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C | EOS Launcher Block One Expands Team with Citigroup s James Mendes | continues to expand its team most recently James Mendes so far HR managing director at Citigroup NYSE C He will hold the title of chief people officer and will join the company s Hong Kong based executive committee
Attracting developing and retaining the best people is critical to our continued success James has a proven history of leading human capital businesses and extensive experience supporting financial services and technology companies to implement human resources solutions across the globe We look forward to him joining the team Block One president Rob Jesudason said in a press release
The new hire comes just days after Block One brought in Michael Alexander of Jefferies Group to oversee financial and investment matters
Block One the company which publishes the protocol and sells the EOS token initially announced it would not be involved with the behavior of the EOS ecosystem It later stated its intention to participate in voting and announced readiness to technically support developers of distributed apps
However the news coming from Block One has failed to prop up the flagging price of EOS which survived several shakedowns but continued to deflate
has slid to 6 74 losing more than 22 of its value in the past week Trading volumes have also fallen signaling that enthusiasm has abated More than 52 of EOS trading happens against Tether USDT but now the inflow of USDT is triggering sales instead of boosting the price Moving funds from EOS to a fixed price asset may indicate expectations that the value is set to continue falling
EOS
The EOS network is running relatively smoothly but this is not enough to stop the selling of coins and lower prices are not out of the question
Not even the Evripedia airdrop and the genesis block of the IQ network were enough to spark new enthusiasm for EOS
RAM prices for using the EOS network have subsided to 0 37 EOS per kilobyte More than 80 of RAM has been used or hoarded for speculation RAM trading is happening through the EOS blockchain and is open without limits on participation However the market is extremely risky and has led to sharp losses
Neither the author nor the publication assumes any responsibility or liability for any investments profits or losses you may incur as a result of this information Cryptocurrency trading and investing is risky and market participants are advised to always conduct thorough research |
C | Know These 3 Facts To Avoid Paying Half Your Retirement Income To The IRS February 06 2020 | Failing to withdraw a required minimum distribution RMD from your own or an inherited IRA by the deadline results in a big tax code penalty 50 That s right If you were supposed to take out a minimum of 4 000 and oops did not do so you have the privilege of writing the IRS a check for 2 000 It s important to remember that the rules related to RMDs changed on January 1 2020
In case you re like most investors you re probably trying to build a financial portfolio that is solid enough to guarantee a comfortable retirement Among retirement financial planners this is known as the accumulation phase In this stage your objective is to carefully invest by selecting stocks with long term potential for your retirement nest egg For example you might choose Citigroup C which is a current top ranked dividend stock
There is also a second phase of retirement planning that gets less focus despite the fact that it s the more interesting part It s the distribution phase which essentially means spending the wealth you ve worked hard to amass
Making plans for the distribution stage involves deciding where you ll live in retirement whether you ll travel your proposed leisure activities and more decisions that will affect your spending during your golden years
In addition to these considerations it is essential to take into account the RMD that applies to most retirement accounts Basically this is an IRS requirement that you withdraw a certain amount from your qualified retirement accounts once you reach age 72
Why does the IRS require you to start taking your money out It s simple they want to make sure they get their tax If this rule didn t exist people could live off other income and never pay tax on their retirement investment gains Then that money could be left to family or friends as an inheritance without the IRS collecting any taxes from you
The Most Important Things to Know About RMDs
What types of retirement accounts have RMDs Qualified retirement accounts such as IRA accounts 401 k s 457 plans and other tax deferred retirement savings plans like a TSP 403 b TSA SEP or SIMPLE IRA plan require withdrawals in retirement
When does it become necessary to begin taking distributions Your first distribution must be taken by April 1 of the year following the calendar year that you turn 72 for most accounts Also if you retire after that age you must take your first RMD from your 401 k profit sharing 403 b or other defined contribution plan by April 1 of the year after the calendar year in which you retire
Every year after your start date you are required to take your RMD by December 31 Remember for Roth IRAs you do not have to take an RMD because you paid taxes before contributing However other types of Roth accounts do require RMDs but you may be able to avoid them for instance by rolling your Roth 401 k into your Roth IRA
What will happen if I neglect to take my RMD If you don t take an RMD or don t take a large enough distribution you are liable for a 50 tax on the amount that was not withdrawn in time
