trump and Chinese President Xi Jinping later today is expected to be closely watched by investors as a negative outcome could weigh on China U S trade relations |
JPM | JPMorgan profit beats on better than expected trading loan growth | By Sweta Singh and David Henry Reuters JPMorgan Chase Co s N JPM quarterly profit topped Wall Street s expectations on Friday as trading revenue came in much higher than expected and demand for loans increased on the back of a strengthening U S economy U S banks are benefiting from a cut in corporate tax rates hikes in interest rates and a growing economy that is driving demand from borrowers while holding down loan loss rates We see good global economic growth particularly in the U S where consumer and business sentiment is high Chief Executive Officer Jamie Dimon said Overall the bank s revenue rose 6 5 percent to 28 39 billion and topped the average analyst estimate of 27 36 billion driven by growth in all four of the bank s businesses Shares of the largest U S bank by assets were up 1 percent in premarket trading JPMorgan s quarterly reports are closely watched for signs about the health of consumers and businesses as the lender plays a major role in several businesses such as home mortgages commercial lending and asset management Average core loans which include consumer credit and loans to the biggest corporations were up 7 percent compared with the year earlier quarter Analysts and economists are watching loan demand at banks for signs of any impact from international trade tariffs on their business and expansion plans Investors have also been looking for signs that the corporate tax cuts have given companies new confidence to borrow a phenomenon that bankers have said might not show up before the second half of the year Earlier this week Dimon was quoted in an Italian newspaper saying that U S business executives have warned U S President Donald Trump that the impact of trade tariffs on economic growth could offset the benefits of tax cuts Trading revenue which makes up about a fifth of JPMorgan s total revenue was up 13 percent compared with a 1 percent gain expected by Credit Suisse SIX CSGN analyst Susan Roth Katzke In May the bank s corporate and investment bank chief Daniel Pinto said second quarter markets revenue was likely to be flat compared with a year earlier Net interest income rose 10 percent as the U S Federal Reserve raised benchmark interest rates four times since the second quarter of 2017 Net income rose 18 3 percent to 8 32 billion or 2 29 per share in the second quarter ended June 30 from 7 03 billion or 1 82 per share a year earlier Analysts expected the bank to earn 2 22 per share according to Thomson Reuters I B E S
Citigroup Inc N C and Wells Fargo Co N WFC the third and fourth largest banks by assets are also set to report results on Friday |
JPM | U S import prices post biggest drop in over two years | By Lucia Mutikani WASHINGTON Reuters U S import prices fell the most in more than two years in June as prices for petroleum products fell and a strong dollar weighed on the costs of other goods Economists said the unexpected drop in import prices reported by the Labor Department on Friday was likely temporary given tariffs imposed by the Trump administration on lumber steel and aluminum imports to protect domestic industries from what it says is unfair foreign competition The government has also slapped 25 percent duties on 34 billion of Chinese imports and President Donald Trump this week threatened 10 percent tariffs on 200 billion of Chinese goods Odds are that the tariffs will begin to boost import prices said Ryan Sweet a senior economist at Moody s Analytics in West Chester Pennsylvania The inflationary impact of the steel and aluminum tariffs has been modest partly because a number of countries initially were exempt but that has changed The Labor Department said import prices dropped 0 4 percent last month the largest decline since February 2016 after jumping 0 9 percent in May Economists polled by Reuters had forecast import prices edging up 0 1 percent in June In the 12 months through June import prices increased 4 3 percent following a 4 5 percent advance in May Imported food prices dropped 2 6 percent last month the biggest decrease since February 2012 after rising 0 4 percent in May Prices for imported petroleum fell 0 8 percent after accelerating 7 4 percent in May June s drop reflected a decline in crude oil prices which has since reversed STRONG DOLLAR Excluding petroleum import prices slipped 0 3 percent in June That was the largest drop in two years and followed a 0 1 percent gain in the prior month Import prices excluding petroleum rose 1 4 percent in the 12 months through June Import prices excluding petroleum were probably held down by the dollar s 1 6 percent appreciation against the currencies of the United States main trading partners in June The dollar has firmed 3 8 percent on trade weighted basis so far this year which supports economists thesis of a gradual increase in inflation even as the labor market tightens An inflation measure tracked by the Federal Reserve for monetary policy hit the U S central bank s 2 percent target in May for the first time in six years Inflation is expected to modestly overshoot its target While we think a tightening labor market will keep upward pressure on pricing in the US the recent strengthening in the dollar along with declines in various commodity prices related to food and energy likely depressed the June import price data said Daniel Silver an economist at JPMorgan NYSE JPM in New York Import prices for nonfuel industrial supplies and materials increased 0 3 percent in June driven by higher prices for metals and paper after rising 0 8 percent in the prior month The cost of imported capital goods fell 0 1 percent for a second straight month as did prices for imported motor vehicles Consumer goods prices excluding automobiles recorded their biggest drop since November 2016 While prices for goods imported from China were unchanged in June they rose 0 5 percent year on year which was the largest gain in two years Once the tariffs start feeding through import prices are likely to reflect them first said Blerina Uruci an economist at Barclays LON BARC in Washington It will then likely feed through with a longer lag and to a smaller extent to producer prices and consumer prices
The Labor Department also reported that export prices increased 0 3 percent in June after rising 0 6 percent in May Prices for agricultural products fell 1 0 percent last month pulled down by a 2 6 percent drop in soybean prices Export prices for corn tumbled 3 1 percent |
JPM | Wells Fargo s loan book shrinks profit misses estimates | By Imani Moise Reuters Wells Fargo Co N WFC said on Friday its loan book shrank and it raked in less fee revenue than a year ago factors that contributed to lower than expected quarterly profit and sent its shares lower The bank said much of the lending decline had to do with moves to avoid riskier loans but the second quarter results ignited fears about lingering reputational damage from Wells Fargo s phony accounts scandal and other customer abuses The total average loan balance for the bank shrank 1 percent in the quarter from a year earlier as its consumer loan book fell by 2 percent and commercial real estate lending slowed Wells Fargo has been running down financial crisis era mortgage portfolios and dialing back lending in other businesses like autos where it sees too much risk Its most recent pullback is in commercial real estate lending where Wells Fargo executives say competition among other lenders has caused a broad decline in underwriting standards As it relates to underwriting standards it s not all bank to bank competition the competition here is just broad as it s ever been Chief Financial Officer John Shrewsberry told analysts pointing to real estate investment trusts sovereign wealth funds and other capital sources Wells Fargo shares were down 0 9 percent in afternoon trading Analyst pressed Wells Fargo executives on a call to discuss the results about when they could expect to see a turning point The bank could soon ramp up auto lending again the executives said without giving a specific time frame I would say that we re happy that it was sort of stabilized and we re now viewing the origination path is growing Shrewsberry said The bank s mortgage business weighed on the income it makes from fees which fell 8 percent in the quarter to 9 billion Intensifying price competition for mortgages hurt margins and borrower prepayments cut into servicing fees The bank also said a program that helps customers avoid overdraft charges dented fee income Even with loan balances falling the bank s net interest income rose 1 percent helped by higher interest rates JPMorgan Chase Co N JPM said on Friday its average core loans rose 7 percent from a year ago One consequence of Wells Fargo s slow loan and deposit growth is that the bank does not have to worry about bumping up against a regulator imposed cap on its balance sheet The Federal Reserve has ordered Wells Fargo to keep assets below 1 95 trillion until the bank s governance and controls improve Total non interest expenses rose 3 percent to 14 billion with the bank noting that marketing costs from a rebranding effort to help repair damage to its reputation added to costs The bank said it also took a 619 million operating loss hit in the quarter for compensating customer harmed by foreign exchange mortgage auto lending and wealth management issues The lender s expenses per dollar of revenue have remained stubbornly high after the phony accounts scandal erupted in 2016 Wells Fargo has vowed to cut costs by shrinking its branch network overhauling internal departments combining certain business areas and other measures Net income applicable to common stock fell to 4 79 billion or 98 cents per share in the second quarter from 5 45 billion or 1 08 per share a year ago
On an adjusted basis earnings were 1 08 per share excluding a 10 cent hit from an income tax expense missing analysts estimates of 1 12 per share according to Thomson Reuters I B E S |