How much money do I have to withdraw To calculate a specific RMD you must divide your prior year s December 31st retirement account balance by a distribution period factor based on your age
Here s an example to give you an idea of the amount Ann is 71 and will take her first RMD in the year following the year she turns 72 Her IRA balance at the end of the prior year was 100 000 Her distribution period factor is 27 4 Dividing 100 000 by 27 4 equals 3 649 63 This is how much Ann is required to withdraw for her first RMD
Learning about the distribution phase is just one aspect of preparing for your nest egg years
To learn more about the tax implications of retirement spending and much more about retirement planning download our free guide Retirement Made Easy You ll find useful detailed steps to help you navigate both the accumulation and distribution phases of retirement planning Get Your FREE Guide Now |
C | Legg Mason LM To Increase Stake In Precidian Investments | Legg Mason NYSE LM is in the process of increasing its existing 20 stake in Precidian Investments to 75 over an approximate period of nine months Per Legg Mason spokesperson the transaction will cost around 25 million Precidian is one of the firms which has developed a SEC approved structure for non transparent actively managed ETFs Per Legg Mason CEO Joe Sullivan 14 firms have licensed the ActiveShares structure which represents one quarter of the assets in U S equity mutual funds at present We notified Precidian last week of our intent to exercise our option to acquire a majority stake in the company Precidian and we will be working very closely with them to continue the buildout of this important capability for our industry Sullivan said Notably using the ActiveShares structure an ETF has been filed by Clearbridge affiliate of Legg Mason which would be the first non transparent fund Therefore the Clearbridge Focus Value ETF CFCV will make investments in large cap U S stocks in order to earn long term capital appreciation Legg Mason s diverse product offerings and investment strategies will continue to attract investors which along with improving assets under management AUM balance are expected to support revenue growth Amid the ongoing trend in the finance industry under which investors are increasingly inclined toward passively managed products like index funds and ETFs compared with traditional mutual funds foraying into such a market will be the driving factor for Legg Mason Shares of the company have gained 5 9 in the past six months compared with 17 4 growth recorded by the Currently Legg Mason carries a Zacks Rank 2 Buy
Other Stocks to ConsiderMidWestOne Financial Group Inc NASDAQ MOFG has been witnessing upward estimate revisions for the last 30 days Additionally the stock jumped nearly 15 2 in the last six months It currently sports a Zacks Rank of 1 Strong Buy You can see Citigroup NYSE C has been witnessing upward estimate revisions for the past 30 days Additionally the stock has jumped more than 20 in the past six months It currently carries a Zacks Rank 2 Farmers National Banc Corp NASDAQ FMNB has been witnessing upward estimate revisions over the past month Over the past six months the company s share price has been up more than 16 It currently sports a Zacks Rank of 1 More Stock News This Is Bigger than the iPhone It could become the mother of all technological revolutions Apple NASDAQ AAPL sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years creating a 1 7 trillion market Zacks has just released a Special Report that spotlights this fast emerging phenomenon and 6 tickers for taking advantage of it If you don t buy now you may kick yourself in 2020 |
C | HSBC Set To Unveil New Strategy Update To Boost Profits | With an aim to boost profits amid a tough operating backdrop HSBC Holdings LON HSBA plc s NYSE C interim chief executive officer Noel Quinn is expected to unveil a new strategy update on Feb 18 when the bank announces its 2019 results The strategy overhaul will likely include a new round of job cuts and reduce the banks presence in some smaller markets The job cuts will be targeted toward senior international managers Per sources the cuts will be implemented within global managerial roles across all business units with most of the cuts targeting the London operations although jobs in Asia will not be spared Concurrent with HSBC s second quarter 2019 earnings release it was announced that John Flint stepped down as the CEO after serving for nearly one and a half years Since then Quinn the chief executive of global commercial banking has assumed the responsibility as the interim CEO In October 2019 just a few months after being appointed as the interim CEO Quinn initiated a round of cost cutting The move was expected to result in a reduction of nearly 10 000 jobs particularly in Europe and the higher paid roles globally This move was part of the bank s broader objective of reducing almost 4 000 jobs globally in 2019 accounting for nearly 2 of its total workforce Over the past years HSBC has focused on profitable markets and on enhancing operating efficiency by divesting non core businesses While these efforts helped the company lower costs in 2017 and 2018 the trend reversed in the first nine months of 2019 Despite undertaking several restructuring efforts the company s financials have not improved significantly Hence Quinn is now making a conscious effort to improve HSBC s financial condition Notably Quinn s strategy update comes amid global economic growth concerns and a low interest rate environment across the world In fact HSBC s largest market Hong Kong has been facing unrest since the past few months along with fears over the fast spreading coronavirus Moreover the ambiguity related to Brexit has been weighing on HSBC s top line growth