JPM | Citigroup executives see better growth ahead but not yet | By Sweta Singh and David Henry Reuters Citigroup Inc N C is still on track to hit its goals for efficiency and revenue growth executives said on Friday as analysts pressed them to explain how those expectations line up with second quarter results Although Citigroup beat Wall Street profit expectations its revenue fell short of forecasts and businesses like branded credit cards and retail banking in Mexico are not yet generating the kind of revenue investors want to see During a conference call Chief Executive Officer Michael Corbat touted progress Citigroup has made toward goals he set last year to grow revenue faster than expenses and return more capital to shareholders Although some businesses are not operating at their full potential management has confidence in longer term growth prospects Chief Financial Officer John Gerspach said Analysts asked how Citigroup will improve performance without having to spend a lot more on those businesses Wells Fargo s Mike Mayo the fourth analyst to bring up a question about costs wondered whether management would need to spend more on digital banking to attract customers I don t think there s anything we re going to surprise you with in terms of new investments said Corbat Expenses accounted for 58 percent of Citigroup s revenue in the second quarter marking the seventh straight period of improvement but remained well above the low 50s range Corbat wants to reach by 2020 Since taking the helm almost six years ago Corbat has struggled to get Citigroup s profit engine humming The bank has been recovering from the 2007 2009 financial crisis which left it with a 45 billion bailout bill a diluted stock and an assortment of businesses around the globe Corbat set about divesting underperforming businesses and amplifying others worth keeping but Citigroup is still far less profitable than rivals JPMorgan Chase Co N JPM which also released earnings on Friday generated a return on assets of 1 28 percent last quarter compared with 0 94 percent at Citigroup JPMorgan s return on common equity was 14 percent compared with 9 2 percent at Citigroup Citigroup s share price reflects the difference trading at 93 percent of book value while JPMorgan investors pay 1 6 times what the bank says its assets are worth We expect Citigroup to be a relative underperformer as concerns still linger about long term revenue growth in the company s cards business KBW analysts wrote in a report on Friday In addition loan growth missed estimates and that is opposite of what we have seen at peers that have reported today Citigroup shares fell 2 3 percent to close at 67 on Friday The stock is down 10 percent for the year compared with a 3 0 percent drop in the S P 500 Banks index Overall Citigroup s net income rose 16 percent to 4 5 billion or to 1 63 per share compared with 3 9 billion or 1 28 per share in the second quarter of 2017 The boost was driven by lower taxes and more revenue from providing treasury and trade services to corporations as well as consumer banking Analysts had expected Citigroup to report 1 56 per share in earnings according to Thomson Reuters I B E S
Revenue rose about 2 percent to 18 47 billion slightly below the average expectation of 18 51 billion Its loan book grew 5 0 percent to 671 billion from 641 billion |
MS | Musing Over Glass Stegall | This is one area where I would like feedback from my readers My view is that the repeal of Glass Stegall had little impact on the crisis Most of the crisis occurred as a result of ordinary failures in investment banking and commercial banking with little change from combining them I would argue that the overall model for investment banking failed No major investment bank survived the crisis intact Goldman Sachs and Morgan Stanley had to seek banking charters to survive and receive help from the Treasury Fed one entity but like Janus two faces Everyone else needed help from the Feds or failed or merged I would also argue that the overall model for commercial banking failed with many making loans that were horrendously underwritten So what aspects of the crisis stemmed from the repeal of Glass Stegall Remember the Fed was chipping away at it for some time Feel free to comment below but if you don t want to do that email me Thanks |
MS | Morgan Stanley MS Depressed Vol into Ambiguous Earnings Date | Morgan Stanley is a global financial services firm that through its subsidiaries and affiliates provides its products and services to a group of clients and customers including corporations governments financial institutions and individuals This is a vol note surrounding an upcoming earnings report Specifically I m interested in examining some depressed vol for MS Let s start with the Charts Tab one year below The top portion is the stock price the bottom is the vol IV30 red vs HV20 blue vs HV180 pink We can see that MS is actually down 50 from its annual high in mid Feb On the vol side we can see that the implied has spiked and stayed elevated relative to the earlier part of the year since early Aug Relative to that spike in August the vol comps today actually point to depressed vol So to convolute things I m examining depressed elevated vol Specifically we can see today IV30 56 43HV20 78 22HV180 68 24That IV30 level is the lowest it has been since 10 28 2011 The 52 wk range in IV30 though is 22 87 128 59 which is an incredibly wide range A linear interpolation puts the current IV30 level at the 32nd percentile For the last two years MS has reported earnings on 1 20 2010 and 1 20 2011 with prior earnings dates of 10 21 2009 and 10 20 2010 Last cycle MS released earnings on 10 19 2011 All of this date parsing becomes interesting because Jan expiry is 1 20 2012 So in English there s an earnings report a volatility event coming either in the last few days of the Jan options cycle or the first few days of the Feb cycle Let s turn to the Skew Tab to examine month to month vols The phenomenon that grabs my attention here is that all three months show nearly identical ATM vol Usually a rather noticeable separation exists between the earnings month and the others The ambiguity as to the earnings date may be the culprit here but either way the implied is depressed relative to the two historical measures across all three front expiries Let s turn to the Options tab for completeness I wrote about this one for TheStreet com OptionsProfits so no specific trade analysis here But we can see at the top of the Options Tab that the Jan Feb and Apr options are priced to 56 03 57 06 and 58 28 vol respectively The depressed implied in MS combined with the earnings report vol event make a compelling case for vega analysis Countering the cheap vega argument is the IV30 level of MS last Jan which was in the low 30 s This is trade analysis not a recommendation |
MS | What Can We Expect in 2012 | As we prepare to bid farewell to 2011 and welcome 2012 it s undoubtedly important for investors to start the new year off with as much knowledge about the markets as possible A great visual I saw over the holiday weekend that captured the effects of the financial crisis was this one from Nomura Research Institute posted by Joe Weisenthal at Business Insider The sky high leverage ratios of Morgan Stanley Bear Stearns Lehman Brothers and Goldman Sachs caused part of the economic weakness but Nomura points to the policy mistake which forced Lehman Brothers to declare bankruptcy as the reason GDP plunged so significantly The dashed line represents the likely decline of GDP had the event not occurred Nomura draws two possible economic paths for the future 1 weaker demand because the private sector may focus on lowering its debt levels or 2 stronger demand due to the stimulus from the government Looking back over the past 400 years there has been a major currency or credit crisis every decade and historically it takes approximately four years to heal from the contraction Will history repeat itself What should investors expect |
MS | Moving Averages Month End Update | Valid until the market close on January 31 2012The S P 500 closed December with a gain of 0 85 from the November close The index signals remain unchanged from last month See the specifics here The Ivy PortfolioThe table below shows the current 10 month simple moving average SMA signal for each of the five ETFs featured in The Ivy Portfolio I ve also included a table of 12 month SMAs for the same ETFs for this popular alternative strategy Backtesting Moving AveragesMonthly Close Signals Over the past few years I ve used Excel to track the performance of various moving average timing strategies But now I use the backtesting tools available on the ETFReplay com website Background on Moving AveragesBuying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets In essence when the monthly close of the index is above the moving average value you hold the index When the index closes below you move to cash The disadvantage is that it never gets you out at the precise top or back in at the very bottom Also it can produce the occasional whipsaw short term buy or sell signal such as we ve experienced this summer Nevertheless a chart of the S P 500 monthly closes since 1995 shows that a 10 or 12 month simple moving average SMA strategy would have insured participation in most of the upside price movement while dramatically reducing losses The 10 month exponential moving average EMA is a slight variant on the simple moving average This version mathematically increases the weighting of newer data in the 10 month sequence Since 1995 it has produced fewer whipsaws than the equivalent simple moving average although it was a month slower to signal a sell after these two market tops A look back at the 10 and 12 month moving averages in the Dow during the Crash of 1929 and Great Depression shows the effectiveness of these strategies during those dangerous times The Psychology of Momentum SignalsTiming works because of a basic human trait People imitate successful behavior When they hear of others making money in the market they buy in Eventually the trend reverses It may be merely the normal expansions and contractions of the business cycle Sometimes the cause is more dramatic an asset bubble a major war a pandemic or an unexpected financial shock When the trend reverses successful investors sell early The imitation of success gradually turns the previous buying momentum into selling momentum Implementing the StrategyOur illustrations from the S P 500 are just that illustrations I use the S P because of the extensive historical data that s readily available However followers of a moving average strategy should make buy sell decisions on the signals for the each specific investment not a broad index Even if you re investing in a fund that tracks the S P 500 e g Vanguard s VFINX or the SPY ETF the moving average signals for the funds will occasionally differ from the underlying index because of dividend reinvestment The S P 500 numbers in our illustrations exclude dividends The strategy is most effective in a tax advantaged account with a low cost brokerage service You want the gains for yourself not your broker or your Uncle Sam Note For anyone who would like to see the 10 and 12 month simple moving averages in the S P 500 and the equity versus cash positions since 1950 Recommended ReadingThe Ivy Portfolio In the past we ve recommended Mebane Faber s thoughtful article A Quantitative Approach to Tactical Asset Allocation The article has now been updated and expanded as Part Three Active Management his book The Ivy Portfolio coauthored with Eric Richardson This is a must read for anyone contemplating the use of a timing signal for investment decisions The book analyzes the application of moving averages the S P 500 and four additional asset classes the Morgan Stanley Capital International EAFE Index MSCI EAFE Goldman Sachs Commodity Index GSCI National Association of Real Estate Investment Trusts Index NAREIT and United States government 10 year Treasury bonds As a regular feature of this website I try to update the signals at the end of each month Footnote on calculating monthly moving averages If you re making your own calculations of moving averages for dividend paying stocks or ETFs you will occasionally get different results if you don t adjust for dividends For example VNQ triggered a buy signal this month based on adjusted monthly closes but there was no signal if you ignored dividend adjustments See the comparison here If you use data from Yahoo Finance for dividend paying assets you would use the right column of adjusted closes in calculating the monthly moving averages Here is the link for VNQ Because the data for earlier months will change when dividends are paid each month you must update the data for all the months in the calculation This will be the case for any dividend paying stocks or funds For a visual representation of the VNQ signal at the December 30 close here is chart from Stockcharts com |