to some extent since the past several months Since 2015 HSBC has made significant investment in Asia mainly in China and has benefited from it Though the company s revenues increased in the first nine months of 2019 growth has remained subdued in its mature markets like Europe the U K and the United States Quinn in his strategy update is expected to announce plans of boosting profits outside Asia Management will likely conduct a review of some of HSBC s markets that produce low returns Notably per people with knowledge of the matter HSBC under Quinn also plans to sell or shrink its business in some markets where it has small scale operations that struggle to compete with local players like Armenia Greece and Oman While no final decision has been made yet HSBC is also seeking to sell its banking business in Turkey because of concerns about the country s volatile currency and economic outlook Our ViewpointWhile the company s initiatives to improve market share in the U K and China are likely to support financials in the long term these are expected to result in an increase in expenses Its initiatives to strengthen digital capabilities globally and improve operating efficiency through further restructuring efforts will support profits in the long term However given the disappointing revenue growth assumptions the company no longer expects to achieve its targeted return on tangible equity ratio in 2020 Shares of HSBC have lost 11 1 in the past year compared with a 4 9 decline of the it belongs to Currently the company carries a Zacks Rank 5 Strong Sell You can see Notably several other companies have also been reducing workforce amid increasing geopolitical tensions in the past few months Some of them are Deutsche Bank NYSE DB Nomura Holdings Inc NYSE NMR and Citigroup NYSE C Just Released Zacks 7 Best Stocks for TodayExperts extracted 7 stocks from the list of 220 Zacks Rank 1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of 24 7 per year These 7 were selected because of their superior potential for immediate breakout |
C | Wells Fargo Streamlines Units Restructures Accountability | With a new move Wells Fargo NYSE C recently came up with the planned appointment of a number of business leaders with revised business organizational structure The latest structure will provide leaders with apparent authority accountability and responsibility with five line of business CEOs Notably each CEO will be accountable to Wells Fargo CEO Charlie Scharf and represented on the company s Operating Committee The consumer bank will be divided into a consumer lending division and a retail banking division while the wholesale bank will be split into a commercial banking unit and a corporate and investment banking unit However the wealth management unit remains intact Reorganization in DetailThe changes will be as follows Mary Mack leader of Consumer Banking has been appointed as the CEO of Consumer and Small Business Banking looking over the Branch Banking and Small Business This line of business includes the company s 5 400 branches offering deposit lending investment and payment products Moreover deposits and a newly formed Digital team to interact with clients digitally will be looked after by Mack Perry Pelos who was leading Wholesale Banking has been transitioned as the CEO of Commercial Banking He will cater both relationship and product responsibilities as well as serve businesses with annual sales of more than 5 million This apart the responsibility of Commercial Capital Treasury Management Business Banking Middle Market Banking and Government and Institutional Banking will be held by Pelos Further Jon Weiss now appointed for a new role as the CEO of Corporate Investment Banking CIB was previously leading Wealth Investment Management Notably CIB was previously part of Wholesale Banking The newly formed business line for CIB will focus on supporting the capital market banking and investment needs of Wells Fargo s corporate government and institutional clients In addition Commercial Real Estate will come under CIB and Weiss will also be catering services to international client businesses and their operations Wealth Investment Management serving with personalized wealth management investment asset management and retirement products and services to clients across its businesses including Wells Fargo Advisors The Private Bank Abbot Downing and Wells Fargo Asset Management will be led temporarily by Weiss until the appointment of a new CEO Mike Weinbach will be joining Wells Fargo in early May and act as CEO of Consumer Lending which serve clients in fulfillment of their financial needs Home Lending Auto Credit Cards Merchant Services and Personal Loans will be accounted by Weinbach Notably Mack will be leading Consumer Lending on an interim basis till Weinbach joins Also Wells Fargo is on the verge of making certain fundamental changes in the company s operations in order to strengthen its services for clients and customers driving operational excellence and executing on its regulatory priorities Additionally for digital customers needs a new Strategy Digital Platform Innovation group has been created Need of Revamping of Segments The Wells Fargo franchise has extraordinary opportunity and power and these organizational changes enable us to more effectively pursue our goals and take advantage of the opportunities in front of us Scharf noted These changes create the right structure to build our businesses over the long term and increase our ability to successfully execute on our top priority which is the risk regulatory and control work I am confident that this organizational model and our strengthened risk and control foundation will bring greater focus and accountability to the company Scharf further stated ConclusionCEO Charlie Scharf is expediting efforts to revamp the bank We believe execution of the restructuring moves will support the company s prospects At present Wells Fargo carries a Zacks Rank 3 Hold Shares of the company have gained around 4 4 in the last six months compared with 18 8 growth registered by the