MS | Was 2011 the end of the Gold Rush | For such a wonderful year for precious metals investors the final calendar quarter left little to celebrate Just as people now take for granted that their phones will also take pictures play music and surf the internet many investors have come to expect gold and silver to move up in a straight line In fact in a recent CNBC interview one analyst claimed that gold s recent correction proves that it is not really a safe haven In truth such a statement merely proves how little some analysts know about markets However much the fundamentals may be on your side there are always mitigating factors that affect price movement In the case of gold and silver the temporary resurgence of the dollar versus other fiat currencies alternatives has been the dominant factor but even that isn t the whole story STAMPEDE OUT OF EUROSThe critical factor that has been in play the past few months has been the European debt crisis going critical I have said all along that the US is in worse shape than the EU overall because the EU has less will and capacity to resolve or even temporarily paper over its problems The flip side is that absent the massive stimulus the US has received Europe has been forced to deal with its sovereign debt problems first Global investors have been spooked since the credit crunch of 2008 That means they are more likely to follow the herd rather than stick to the fundamentals It takes a certain firmness of character to watch your investments sell off by double digits and not have a moment of self doubt So what we re seeing is big moves into and out of asset classes But what is important to understand about these circumstances is not the scale of the moves but the direction of the trend Right now the dollar is riding high But it s still down over 30 over the last decade as measured by the generous US Dollar Index Gold by contrast is up over 350 in that period Of course past performance does not guarantee future results but the fundamentals have not changed It s worth remembering that mainstream analysts chose the dollar over gold in almost every report over the last 10 years based on a blind faith in the power of the US government to centrally plan the American economy The market proved them wrong Once again the mainstream narrative is that the real danger is in Europe and therefore the US offers a safe haven This has caused a stampede out of euros and into dollars But as we ve seen over the last few years the euro and dollar can decline simultaneously and will continue to do so as more and more investors realize that the real safe haven is gold SHOOTING STRAIGHT UPThere is a reason assets don t move up in a straight line Besides varying liquidity needs and risk appetites of investors there are also built in mechanisms to flush speculators out of a skyrocketing market As silver approached 50 this past April the COMEX raised margin requirements for futures contracts on the metal thereby pushing many speculators out of the market While this practice presumably prevents speculators from overusing leverage it also has the effect of crushing the short term price of the metal Both gold and silver have been subject to increased margin requirements this past year While we can now rest assured that future price increases are driven more by long term investment than short term speculation it is not without costs Speculators serve to reduce volatility in a market by buying in anticipation of future scarcity and vice versa So pushing out the speculators may increase volatility in the future However it s my feeling that in truth no gains have been lost at all they have merely been postponed IS THIS THE TOP In order to determine whether the recent sideways movement of gold and silver is cause for concern let s look at what lies ahead for 2012 It is clear from 2011 that the new Tea Party members of Congress are not strong enough to stop the fiscal bleeding and with the Occupy Wall Street movement in full swing President Obama doesn t have a lot of room to compromise Washington has been reduced to short term measures to pay its bills and the bills are mounting faster than ever Meanwhile Ben Bernanke s Federal Reserve seems intent on pushing all the boundaries of monetary policy In its most recent ploy the Fed has engaged in a covert bailout of Europe through the use of currency swaps From an investment perspective this goes to show how deluded dollar investors are they re buying into a currency that is being printed for any and all comers This news should have caused the dollar to tank and gold and the euro to rise but again the fear trade is overriding all other considerations 2012 should see more trouble from Europe and therefore potentially more dollar buying This might even be the year we see a few members exit the euro However there is no way to know how the euro will react in the short term to such events as such scenarios may already be priced into the market In any event long term the eurozone will be stronger without its weaker members If they cannot mend their profligate ways better to force them out now than compromise the solvency of the stronger members For smart investors dollar strength caused by euro fears is simply an opportunity to buy contra dollar assets on the cheap Yes I believe sub 30 silver and sub 1600 gold are still cheap for what s ahead And with 2012 forecasts of 2 200 by Morgan Stanley 2 050 by UBS and 2 000 by Barclays it appears I m not alone |
MS | S P Due to Downgrade Several European Countries | EquitiesThe week closed on an up note in Asia as the region s markets traded mostly higher The Nikkei rallied 1 4 to 8500 the Kospi gained 6 and the ASX 200 rose 4 In greater China the Hang Seng edged up 6 while the Shanghai Composite fell 1 3 following the release of a report which revealed a drop in China s foreign exchange reserves News that S P was due to downgrade the credit rating of several European countries pressured the region s markets The FTSE lost 5 the DAX dropped 6 while the CAC40 edged down 1 It is expected that France and Austria will be downgraded by one notch while Spain and Portugal will drop 2 notches Adding to the debt pain a breakdown in negotiations between Greece and holders of its debt could spell major troubles for the Euro zone US stocks fell moderately as well The Dow lost 49 points to 12422 while the Nasdaq and S P 500 shed 5 Dow Mostly Recovers from Steep Morning SlideJPMorgan reported earnings that fell short on revenue sending the shares down 2 5 The negative news weighed on banking shares sending Citigroup down 2 7 and Morgan Stanley down 3 1 CurrenciesThe heavy dose of negative European news hit the single currency hard The Euro fell as low as 1 2626 before recovering slightly closing down 1 1 to 1 2680 The Yen Pound and Australian Dollar all declined a mere 1 which the Canadian Dollar dropped 4 to 1 0230 The Swiss Franc eased 2 to 1 0506 Economic OutlookConsumer sentiment data from the University of Michigan rose to 74 from 69 9 beating estimates for 71 2 The trade deficit grew to 47 8 billion a significant increase from last month s 43 3 billion deficit hitting its highest level in 5 months European Markets Shrug Off S P DowngradesEquitiesOver the weekend S P downgraded the debt ratings of 9 out of 17 euro zone countries sending Asian markets lower on Monday The Nikkei sank 1 4 to 8378 as the Euro Yen EURJPY fell to 97 22 its lowest level in more than a decade hurting exporters In Korea the Kospi shed 9 and Australia s ASX 200 dropped 1 2 The Hang Seng slid 1 to 19012 while the Shanghai Composite tumbled 1 7 largely erasing last week s gains Shanghai Composite Slides 1 7 In contrast European markets climbed despite the wave of credit downgrades The DAX rallied 1 3 the CAC40 climbed 9 and the FTSE rose 4 Late Monday S P downgraded the European Stability Fund s credit rating by one notch which may make it harder for the fund to obtain cheap funding CurrenciesGlobal currencies traded in relatively narrow ranges thanks to the US holiday The Canadian Dollar gained 5 to 1 1081 ahead of the Bank of Canada s rate decision on Tuesday The Swiss Franc slipped 3 to 1 0478 the Australian Dollar eased 2 to 1 0306 and the Euro edged down 1 to 1 2664 The Yen rose 2 to 76 78 Economic OutlookTuesday s sole economic report is the Empire State manufacturing survey Analysts are expecting the index to rise to 10 8 from last month s 9 5 reading Chinese GDP Better than Expected Lifting MarketsEquitiesGDP data from China showed the economy grew at 8 9 in the last quarter better than forecast The news sent the Shanghai Composite soaring 4 2 despite the fact that the figure was lower than last quarter s 9 1 growth Across the region stocks rallied particularly in neighboring Hong Kong where the Hang Seng jumped 3 2 to 19638 The Nikkei advanced 1 1 to 8466 the Kospi climbed 1 8 and the ASX rose by 1 7 The upbeat sentiment continued in Europe as the DAX rallied 1 8 the CAC40 gained 1 4 and the FTSE rose 7 Automakers posted a 2 8 gain as fear of a Chinese hard landing abated US stocks posted smaller gains The Dow tacked on 60 points to 12482 the Nasdaq advanced 6 and the S P 500 gained 4 CurrenciesA successful bond auction in Spain helped boost European currencies The Swiss Franc rallied 8 to 1 0533 the Euro gained 6 to 1 2734 and the Pound inched up 1 to 1 5332 The Canadian Dollar edged up 3 after the Bank of Canada kept rates steady at 1 In the Pacific region the Australian Dollar climbed 7 to 1 0379 and the Yen closed down fractionally at 76 82 Economic OutlookThe Empire State manufacturing index blew past expectations rising to 13 5 from last month s 9 5 reading its highest level since April Housing Market Sentiment Soars to 4 5 Year HighEquitiesAsian markets traded mixed on Wednesday as doubts over Greece s debt burden clashed with Tuesday s cheer The Nikkei climbed 1 to 8551 lifted by a sharp 6 6 rally in Elpida Memory on news the company is seeking a deal with Micron Technology The Hang Seng rose 3 to 19687 while the Kospi and ASX 200 settled little changed The Shanghai Composite fell 1 4 to 2264 following Tuesday s powerful 4 2 rally the largest single day gain in more than 2 years European shares traded mixed as well The FTSE rose 2 the DAX gained 3 while the CAC40 eased 2 Societe Generale shares surged 6 as Greece resumed debt negotiations on hopes the bank s losses due to exposure to Greek debt will be less than feared Upbeat data and rumors of a possible Greek debt deal later in the week sent US stocks higher The Nasdaq led the advance climbing 1 5 The Dow rose 97 points to 12576 and the S P 500 gained 1 1 to 1308 Nasdaq Rallies 1 5 Goldman Sachs surged 6 8 after beating earnings estimates while Bank of NY Mellon sank 4 6 after reporting weak earnings Home builders soared thanks to upbeat home builder sentiment index data The index rose to its highest level since June 2007 Hovnanian closed up 12 2 and Pulte Homes posted a 5 9 gain CurrenciesThe Euro surged 1 6 as hopes for a solution to Greek s debt woes lifted the single currency The Australian Dollar rallied 1 2 to 1 0430 the Swiss Franc advance 1 to 1 0654 and the Pound climbed 8 to 1 5441 The Canadian Dollar posted a smaller 4 gain to 1 0112 and the Yen inched up fractionally to 76 99 Economic OutlookThe NAHB housing market index jumped to 25 from last month s reading of 21 blowing past analyst estimates of a rise to 22 Industrial production rose by 4 slightly less than forecast and PPI slipped 1 following last month s 3 gain Stocks Gain on IMF Hopes Kodak Files for BankruptcyEquitiesAsian markets rallied to their highest level in more than a month following news the IMF is hoping to raise 600 billion in funding to help tackle the euro debt crisis The Nikkei gained 1 to 8640 the Kospi jumped 1 2 and the Hang Seng rallied 1 3 China s Shanghai Composite climbed 1 3 nearly erasing Wednesday s 1 4 drop Australia s ASX 200 lagged the region easing 1 as employment data showed an unexpected drop of 30K jobs in December France s CAC40 soared 2 to 3329 as European indexes traded higher following strong bond auctions in Spain and France The DAX gained 1 and the FTSE rose 7 as European banks rocketed up 7 4 on hopes the IMF will help address the ongoing debt crisis US stocks posted moderate gains thanks to positive economic and earnings news The Dow rose 45 points to 12624 the Nasdaq rallied 7 and the S P 500 gained 5 to 1314 50 CurrenciesEuropean currencies advanced as renewed hopes for a debt solution lifted the region The Euro and Swiss Franc gained 8 and the Pound rose 4 to 1 5484 The Yen fell 4 to 77 12 while the Australian Dollar closed down 1 to 1 0412 Economic OutlookWeekly unemployment claims dropped to 352K vastly exceeding analyst expectations of 387K CPI was flat while core CPI rose 1 in line with forecasts On a weaker note housing starts fell to 660K 30K short of forecasts |
C | The Fed May Be About to Make a Mistake | Bloomberg Opinion The natural state of a capitalist economy is expansion Recessions occur when something breaks rather than an expansion simply dying of old age Unfortunately central banks have a history of pumping the brakes for too long and too hard when attempting to contain growth and inflation and are often the cause of a recession
Given that the Federal Reserve has now shifted away from its so called third mandate of financial stability which dominated much of the post crisis period and back to worrying about faster inflation concern about too much tightening is warranted While inflation is indeed accelerating investors remain skeptical that higher prices are returning with the vengeance needed to justify the several more interest rate hikes the Fed is talking about We fear another Fed mistake is in the offing
The chart below shows the percentage of official Fed communications speeches testimonies and statements by topic since the mid 1990s Inflation concerns and hawkish rhetoric make up well more than half the talk and are crowding out dovish comments and global and financial stability concerns
Zeroing in on inflation Fed Chairman Jerome Powell and his fellow policy makers at the central bank have talked more about inflation in 2018 than any other post crisis year A good example is Chicago Fed President Charles Evans a longtime monetary dove who has shocked Fed watchers by putting on his seldom used hawk talons Evans suggested the Federal Open Market Committee may need to raise rates to somewhat restrictive levels to combat anticipated inflation
Evans justified his position by pointing to economic surveys which see more inflation on the horizon In a Bloomberg Opinion column in May we argued that such surveys no longer work Nevertheless investors are acknowledging the Fed s commitment to battling higher prices by fully pricing in a rate hike at the Sept 26 FOMC meeting Even the December meeting shows a very high 70 percent probability of a hike
The next chart shows that this aggressive pace of rate hikes has decoupled from realized economic growth The blue line shows the Citigroup NYSE C U S economic data change index which is an aggregate measure of incoming economic releases relative to one year averages The orange line shows the number of rate hikes priced in over the next 12 months The data is clearly softening yet expectations for rate hikes remain elevated Inflation concerns are superseding actual economic data
Is the Fed right to worry so much about inflation Six years ago the Fed adopted a 2 percent inflation target As the chart below shows other than the first few months after it was implemented this target hasn t been reached Yet Fed officials are preparing for a battle by assuming inflation will exceed a target it has not hit it in seven years
To illustrate how Fed talk is running ahead of market expectations the chart below uses the central bank s own words to estimate the number of rate hikes expected over a 12 month period We modeled the number of rate hikes synonymous with Fed rhetoric from 1996 through 2007 and then projected it starting in 2008 The blue line provides a market based expectation for rate hikes over the next 12 months taken from the futures market The spread between market and Fed expectations for rate hikes is shown in the bottom panel Values below zero show periods when Fed talk is more hawkish than market pricing
This spread between Fed rhetoric and market expectations is also shown in blue in the chart below It is compared to U S 10 year Treasury note yields Periods of the Fed being more hawkish than markets have coincided with declining yields Conversely when the Fed is less hawkish than the market positive blue line yields have risen However this circumstance has been infrequent in the post crisis period which we believe has contributed to the inability of 10 year yields to break out to the upside Fed rhetoric is giving bond vigilantes a reason to drive yields higher
The case for more Fed tightening hinges on inflation The Fed assumes it will return and it is talking about hiking well ahead of the economic data and market expectations If policy makers are correct and the economic surveys are right this time and inflation returns they have the correct policy But if the surveys are wrong like they have been for two decades and the Fed is worrying too much about something that doesn t materialize then it risks breaking the nine year old expansion and becoming the catalyst for a recession Evans needs a better argument
To contact the authors of this story Jim Bianco at jimb bloomberg netBen Breitholtz at bbreitholtz bloomberg net
To contact the editor responsible for this story Robert Burgess at bburgess bloomberg net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners
Jim Bianco is the President and founder of Bianco Research a provider of data driven insights into the global economy and financial markets He may have a stake in the areas he writes about
Ben Breitholtz is a data scientist at Arbor Research Trading He may have a stake in the areas he writes about
2018 Bloomberg L P |
C | U S banking regulators ease liquidity rules for municipal securities | By Pete Schroeder
WASHINGTON Reuters U S banking regulators said on Wednesday they were easing liquidity rules on the treatment of municipal securities allowing banks to count more of the assets toward certain liquidity requirements
The interim final rule allows banks to treat investment grade municipal securities as high quality liquid assets similar to cash and U S Treasury bonds in order to comply with rules requiring banks to hold easily sold assets as a cushion against future downturns The regulatory change was mandated by a law easing bank rules signed by President Donald Trump in May
The change one of the first by regulators implementing that law should help banks that are heavy investors in municipal debt including large companies like Citigroup N C by allowing them to count more types of investments toward liquidity requirements State and local governments also pushed for the relaxed treatment of municipal securities while Congress considered the law to ensure the debt remained attractive to banks
Under the change municipal securities can be counted toward calculating a bank s liquidity coverage ratio so long as they are investment grade and liquid and readily marketable
The change was jointly announced by the Federal Reserve Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency It will take effect immediately once it is published in the Federal Register in the coming days |
C | Exchange Bank declares 0 95 dividend | Exchange Bank OTCPK EXSR declares 0 95 share quarterly dividend in line with previous Forward yield 2 07 Payable Sept 21 for shareholders of record Sept 7 ex div Sept 6 See EXSR Dividend Scorecard Yield Chart Dividend Growth Now read |
C | Trump s Dollar Policy Could Derail Citigroup s Bullish Forecast | Bloomberg Citigroup Inc NYSE C is bullish on the dollar U S President Donald Trump could change that
The administration s preference for a weaker greenback combined with its unpredictable policy moves pose a key risk for foreign exchange markets according to Calvin Tse North American head of G 10 FX strategy at Citigroup in New York Even though the chances are slim investors can t ignore the possibility that the Treasury may intervene by selling dollars Tse said
We remain structurally bullish as strong growth and relative yields attract capital to the U S Tse said in an email The biggest risk to our view however is that the Treasury decides to intervene to weaken the USD Though still a tail risk if they were able to corral the Fed to participate this would be a game changer for the USD outlook