Stocks to ConsiderState Street Corp NYSE STT has been witnessing upward estimate revisions for the past 30 days Moreover this Zacks 1 Ranked Strong Buy stock has rallied more than 50 in the past six months You can see Citigroup NYSE C has been witnessing upward estimate revisions for the past 30 days Also the company s shares have gained 22 in six months time At present it carries a Zacks Rank of 2 Buy Bank of America Corp NYSE BAC has been witnessing upward estimate revisions for the past 30 days Additionally the stock has jumped 25 4 over the past six months It currently holds a Zacks Rank 2 Today s Best Stocks from Zacks Would you like to see the updated picks from our best market beating strategies From 2017 through 2019 while the S P 500 gained and impressive 53 6 five of our strategies returned 65 8 97 1 118 0 175 7 and even 186 7 This outperformance has not just been a recent phenomenon From 2000 2019 while the S P averaged 6 0 per year our top strategies averaged up to 54 7 per year |
C | 6 Low Price to Book Stocks With Great Growth Prospects | It s not an easy job to find value stocks Being aware of a company s key financial numbers like earnings per share and sales growth can help investors identify stocks that are trading for less than what they re worth However a proper analysis of the fundamentals with the help of a number of metrics is necessary to determine whether a stock is a good bargain or not For narrowing down the list of undervalued stocks price to earnings P E and price to sales P S are the first ratios that come to an investor s mind However the price to book ratio P B ratio though underrated is also an easy to use valuation tool for identifying low priced stocks with high growth prospects The P B ratio is calculated as below P B ratio market capitalization book value of equityWhat is Book Value Book value is the total value that would be left over according to the company s balance sheet if it goes bankrupt immediately In other words this is what shareholders would theoretically receive if a company liquidates all its assets after paying off all its liabilities It is calculated by subtracting total liabilities from the total assets of a company In most cases this equates to common stockholders equity on the balance sheet However depending on the company s balance sheet intangible assets should also be subtracted from the total assets to determine book value Understanding P B RatioBy comparing the book value of equity to its market price we get an idea of whether a company is under or overpriced However like P E or P S ratio it is always better to compare P B ratios within industries A P B ratio less than one means that the stock is trading at less than its book value or the stock is undervalued and therefore a good buy Conversely a stock with a ratio greater than one can be interpreted as being overvalued or relatively expensive For example a stock with a P B ratio of 2 means that we pay 2 for every 1 of book value Thus the higher the P B the more expensive the stock But there is a caveat A P B ratio less than one can also mean that the company is earning weak or even negative returns on its assets or that the assets are overstated in which case the stock should be shunned because it may be destroying shareholder value Conversely the stock s price may be significantly high thereby pushing the P B ratio to more than one in the likely case that it has become a takeover target a good enough reason to own the stock Moreover the P B ratio isn t without limitations It is useful for businesses like finance investments insurance and banking or manufacturing companies with many liquid tangible assets on the books However it can be misleading for firms with significant R D expenditure high debt service companies or those with negative earnings In any case the ratio is not particularly relevant as a standalone number One should analyze other ratios like P E P S and debt to equity before arriving at a reasonable investment decision Screening ParametersPrice to Book common Equity less than X Industry Median A lower P B compared with the industry average implies that there is enough room for the stock to gain Price to Sales less than X Industry Median The P S ratio determines how much the market values every dollar of the company s sales revenues a lower ratio than the industry makes the stock attractive Price to Earnings using F 1 estimate less than X Industry Median The P E ratio F1 values a company based on its current share price relative to its estimated earnings per share a lower ratio than the industry is considered better PEG less than 1 PEG ratio links the P E ratio to the future growth rate of the company PEG ratio portrays a more complete picture than the P E ratio A value of less than 1 indicates that the stock is undervalued and investors need to pay less for a stock that has bright earnings growth prospects Current Price greater than or equal to 5 They must all be trading at a minimum of 5 or higher Average 20 Day Volume greater than or equal to 100 000 A substantial trading volume ensures that the stock is easily tradable Zacks Rank less than or equal to 2 Zacks Rank 1 Strong Buy or 2 Buy stocks are known to outperform irrespective of the market environment equal to A or B Our research shows that stocks with a Value Score of A or B when combined with a Zacks Rank 1 or 2 offer the best opportunities in the value investing space Here are six of the 13 stocks that qualified the screening Navient Corporation NASDAQ NAVI a loan management servicing and asset recovery company currently carries a Zacks Rank of 2 It has a 3 5 year EPS growth rate of 18 and a Value Score of A You can see Credit Suisse SIX CSGN Group NYSE C a Swiss finance company has a projected 3 5 year EPS growth rate of 18 4 It currently has a Zacks Rank 1 and a Value Score of A Citigroup NYSE C a globally diversified financial services holding company currently has a Zacks Rank of 2 It has a 3 5 year EPS growth rate of 11 7 and a Value Score of B SYNNEX Corporation NYSE SNX a leading business process services company is currently a Zacks 1 Ranked stock It has a 3 5 year EPS growth rate of 10 4 and a Value Score of A Legg Mason NYSE LM a global asset management firm has a projected 3 5 year EPS growth rate of 13 2 It currently has a Zacks Rank 2 and a Value Score of A Macy s NYSE M a leading department store retailer in the United States currently carries a Zacks Rank of 2 It has a 3 5 year EPS growth rate of 7 5 and a Value Score of A Get the rest of the stocks on the list and start putting this and other ideas to the test It can all be done with the Research Wizard stock picking and back testing software The Research Wizard is a great place to begin It s easy to use Everything is in plain language And it s very intuitive Start your Research Wizard trial today And the next time you read an economic report open up the Research Wizard plug your finds in and see what gems come out Disclosure Officers directors and or employees of Zacks Investment Research may own or have sold short securities and or hold long and or short positions in options that are mentioned in this material An affiliated investment advisory firm may own or have sold short securities and or hold long and or short positions in options that are mentioned in this material Disclosure Performance information for Zacks portfolios and strategies are available at |
JPM | Forget TIPs Buy These Bond ETFs Instead | U S consumer price inflation hit the brake suddenly after improving for quite some time Consumer prices in the U S rose year over year in March 2017 below last month s reading of a 2 7 rise as well as market expectations of a 2 6 increase Hurt by a decline in energy prices and services cost the country witnessed the lowest inflation rate this year On an annual basis energy prices increased 10 9 in March but came in lower than 15 2 in February
Annual core inflation which does not consider food and energy declined to 2 from 2 2 in the prior month It is the lowest core inflation since November 2015 that also fell shy of market expectations of 2 3
On a monthly basis consumer prices dropped 0 3 marking the first plunge in 13 months A 3 2 sequential plunge in the energy index led to this slump A fall in the index for wireless telephone services also restricted the overall reading
Dark Days for TIPS ETFs
TIPS offers robust real returns during inflationary periods unlike its unprotected peers in the fixed income world These securities pay an interest on an inflated principal amount principal rises with inflation and when the securities mature investors get either the inflation adjusted principal or the original principal whichever is greater
However amid lackluster inflation the one year five year and 10 year so called break even rates the inflation compensation implied by inflation protected Treasuries dipped to their lowest levels for 2017
It seems that the Trump induced inflationary expectations are easing now The timeline for his tax reforms which promised solid tax cuts now seems far away mainly thanks to the administration s inability to push through healthcare reforms iShares TIPS Bond lost 0 23 on April 17 reflecting the recent release of inflation data
Are There Any Better Bond ETF Plays
With Trump backed factors seemingly taking a backseat the U S bond market will likely be ruled by the Fed and geopolitics which in turn triggers safe haven trade The Fed is on a policy tightening mode
Notably expectations of a hike in interest rates by the Fed in June have fallen 10 bps from a week ago to about 50 as per Several analysts have even reduced predictions for the year end benchmark 10 year yields as per Bloomberg In such a situation investors may try investing in some other form of bond ETFs read
Muni Bond ETFs
Municipal bonds are excellent choices for investors seeking a steady stream of tax free income Usually the interest income from munis is exempt from federal tax and may also not be taxable per state laws making it especially attractive to investors in the high tax bracket looking to reduce their tax liability read
Apart from investors desire for a tax shelter improving fiscal health of many municipal bond issuers and an edgy sentiment prevailing in the market on geopolitical concerns make a rewarding combination Munis are comparatively more stable than equity or high yield bonds and yield better than Treasuries read
VanEck Vectors AMT Free Long Municipal Index ETF V MLN 3 07 Yield
PowerShares National AMT Free Municipal Bond Portfolio ETF TO PZA 3 06 Yield
U S Corporate Bond ETFs
Yield hungry investors intending to restrict their plays within U S boundaries but not trying to expose themselves to stock market uncertainties may find investment grade corporate bonds compelling
The investment grade U S corporate bond market has been on a decent path lately as these normally yield more than their Treasury cousins with only a little rise in risk see here
Plus edgy investors need to be aware of default risks and should bet on investment grade corporate bond ETFs Here are the choices