The dollar has risen more than 1 3 percent this year amid strong U S economic growth and Federal Reserve interest rate hikes The greenback s been whipsawed by escalating tension between the U S and its trading partners punctuated by Trump s repeated accusations that China and the European Union are manipulating their currencies
While some traders and analysts consider the chances of U S intervention remote the possibility appears less far fetched than it once was because of the Trump administration s pronouncements and unorthodox policy The U S hasn t intervened in markets to sell the greenback since 2000 when it united with fellow members of the Group of Seven in an effort to boost the sliding euro
In terms of firepower Tse calculates the Treasury and Fed would have a combined 189 billion to step into the market He says such an move could trigger double digit percentage losses for the greenback in a matter of months eroding the currency s position as a global reserve asset
The U S has enjoyed the ability to run twin deficits without much detriment to its currency because it holds the sacred position of being the reserve currency of the world Tse wrote separately in a client note But if this status is lost it opens the floodgates for asset repatriation |
JPM | Buy 5 Global Equity Funds As Inflows Touch 2 Year Highs | Investors are shifting their focus to global equity funds from domestic equity funds following concerns over President Trump s ability to implement his pro growth economic proposals According to Investment Company Institute s latest fund flow report stock funds investing globally have registered the best inflows since April 2015 In contrast domestic equity funds have registered significantly strong outflows over the last few weeks Moreover recently released economic data indicates that the world s major economies including China and Europe are gradually picking up pace Given their bullish economic backdrop these countries offer lucrative investment propositions Global mutual funds are excellent options for investors looking to widen exposure across countries and might be a sensible investment option Global Equity Funds Post Best Inflows Since 2015As per the latest Investment Company Institute ICI weekly fund flow report domestic equity based funds have recently seen heavy outflows whereas global equity funds continued to attract investors In the week ended May 10 equity funds reported inflows of 7 243 billion While domestic equity funds witnessed outflows of around 991 million international equity funds saw inflows of 8 234 billion According to Lipper s weekly fund flow report for the same period equity fund flows remained mixed last week Total inflows in international equity funds reached 4 810 billion registering nine consecutive weeks of gains Meanwhile domestic equity funds posted outflows of 6 045 posting third straight weeks of declines Why Buy Global Equity Funds If selected carefully global mutual funds have the potential to offer secure and attractive investment opportunities Different studies over the years have shown that a portfolio with both domestic and foreign securities helps in reducing risk while enhancing returns Also a steady decline in U S equity funds demand might encourage investors to consider diversifying their investments throughout the globe Separately China and Europe have reported encouraging economic data recently For instance China s GDP rose 6 9 in the first quarter of this year marginally better than prior quarter s increase of 6 8 The world s second biggest economy registered its quickest GDP growth since 2015 Additionally retail sales and factory output data remained upbeat in April According to the National Bureau of Statistics retail sales rose 10 7 year over year relatively better than a rise of 10 1 in the previous year Industrial production also increased 6 5 year over year which is better than a rise of 6 registered in the prior year Moreover Europe s GDP is expected to increase about 2 after growing 1 7 in 2016 Meanwhile growth in U S GDP is expected to expand 1 6 this year Overseas purchasing managers indices are strong with Germany s at a six year high The key economic metric of productivity is also increasing at a faster pace in Europe than in the U S Read More Buy These 5 Global Equity FundsWith investors still fretting over Trump led uncertainty equity mutual funds with strong exposure to international markets have emerged as prudent investment options According to Morningstar the world stock mutual fund category posted three month year to date YTD and one year returns of 5 5 11 9 and 18 3 respectively This encouraging backdrop calls for investors attention to five global equity mutual funds that boast a Zacks Mutual Fund Rank 1 Strong Buy Moreover these funds have impressive year to date YTD and one year annualized returns They also have minimum initial investment within 5000 and low expense ratios We expect these funds to outperform their peers in the future Remember the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers Unlike most of the fund rating systems the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund Invesco European Small Company A invests the lion s share of its assets in equity securities of small cap European companies Small cap companies are those whose market cap is similar to companies included on the Russell 2000 Index ESMAX mostly invests in depositary receipts and equity securities ESMAX has an annual expense ratio of 1 40 which is below the category average of 1 44 The fund has YTD and one year returns of 18 3 and 25 3 respectively JPMorgan NYSE JPM Intrepid European A invests a bulk of its assets in equity securities of European companies with a key focus on those that are based in Western Europe The fund may try to manage its cash flows effectively by utilizing exchange traded futures VEUAX has an annual expense ratio of 1 42 which is below the category average of 1 44 The fund has YTD and one year returns of 16 2 and 20 9 respectively Oppenheimer Global Y invests heavily in common stocks of both domestic and foreign companies OGLYX focuses on investing in foreign securities which include those from developing and emerging markets OGLYX has an annual expense ratio of 0 90 which is below the category average of 1 11 The fund has YTD and one year returns of 17 7 and 27 9 respectively Matthews China Investor invests the major portion of its assets in preferred and common stocks of companies based in China and Hong Kong MCHFX seeks appreciation of capital for the long run MCHFX has an annual expense ratio of 1 18 which is below the category average of 1 33 The fund has YTD and one year returns of 23 5 and 43 9 respectively Vanguard Global Equity Investor uses bottom up stock analysis to invest a large share of its assets in equities of companies all over the globe It invests in both growth and value companies irrespective of their market capitalization VHGEX has an annual expense ratio of 0 51 which is below the category average of 1 11 The fund has YTD and one year returns of 12 4 and 21 9 respectively Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | 4 Trending Stocks To Watch | Medidata Solutions Inc NASDAQ MDSO climbed to a new all time high of 73 15 on Monday closing the session up 2 08 or 3 to 72 76 on 455 600 shares traded The cloud technology stock has been stair stepping up a rising channel over the last few months and has popped 4 57 since Wednesday s close The next target is near the channel top at around 79 80 Short interest of 7 9 times its average volume could fuel the move as shorts cover on a rally
Mimecast Ltd NASDAQ MIME popped another 1 10 or 4 25 to 27 00 on 388 800 shares traded The advance up came as the email security company s CEO and CFO spoke at JPMorgan s NYSE JPM technology conference in Boston Despite no dramatic increase in volume the stock s technicals look positive climbing steadily since early March and holding support on the pullbacks Watch for price to exceed last week s all time high of 27 25 to reach 30 31 in the short term
Square Inc NYSE SQ reached a new all time high on Monday of 21 It closed up 1 04 or 5 2 at 20 95 on 9 8 million shares traded The payment technology stock has been climbing since last week when industry analysts raised targets after the company s first investor day Price has doubled over the last year and there may still be some room left to run to 22 but the stock is near the top of its channel
Varonis Systems NASDAQ VRNS rose 60 cents or 1 67 to 36 55 on 495 700 shares traded Monday Price broke out of its bull wedge consolidation on Friday and followed through Monday to close at its highest level since 2014 The stock has risen nearly 14 since the data management software company announced better than expected Q1 results earlier this month The way price and volume are accelerating the next target is 50 which would be the top of the rising channel going back to late 2015 |
MS | Analyst action healthcare | Auxilio OTCQB AUXO 5 9 initiated with Buy rating and 10 price target by Craig Hallum
Calithera Biosciences CALA 1 3 initiated with Outperform rating and 16 price target by Leerink Swann
CryoPort CYRX initiated with Buy rating and 3 50 price target by Needham
Loxo Oncology LOXO 2 9 initiated with Overweight rating and 59 price target by Morgan Stanley NYSE MS
Acorda Therapeutics ACOR 4 5 downgraded to Neutral with a 24 price target by JPMorgan NYSE JPM Downgraded to Neutral with a 19 price target by Janney Capital
Forward Pharma FWP 2 9 downgraded to Hold with a 24 price target by Jefferies Downgraded to Market Perform by JMP Securities
Mead Johnson MJN downgraded to Market Perform by Wells Fargo NYSE WFC
ReWalk Robotics RWLK downgraded to Underweight with a 1 50 price target by Barclays LON BARC |
MS | Krispy Kreme owner JAB to buy bakery chain Panera Bread | Reuters JAB Holdings the owner of Caribou Coffee and Krispy Kreme Doughnuts said on Wednesday it would buy U S bakery chain Panera Bread Co O PNRA for 7 16 billion excluding debt as it expands its coffee and breakfast empire Panera shares had risen about 4 6 percent from March 31 through Tuesday s close of 274 00 The stock jumped nearly another 14 percent to 311 23 in premarket trading JAB has offered 315 in cash per Panera share representing a 20 3 percent premium to the stock s closing price on March 31 the last trading day before media reports of a potential deal The deal includes the assumption of about 340 million of net debt JAB and Panera said in a joint statement JAB s acquisition of Panera is the biggest ever U S restaurant deal according to S P Global Market Intelligence It will be the North American restaurant industry s second largest acquisition after Burger King s 11 53 billion deal for Canadian coffee and doughnut chain Tim Hortons JAB the investment vehicle of Germany s billionaire Reimann family is run by Chief Executive Olivier Goudet who is also the chairman of Anheuser Busch InBev BR ABI Like the world s largest brewer JAB has built up an empire of coffee and food chains through a series of acquisitions in recent years including Krispy Kreme Doughnuts and K cup coffee pod maker Keurig Green Mountain Inc JAB became the world s largest pure play coffee maker by volume in 2015 when it created Jacobs Douwe Egberts in Europe a joint venture that combined its D E Master Blenders 1753 business with the coffee business of U S based Mondelez International Inc O MDLZ Panera has about 2 000 bakery cafes throughout the United States and its fresh offerings appeal to health conscious consumers The St Louis based company has reported better than expected earnings per share for the last six quarters The deal is expected to close in the third quarter Panera founder and Chief Executive Ron Shaich and entities affiliated to him have agreed to vote shares representing about 15 5 percent of the company s voting power in favor of the deal JAB also has controlling stakes in cosmetics company Coty Inc N COTY and luxury goods maker Jimmy Choo L CHOO among other companies
Panera is being advised by Morgan Stanley Co LLC NYSE MS and Sullivan Cromwell LLP is providing legal counsel |
MS | Asian stocks waver investors on knife edge for Trump Xi meeting | By Wayne Cole SYDNEY Reuters Stocks slipped and bonds rose in Asia on Thursday with risk appetite soured by signs the Federal Reserve might start paring its king sized asset holdings later this year just as the chance of early U S fiscal stimulus faded further Futures markets pointed to opening falls of between 0 5 percent and 0 7 percent for the major European bourses while S P 500 futures ESc1 eased 0 2 percent Investors were also wary ahead of a potentially tense meeting between U S President Donald Trump and his Chinese counterpart Xi Jinping the first between the world s two most powerful leaders Topping the agenda at Trump s Mar a Lago resort in Florida will be whether he makes good on his threat to use U S China trade ties to pressure Beijing to do more to rein in its nuclear armed neighbor North Korea Nerves were not helped when U S Pacific Fleet Commander Admiral Scott Swift said any decision on a pre emptive attack against North Korea would be up to President Donald Trump Lingering fears of a possible trade war kept Asian markets on edge and MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS lost 0 8 percent Japan s Nikkei N225 fell 1 4 percent to its lowest since early December Australia s index AXJO lost 0 5 percent Shares in Shanghai SSEC made marginal gains as a private survey of China s service sector showed activity expanded at its slowest pace in six months in March Sentiment had been bruised overnight when U S House of Representatives Speaker Paul Ryan said there was no consensus on tax reform and it would take longer to accomplish than healthcare Markets have risen in recent months in part on speculation fiscal stimulus would boost U S growth and inflation Minutes of the Fed s last meeting also showed most policymakers thought the U S central bank should begin trimming its 4 5 trillion balance sheet later this year much earlier than many had expected Central bank asset purchases and broader largesse have been a key support factor for markets for nearly a decade said ANZ economist Felicity Emmett who wondered if the global economy could cope with such a sea change Raising the fed funds rate a quarter of a point every now and then is tinkering at the edges compared to the elephant in the room that is the balance sheet WHIPLASH ON WALL STREET The minutes also showed some participants viewed equity prices as quite high relative to standard valuation measures The reaction was whiplash on Wall Street The Dow posted its largest intra day downside reversal in 14 months after shedding a gain of more than 198 points N The Dow DJI ended down 0 2 percent while the S P 500 SPX lost 0 31 percent and the Nasdaq IXIC 0 58 percent We were hit by a bucket of cold water said Norihiro Fujito senior investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities Signs that the Fed could pare its balance sheet are shocking enough but the mood was exacerbated as the Fed touched upon stock valuations which is very rare The news overshadowed data showing U S private employers added a surprisingly strong 263 000 jobs in March spurring speculation the official payrolls report on Friday would also impress Treasuries rallied with yields on 10 year paper back at 2 33 percent US10YT RR and threatening to clear a hugely important chart barrier at 2 30 percent The drop in yields dragged the dollar down on the yen where it was last at 110 43 and nearing chart support in the 110 11 27 zone USD Against a basket of currencies the dollar was off 0 1 percent at 100 450 DXY The euro was trading sideways at 1 0676 In commodity markets oil ticked lower after the U S government reported a surprise increase in U S crude inventories to a record high U S crude was down 29 cents at 50 86 a barrel while Brent lost 27 cents to 54 09 O R
Easily the biggest mover this week has been coking coal which surged 43 percent on Singapore listed futures after Cyclone Debbie slammed into top supplier Australia crippling exports of the steelmaking fuel |
JPM | JPMorgan CEO Dimon issues stark warning about catastrophic events if Italy leaves the euro | JPMorgan NYSE JPM boss Dimon warns of catastrophic events if Italy attempts to leave the eurozone Because of the way it has been designed the European Monetary Union would be hard to reverse without causing catastrophic events Dimon told Italian paper Il Sole 24 Ore Dimon also warned about Brexit saying it could turn out to be tough for the British people JPMorgan boss Jamie Dimon has warned Italy s populist government of the likely catastrophic consequences that would come from attempts to pull the country out of the eurozone Dimon said that because of the structure of the European Monetary Union the formal name for the project to converge monetary policy of the eurozone pulling out would not only be immensely difficult but also immensely dangerous for the stability of the global financial system Because of the way it has been designed the European Monetary Union would be hard to reverse without causing catastrophic events Dimon told the paper This does not mean that Europe should not fix itself there are many regulatory issues that remain to be solved and the fact that Brexit happened should make the dialogue between European countries easier Dimon s comments come as Italy s populist coalition government comprised of the Lega Nord and Five Star Movement repeatedly publicly mentioning pulling out of the euro in the lead up to the creation of that government Official policy is that the government backs remaining in the European Union but Matteo Salvini the Lega Nord s leader is an avowed eurosceptic and is believed to privately back an exit In May a leaked report showed that both the parties discussed a commitment to leave the euro prior to entering into government before abandoning that pledge Whether or not the parties push for an exit from the euro the fact that such a proposal almost formed a part of their plan for government marked a huge moment for the eurozone Italy is one of the three most crucial members of the eurozone project alongside France and Germany Italy is the third biggest economy in the group and the largest in southern Europe If Italy were to make attempts to withdraw from the EMU it would undoubtedly be a huge market event Elsewhere in his interview with Il Sole 24 Ore Dimon also warned that Brexit could turn out to be tough for the British people I think Brexit could turn out to be tough for the British people because of its impact on British growth if there is going to be less growth in the UK this will have an impact on global growth and so Brexit could hurt everybody a bit |
JPM | U S inflation steadily firming labor market strong | By Lucia Mutikani WASHINGTON Reuters U S consumer prices recorded their largest increase in nearly 6 1 2 years in the year through June while the monthly pace continued to suggest a steady buildup of inflation that could keep the Federal Reserve on a path of gradual interest rate increases Other data on Thursday showed first time applications for unemployment benefits dropped to a two month low last week as the labor market strengthened further The tight jobs market is supporting inflation and import tariffs which are set to be broadened to include consumer goods could fan price pressures U S inflation continues to drift gradually higher in response to a nearly fully employed economy with some nudging from tariffs said Sal Guatieri a senior economist at BMO Capital Markets in Toronto The Labor Department said its Consumer Price Index edged up 0 1 percent last month on moderate gains in gasoline prices and sharp declines in the cost of apparel and hotel accommodation The CPI rose 0 2 percent in May In the 12 months through June the CPI increased 2 9 percent the biggest rise since February 2012 after advancing 2 8 percent in May With gasoline prices rising modestly and the cost of household utilities dropping in recent months the increase in the annual inflation rate is expected to slow Excluding the volatile food and energy components the CPI rose 0 2 percent matching May s gain That lifted the annual increase in the so called core CPI to 2 3 percent the largest rise since January 2017 from 2 2 percent in May Economists polled by Reuters had forecast both the CPI and core CPI rising 0 2 percent in June The Fed tracks a different inflation measure which hit the U S central bank s 2 percent target in May for the first time in six years Economists expect the personal consumption expenditures PCE price index excluding food and energy to slightly overshoot its target Fed officials have indicated they would not be too concerned with inflation overshooting its target The Fed raised interest rates in June for a second time this year and has forecast two more rate hikes before the end of 2018 While we continue to expect the next hike in September even the hawks may sound more comfortable with the current gradual tightening pace said Michael Feroli an economist at JPMorgan NYSE JPM in New York The dollar was little changed against a basket of currencies while stocks on Wall Street were trading higher Prices for U S Treasuries were mostly flat LOW LAY OFFS In another report on Thursday the Labor Department said initial claims for state unemployment benefits dropped 18 000 to a seasonally adjusted 214 000 for the week ended July 7 the lowest level since early May That suggests robust labor market conditions prevailed in early July after the economy added 213 000 jobs in June Steadily rising inflation however is eating into workers modest wage gains