SPDR Barclays LON BARC Capital Long Term Corporate Bond ETF 4 21 Yield
ProShares Investment Grade Interest Rate Hedged ETF 3 35 Yield
Emerging Market bond ETFs
EM bond ETFs have been on a tear lately thanks to the high yield nature and diminishing volatility in these markets Emerging market companies and governments sold 178 5 billion of dollar denominated debt in Q1 marking the highest quarterly amount ever
iShares JPMorgan NYSE JPM USD Emerging Markets Bond ETF AX EMB 4 70 Yield
ProShares Short Term USD Emerging Markets Bond 4 63 Yield
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JPM | Financials Falter On Bank Earnings | Last week the awakening began In the tawny uptown offices big banks reported mostly dismal results and warned the economic Trump bump was more smoke than fire
The contrast from January is stark Then favorable earnings comparisons and the presidential honeymoon led many to promise the start of something big However recent conference calls were about plummeting consumer loan growth delinquencies and policy uncertainty
The fact that so many got it so wrong is not a surprise It was wishful thinking
It s something legendary trader Jesse Livermore understood well The 1923 classic Reminiscences of a Stock Operator counseled traders against making feel good investment decisions that ignored rational evidence Livermore knew there are no easy fixes to big problems
Silly Sausage
Last week bank leaders tamped down enthusiasm The Wall Street Journal reported that Jamie Dimon CEO of JP Morgan NYSE JPM admonished analysts that it would be just silly to expect a new president to easily push through his agenda during the sausage making period
That s an understatement Republicans could not keep their seven year old promise to repeal and replace the Affordable Care Act despite having control of Congress and the White House Sure they are likely to take another run at it But that effort also delays tax reform
Consumers could use some help Despite stronger sentiment actual consumer lending is falling off a cliff Credit card delinquencies are rising too
At Wells Fargo NYSE WFC car loans are down 29 The news is not much better elsewhere In fact North American consumer banking profits at Citigroup NYSE C JP Morgan and Wells Fargo fell 25 20 and 9 respectively
The problems are not new Last November the New York Federal Reserve noted six million Americans stopped paying their auto loans Stagnant wages and rising costs are hurting Average consumers feel stretched It s pain that should have been the message of the November presidential election
More Pain
Sadly relief is not near In March the Federal Reserve bumped short term rates higher and suggested more increases are in the offing While this helps banks they make money with higher spreads between their short term borrowing and longer term lending rates it means even higher payments for consumer loans It means more pain
Following the presidential election many assumed a flurry of tax and regulatory reforms would instantly lead to a stronger economy Stocks particularly banks spurted higher The idea was as intoxicating as it was flawed
Tax and regulatory reform is not easy Making sausage is messy and ugly
Now investors are waking to the reality real reform might be several months away even as economic pressure points persist They are getting nervous They are beginning to question the post election leadership of financials Wishful thinking is meeting reality
Shares of the SPDR Financials NYSE XLF rose from a low 19 50 following the election to 25 25 in March Since that time most of the price action has been below the 50 day moving average at 24 This is worrisome and suggests more weakness
Bank shares could even fully reverse the gains from November
Livermore prided himself in making rational investment decisions based on the evidence He would have respected the November rally He also would have been mindful of the more recent weakness and the growing set of negative economic data
The XLF was trading at 23 02 per share on Tuesday afternoon down 0 28 1 20 Year to date XLF has declined 0 99 versus a 4 41 rise in the benchmark S P 500 index during the same period
XLF currently has an ETF Daily News SMART Grade of B Buy and is ranked 9 of 38 ETFs in the Financial Equities ETFs category
From Jon Markman |
JPM | Navient NAVI Q1 Earnings Lag On Lower Net Interest Income | Navient Corporation s NASDAQ NAVI first quarter 2017 adjusted core earnings per share EPS of 36 cents missed the Zacks Consensus Estimate of 43 cents Also the figure came below the year ago quarter tally The reported EPS for the quarter includes the effect of regulatory related costs Core earnings excluded the impact of losses from the derivative accounting treatment It also excluded the impact of certain other one time items including unrealized mark to market gains losses on derivatives and goodwill and acquired intangible asset amortization and impairment Results of Navient reflect reduced net interest income However on a positive note the company recorded a decline in expenses and lower provision for credit losses in the quarter Net income came in at 107 million in the first quarter down from 147 million recorded in the prior year quarter
GAAP net income for the quarter was 188 million or 30 cents per share compared with 181 million or 53 cents per share in the year ago quarter
Prior to release of the results Navient announced that it has entered into an agreement with JPMorgan Chase NYSE JPM to purchase an education loan portfolio worth 6 9 billion The portfolio is said to comprise 3 7 billion in FFELP loan and 3 2 billion in private education loans The deal is expected to be completed in the next quarter Further it is anticipated to be accretive to the company s 2017 financial results
Performance in Detail on core earnings basis Net interest income declined 19 7 year over year to 334 million However non interest income inched up 2 8 year over year to 181 million Asset recovery revenues rose while servicing revenues declined Further provision for credit losses decreased 3 6 year over year to 107 million Total expenses declined 3 6 year over year to 238 million Segment Performance
Federally Guaranteed Student Loans FFELP The segment generated core earnings of 51 million down 22 7 year over year The underperformance was mainly attributable to lower net interest income owing to amortization of the portfolio and also a decrease in net interest margin NIM partially offset by a decline in operating expenses FFELP loan spread contracted 3 basis points bps year over year to 0 86 During the quarter Navient acquired FFELP loans of 686 million As of Mar 31 2017 the company s FFELP loans were at 85 3 billion down 10 1 year over year Private Education Loans The segment reported core earnings of 35 million down 42 6 year over year The decrease was due to lower net interest income owing to amortization of the portfolio and lower NIM partially offset by reduced provision for loan losses Total delinquency rate came in at 6 8 up 6 bps Charge off rate of 2 6 of average loans in repayment was 2 bps higher on a year over year basis Student loan spread contracted 37 bps year over year to 3 33 As of Mar 31 2017 the company s private education loans totaled 22 6 billion down 11 4 year over year Business Services The segment reported core earnings of 77 million up 2 7 year over year Currently Navient services student loans for over 12 million customers This includes 6 1 million customers on behalf of the U S Department of Education Other The segment reported a net loss of 56 million compared with a net loss of 55 million in the prior year quarter Source of Funding and LiquidityIn order to meet liquidity needs Navient expects to utilize various sources including cash and investment portfolio issuance of additional unsecured debt repayment of principal on unencumbered student loan assets and distributions from securitization trusts including servicing fees It may also issue term asset backed securities ABS During the reported quarter Navient issued 1 9 billion in FFELP Loan ABS and 843 million in unsecured loan debt Also the company retired or repurchased 568 million of senior unsecured debt during the quarter Share RepurchaseDuring the quarter Navient repurchased 7 4 million shares of common stock for 110 million Our TakeNavient s first quarter results are not impressive The top line continues to remain under pressure However we believe that the company will continue to maintain its leadership position in the student lending market through various growth avenues including its acquisition of loan portfolio from JPMorgan Additionally the economic recovery and declining unemployment rate are likely to fortify its business prospects as well as help borrowers in repaying their loans Further we remain encouraged by the company s steady capital deployment activities Navient Corporation Price and EPS Surprise Navient currently carries a Zacks Rank 3 Hold You can see
Among other firms in the finance space Ally Financial Inc NYSE ALLY is slated to release results on Apr 27 while Trustmark Corp NASDAQ TRMK will release its earnings on Apr 25
Will You Make a Fortune on the Shift to Electric Cars
Here s another stock idea to consider Much like petroleum 150 years ago lithium power may soon shake the world creating millionaires and reshaping geo politics Soon electric vehicles EVs may be cheaper than gas guzzlers Some are already reaching 265 miles on a single charge With battery prices plummeting and charging stations set to multiply one company stands out as the 1 stock to buy according to Zacks research It s not the one you think |
MPC | Marathon backs CEO amid calls for his ouster | Reuters Marathon Petroleum Corp NYSE MPC said on Friday the company s board supports Gary Heminger as the chief executive officer after a report that two shareholders were calling for his ouster
The board of directors is firmly and unanimously supportive of Gary Heminger as MPC s chairman and CEO and his track record of delivering value to shareholders and all of the company s constituencies the company said in a statement
The shareholders Paul Foster and Jeff Stevens sent a letter to the company on Thursday evening calling for the CEO s removal the Wall Street Journal reported early on Friday
The shareholders also backed a proposal by hedge fund Elliott Management Corp to split Marathon into three units the Journal reported citing a copy of the letter
The shareholders who are former board members of refiner Andeavor which Marathon acquired last year own about 1 7 of Marathon the Journal said
Elliott was not immediately available for a Reuters request for comment after regular U S business hours while Foster and Stevens could not be reached
Elliott on Wednesday urged the energy company to split into three companies for retail refining and midstream assets saying it would boost shareholder value by as much as 40 billion
Marathon had responded to the hedge fund s proposal stating it was focused on increasing shareholder value and would thoroughly evaluate Elliott s proposal
Heminger s membership of Marathon s board of directors is due up for shareholder vote in 2020 according to Marathon s 2019 proxy statement |