Inflation adjusted average weekly earnings rose 0 1 percent in June following a similar gain in May While economists do not expect inflation to accelerate much from current levels they cautioned that the Trump administration s protectionist trade measures could boost prices Tariffs on lumber aluminum and steel imports have left manufacturers facing rising input costs So far they have not passed on those higher costs to consumers President Donald Trump imposed the tariffs to protect domestic industries from what he says is unfair competition from foreign manufacturers Last week Trump slapped 25 percent tariffs on 34 billion of Chinese imports On Tuesday Trump threatened 10 percent tariffs on an additional 200 billion of Chinese goods We do not anticipate much movement in the year ago rate of core CPI over the next few months said Sarah House a senior economist at Wells Fargo NYSE WFC Securities in Charlotte North Carolina Broadening tariffs including the possibility of consumer goods getting hit directly create some upside risk to our inflation forecast in the second half of the year however In June gasoline prices rose 0 5 percent after increasing 1 7 percent in May Food prices gained 0 2 percent with food consumed at home rebounding 0 2 percent after falling 0 2 percent in May Food prices were unchanged in May Owners equivalent rent of primary residence which is what a homeowner would pay to rent or receive from renting a home rose 0 3 percent last month after increasing by the same margin in May But the cost of hotel accommodations fell a record 4 1 percent Healthcare costs advanced 0 4 percent with the price of hospital services surging 0 8 percent Healthcare prices gained 0 2 percent in May and consumers also paid more for prescription medication last month Prices for new motor vehicles rose for a second straight month There were also increases in the cost of communication motor vehicle insurance education and alcoholic beverages
But apparel prices fell 0 9 percent after being unchanged in May The cost of airline tickets declined for a third straight month while prices of household furnishings and tobacco also dropped last month |
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 Bank Earnings Will Dominate Early Headlines
It s almost the middle of the month but Friday will be when earnings season really gets underway with major banks reporting before the bell
Citigroup NYSE C JPMorgan Chase NYSE JPM and Wells Fargo NYSE WFC are all scheduled to issue numbers
Analysts expect Citi to earn 1 57 a share on revenue of about 18 5 billion JP Morgan is forecast to post 2 22 a share in earnings on revenue of about 27 5 billion And Wells Fargo is expected to report a profit of 1 12 a share on revenue of about 21 7 billion
Along with the headline numbers investors will be looking closely at net interest margin the measure of interest paid to lenders vs the interest earned on interest bearing assets which is a key measure of the health of the big banks
Analysts are already expecting that net interest margin will have been impacted by a flattening yield curve which happens when the difference between short and long term interest rates narrows
See the difference in the slope of the yield curve charted
In the case of the second quarter the flattening has occurred as short term yields on Treasuries have climbed A strong labor market and inflation data have increased speculation for a more hawkish Fed On Thursday the consumer price index for June came in at a six year high
Overall the financial sector earnings are expected to rise 18 5 for the three months ended June according to Zacks That s below the 19 1 rise in earnings forecast for all stocks in the S P 500
2 Consumer Inflation Expectations Could Be Significant
The star of Friday s economic indicators will be the University of Michigan s initial measure of July consumer sentiment at 10 00 AM ET 14 00 GMT Economists expect that the index ticked down to 98 1 from 98 2 in June
But the headline number is unlikely to be much of a market mover given the acknowledgment of the market that consumers confidence is very strong The Michigan index hasn t dropped below 90 this year
But Fed watchers may be paying attention to the inflation expectations component of the survey which arrived at 3 in June
The Fed takes inflation expectations as well as inflation data into account when setting rate policy Given consumer inflation hitting a six year high in June a spike in inflations expectations could raise some worries of more hawkish moves by the FOMC
3 Will Oil Drop Below 70
While financial stocks will likely call the market tune investors will also be keeping an eye on energy shares
After hitting levels not seen since late 2014 oil prices have retreated in the last few sessions On Thursday crude oil prices fell 5 cents to settle at 70 33 a barrel
If oil prices push and stay below the 70 level that could put pressure on energy stocks
Oil prices are moving lower as supply outages in Canada and Libya are being resolved and Saudi Arabia is pushing to produce more barrels per day to make up for any shortfall from sanctions on Iranian oil
But the International Energy Agency on Thursday said in its monthly report that rising production from Middle East Gulf countries and Russia welcome though it is comes at the expense of the world s spare capacity cushion which might be stretched to the limit
On Friday Baker Hughes will report its U S rig count at 1 00 PM ET 17 00 GMT Last week it reported a rise to 863 rigs the first gain in three weeks |
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 July 13
1 JP Morgan kicks off Q2 earnings season
Wall Street s second quarter earnings season unofficially kicks off on Friday with JP Morgan Chase NYSE JPM releasing its results at approximately 7 00 AM ET 11 00 GMT
Citigroup NYSE C and Wells Fargo NYSE WFC will follow up with their own earnings at approximately 8 00 AM 12 00 GMT
Q2 earnings growth is tipped to be 20 7 according to Thomson Reuters data moderating slightly from a gain of 26 6 the first quarter which was the highest in seven years when results were boosted by tax cut tailwinds
However the season is being clouded by trade tensions and their impact on corporate profits with analysts likely to scrutinize outlook statements to see whether to adjust numbers for the rest of 2018
2 U S stocks little changed ahead of bank earnings
U S futures pointed to a higher open on Friday as concerns over trade tensions faded to the background and investors looked forward to the start of the second quarter earnings season
At 5 55 AM ET 9 55 GMT the blue chip Dow futures slipped 11 points or 0 04 S P 500 futures dropped 2 points or 0 08 while the Nasdaq 100 futures traded down 3 points or 0 03
China s vice foreign minister Zhang Jun said on Friday that the U S s accusations against China on trade were groundless and that Washington s actions are not supported by the international community
His comments came after U S Treasury Secretary Steven Mnuchin said on Thursday that he and the administration are available for discussion but China must first agree to deeper economic reforms
To the extent that China wants to make structural changes I and the administration are available Mnuchin said on Thursday We are not advocating tariffs We are advocating fair trade
China s Vice Minister of Commerce Wang Shouwen also said on Thursday when we have a trade problem we should talk about it
Elsewhere European shares moved higher nearing midday trade on Friday and looked set for a second week of gains as fears of a full blown trade war were kept in check and optimism about the next corporate earnings season grew
Earlier Asian stock markets closed mostly higher on Friday although China s Shanghai Composite remained under pressure as the Chinese trade surplus with the U S hit a record in June underlining concerns about how U S President Donald Trump will react to the data
3 Cable falls as Trump Bashes May s Brexit plan
The pound fell against the dollar on Friday after Trump suggested that UK Prime Minister Theresa May s plan to exit the European Union would likely make any type of U S British trade deal unfeasible
If they do a deal like that we would be dealing with the European Union instead of dealing with the UK so it will probably kill the deal Trump said on Friday in an interview with Sun
GBP USD fell 0 54 to 1 3133 by 5 57 AM ET 9 57 GMT
Meanwhile the dollar continued its bullish run for a fifth consecutive session as investors looked ahead to University of Michigan s preliminary measure of July consumer sentiment at 10 00 AM ET 14 00 GMT
At 5 57AM ET 9 57GMT the U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies gained 0 29 at 94 84
4 China trade surplus with U S Hits Record
China s monthly trade surplus with the U S rose to a record in June and exports to the nation also soared underlining the cause of an escalating trade war between the world s two largest economies
Chinese imports to U S ports rose more than expected in June with analysts commenting that buying may have been boosted given the threat of impending tariffs
The trade surplus with the U S was 28 97 billion a record in data back to 1999 Exports climbed to 42 62 billion also a historic high
5 Oil prices head for weekly loss ahead of U S production data
Oil prices headed lower in early morning trade on Friday as investors looked ahead to Baker Hughes weekly data on U S production The number of active U S rigs drilling for oil rose by five to 863 last week
Although that was the first increase in three weeks the U S rig count an early indicator of future output is much higher than a year ago when 763 rigs were active as energy companies have been ramping up production in tandem with OPEC s past efforts to cut global output over the past year and a half
U S crude oil futures lost 0 44 to 70 02 at 5 58AM ET 9 58GMT while Brent oil fell 1 17 to 73 58
Both barrels were on track for weekly losses of more than 4 as investors focused this week on the return of Libyan oil to the market amid concerns about a China U S trade war |
JPM | Stocks U S Futures Cautious with Focus on Bank Earnings Consumer Sentiment | Investing com U S futures pointed to a flat open on Friday as investors digested better than expected earnings from JP Morgan and waited for further reports from Wells Fargo and Citigroup while also looking ahead to a reading on U S consumer sentiment
The blue chip Dow futures inched up 13 points or 0 05 by 7 09 AM ET 11 09 GMT the S P 500 futures edged forward 1 point or 0 04 while the tech heavy Nasdaq 100 futures traded up 9 points or 0 12
JP Morgan NYSE JPM reported a 6 increase in revenue to 28 39 billion beating expectations for 27 55 billion The bank also registered earnings per share of 2 29 above consensus for 2 22 Shares were up 0 64 at 107 54 in pre market trade at 7 10 AM ET 11 10 GMT Friday
After JP Morgan s positive earnings Citigroup NYSE C and Wells Fargo NYSE WFC will follow up with their own reports at approximately 8 00 AM 12 00 GMT
Q2 earnings growth is tipped to be 20 7 according to Thomson Reuters data moderating slightly from a gain of 26 6 the first quarter which was the highest in seven years when results were boosted by tax cut tailwinds
However the season is being clouded by trade tensions and their impact on corporate profits with analysts likely to scrutinize outlook statements to see whether to adjust numbers for the rest of 2018
Trade tensions remained in focus although U S Treasury Secretary Steven Mnuchin said on Thursday that he and the administration are available for discussion but China must first agree to deeper economic reforms
China s vice foreign minister Zhang Jun said on Friday that the U S s accusations against China on trade were groundless and that Washington s actions are not supported by the international community
Also in trade news U S President Donald Trump suggested that UK Prime Minister Theresa May s plan to exit the European Union would likely make any type of U S British trade deal unfeasible
If they do a deal like that we would be dealing with the European Union instead of dealing with the UK so it will probably kill the deal Trump said on Friday in an interview with Sun
On the economic front traders will focus on University of Michigan s preliminary measure of July consumer sentiment at 10 00 AM ET 14 00 GMT
Import and export prices for June are also scheduled for released at 8 30 AM ET 14 30 GMT
Later in the session market participants will look for clues on the future path of interest rates as Atlanta Fed president Raphael Bostic participates in a town hall chat in which he will take questions from the audience
Meanwhile oil prices headed lower on Friday extending the weekly decline to more than 4 as investors focused this week on the return of Libyan oil to the market amid concerns about a China U S trade war
Investors looked ahead to Baker Hughes weekly data on U S production due out later on Friday The number of active U S rigs drilling for oil rose by five to 863 last week
Although that was the first increase in three weeks the U S rig count an early indicator of future output is much higher than a year ago when 763 rigs were active as energy companies have been ramping up production in tandem with OPEC s past efforts to cut global output over the past year and a half
Elsewhere European shares moved higher nearing midday trade on Friday and looked set for a second week of gains as fears of a full blown trade war were kept in check and optimism about the next corporate earnings season grew
Earlier Asian stock markets closed mostly higher on Friday although China s Shanghai Composite remained under pressure as the Chinese trade surplus with the U S hit a record in June underlining concerns about how U S President Donald Trump will react to the data |
MS | Equity Markets Commodities Hit on EBA Report | The European Banking Authority EBA overnight released a report that showed that European banks would need to raise almost EUR 115 billion in new capital as part of the European rescue plan that involves write downs on Greek debt amongst other measures Out of that total the EBA estimated that Banco Santander alone would require EUR 15 3 billion while Unicredit SpA would require EUR 8 billion Only two months ago the EBA had estimated that banks would require EUR 106 billion The EBA which runs stress tests on banks annually failed 8 banks in July and will now postpone next year s test to allow banks to finalise capital raisings The EUR lost ground overnightAs expected ECB President Mario Draghi cut interest rates and offered banks unlimited cash for 3 years while stopping short of announcing more bond purchases The omission surrounding further asset purchases weighed heavily on the markets and in combination with the EBA announcements of increasing capital shortfalls in the European banking system has seen risk aversion rise overnight In the prelude to the EU Summit EC President Barroso called on leaders to set aside differences and work towards more fiscal discipline Equity markets were dragged lower once again by news developments out of Europe Not surprisingly banks were hardest hit overnight with Morgan Stanley and Citigroup falling almost 7 However there was some good news with fewer than expected unemployment claims filed in the US last week The optimists believe that the figures show that the US job market is in recovery mode The S P 500 has closed 2 11 lower at 1 234 continues to find resistance at the 200 day moving average Shares in McDonald s bucked the trend with with sales growth driven by strong demand in China and Japan Earlier in Europe the DAX sank 2 to 5 874 while the FTSE fell 1 14 to 5 484 Commodity prices fell as the ECB dampened speculation that they would increase asset purchases WTI Crude fell the most in 3 weeks losing 2 15 to 98 34 Precious metals fell with gold losing 1 9 to 1 711 while silver gave away 3 to trade at 31 65 Soft commodities were broadly lower while copper lost 1 7 The CRB has lost 2 12 points to close at 307 95 Today we have the release of Japanese GDP figures and CPI PPI Industrial Production and Retail Sales out of China GOLD fell sharply in offshore trade as ECB President Draghi ruined what was ultimately looking like a good session as the ECB cut rates by 0 25 and US unemployment claims fell which saw markets rally The announcement by the ECB that it is not planning to buy more bonds to spur growth in the region lead to heavy selling in all risk assets and this included gold as the USD gained for the first time in nearly a week and equities crumbled Gold finished US trade weaker by 1 80 at 1 713 Last night was not a good night for global financial markets as European leaders and central bankers continue to say things that we just do not want to hear right now and no matter what they should be spinning positive rhetoric so that investor sentiment improves not deteriorates Gold is not just a safe haven asset so when we see nights of risk reversal gold will be hit as there is a race to liquidity We remain bulls in the bigger picture but it is only prudent to be cautious at these levels We do remain a keen buyer of dips though and major shortterm support at 1 700 02 is on focus and if this level holds in early trade today we would consider buying with stops at 1 695 Below the level 1 665 75 comes into focus as the last level of support Offers are strong towards 1 711 with a break opening a move to 1 rallied as risk sentiment improved during the European session as the ECB cut rates by 0 25bps and lifted the inflation outlook for the 2012 year AUD spiked on the positive news to 1 0380 as weaker stops caused a short squeeze across the markets However the tone was to change quickly as ECB president Draghi spoke about the markets desire to see ECB bypassing the IMF and being the lender of last resort However when he signalled that the ECB wouldn t take that role and that they would not lend to the IMF the risk sentiment changed quickly with the new bulls getting crushed as the AUD collapsed to be closing the day over 200 points lower than the day s highs With it being a data free Friday and the markets having a risk off tone thanks to the overnight events the AUD could finally make its way back towards parity by the end of the day There will be medium level support between 1 0075 and 1 0125 but a move to 1 0055 is the next big target |
C | Citi settles SEC charges over bad controls supervision | WASHINGTON Reuters Citigroup NYSE C agreed to pay 10 5 million to settle two separate complaints one relating to bad loans made by its Mexican subsidiary Banamex between 2008 and 2014 U S regulators said on Thursday The other concerned a trader mismarking illiquid positions and unauthorized proprietary trading by Citigroup Global Markets Inc CGMI from 2013 to 2016 the Securities and Exchange Commission said Fraudulently induced loans made by Banamex to Oceanografia that led to 475 million in losses were the result of inadequate controls that prevented them from registering numerous red flags in the borrower s documents the SEC said in a statement The regulator also said inadequate supervision allowed CGMI traders to mismark illiquid positions and cover up 81 million in losses We are pleased to have these matters resolved Danielle Romero Apsilos a spokeswoman for Citi Global said in an email
Citigroup and CGMI settled the allegations without admitting or denying the SEC s findings |
C | Argentina Pulls Cash From Financial System After Bond Sale Flop | Bloomberg Argentina forced the nation s biggest lenders to start turning over more cash to the central bank in its latest bid to shore up the peso
The move comes a day after the government failed to lure as many investors as it sought into the longer term securities it was offering in place of short term central bank notes it wants to scrap That left billions of additional pesos in investors hands money that analysts expect will be used to buy dollars By pushing up the minimum reserve requirement on big banks by 3 percentage points the central bank is offsetting some of that surge in cash in the financial system
This measure will help absorb 60 billion pesos the central bank said A stronger control of liquidity in the market is fundamental to reinforce this institution s anti inflationary commitment
The peso didn t show much of an immediate reaction to the latest measure edging up 0 7 percent Thursday to 29 8 per dollar
The currency has plummeted 37 percent year one of the worst performances in emerging markets as investors grew nervous about a widening current account deficit accelerating inflation and what many viewed as an inadequate response by policy makers especially at the central bank
Authorities concerned the weakening peso would fuel inflation already running at 30 percent this week jacked up interest rates that were already the highest in the world revamped a method for selling dollars in the local market and came up with the plan to get rid of the short term central bank notes that fueled volatility
The new reserve requirements will apply to almost 20 of the country s biggest banks or their local units including Industrial Commercial Bank of China Citigroup Inc NYSE C Banco Bilbao Vizcaya Argentaria SA Banco Santander MC SAN SA and HSBC Holdings Plc LON HSBA
The central bank is encouraging investors to move their pesos to one year notes known as Nobacs as it moves to phase out its short term securities Lebacs A surge in Lebac issuance in the past few years have created a monthly headache for policy makers when they have to roll over sometimes as much as 500 billion pesos of the securities Argentina has promised to phase them out as part of a 50 billion credit line with the International Monetary Fund
Updates peso trading in fourth paragraph |
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