MPC | Elliott ranks as busiest activist hedge fund in third quarter again | BOSTON Reuters Elliott Management Paul Singer s 35 billion hedge fund kept up its blistering pace of pushing for corporate changes during the third quarter outspending all rivals with campaigns at AT T NYSE T and Marathon Petroleum Corp NYSE MPC data released on Friday showed The firm committed 5 2 billion in new capital during July August and September making it the busiest activist both by capital committed and number of campaigns launched according to data compiled by Lazard This year Elliott has committed 8 4 billion in 14 campaigns That easily outpaces Carl Icahn s Icahn Associates which has committed 2 6 billion in three campaigns and Daniel Loeb s Third Point which put 2 4 billion to work in three campaigns Starboard Value has launched 11 campaigns this year committing 2 3 billion in cash Thanks to Elliott s activities the pace of activism overall was higher in the third quarter of 2019 than a year earlier with 11 billion deployed in capital compared with 8 7 billion last year Europe became the favorite hunting ground as activists launched a record 20 campaigns at companies like EssilorLuxottica and Scout24 While activists traditionally push for strategic reviews demands for mergers and acquisitions have never been higher Lazard said noting that nearly half of all campaigns this year have had an M A thesis |
MPC | San Francisco Area Fuel Tank Fire Contained Shelter Order Ends | Bloomberg An explosion and fire at a San Francisco area fuel terminal spewed black smoke high in the air snarling rush hour traffic and prompting local officials to ask residents to take shelter on Tuesday before the emergency situation eased early on Wednesday
The fire that affected two tanks at Nustar Energy LP s Selby Terminal in Crockett about 25 miles 40 kilometers northeast of San Francisco has now been contained the Contra Costa Country fire department said on Twitter The tanks held very low volumes of ethanol comprising less than 1 of their capacity NuStar said earlier in a statement All operations have been suspended and product shipments into and out of the facility have halted All personnel are safe and accounted for
A shelter in place order has been lifted for all areas affected areas near the Nustar facility the Contra Costa County health department said in a tweet Since there is no longer any imminent danger to the public a section of Interstate 80 near the terminal that had been closed in both directions has now re opened the California Highway Patrol said in a tweet
The blaze comes less than a day after an earthquake forced Marathon Petroleum Corp NYSE MPC to shut units at its nearby Martinez refinery threatening to push up gasoline prices that had just eased from the highest level in seven years Disruptions at California refineries sent retail pump prices in the state well above 4 a gallon
Two tanks were burning as of late Tuesday afternoon and three other tanks holding ethanol and jet fuel were threatened and being doused with water Steve Hill a spokesman for the Contra Costa Fire Protection District said in a televised press conference He corrected an earlier statement saying three tanks were burning
The two burned tanks contained a combined 250 000 gallons of ethanol The blaze spread to 15 acres of nearby vegetation a brush fire that was put out Hill said A shelter in place order was in force and between 12 and 20 nearby residents were evacuated
The incident also comes a week after the state s utility PG E Corp shut power to 738 000 homes and businesses to prevent wildfires similar to those that devastated the state last year causing dozens of fatalities
Phillips 66 s Rodeo refinery wasn t affected by the blaze the company said in a tweet Some early initial reports indicated the fire was at the refinery located close to the NuStar terminal
Nustar operates about 9 800 miles of pipeline and 74 terminal and storage facilities that store and distribute crude oil refined products and specialty liquids Its San Francisco area facility has a capacity of about 3 million barrels of gasoline diesel jet fuel and ethanol according to the company s website
Updates with lifting of shelter in place order re opening of highway in third paragraph |
MS | Morgan Stanley weighs initial 300 Brexit job moves Bloomberg | LONDON Reuters U S bank Morgan Stanley N MS may initially move 300 staff from Britain following its exit from the European Union and is scouting for office space in Frankfurt and Dublin Bloomberg News reported on Thursday The Wall Street firm will eventually choose either Frankfurt or Dublin to base its enlarged European Union hub according to the Bloomberg report which cited three people with knowledge of the matter Leading financial firms warned for months before last June s Brexit referendum that they would have to move some jobs if there was a leave vote and have been working on plans for how they would do so for the past several months More details are starting to emerge after Prime Minister Theresa May confirmed Britain would leave the European single market ending banks hopes they might retain passporting rights that let them sell their services across the EU out of their London hubs Morgan Stanley which bases the bulk of its European staff in Britain will have to move up to 1 000 jobs in sales and trading risk management legal and compliance as well as slimming the back office in favor of locations overseas a source involved in the process told Reuters in January Our focus is on ensuring that we can continue to service our clients whatever the Brexit outcome Hugh Fraser a spokesman for Morgan Stanley in London said in response to the report
Our strong franchise and material presence in Europe gives us many options and we will adapt as the details of Brexit become clear Given all of this no decisions have yet been made |
JPM | Nikkei slips as trade war fears dent automakers | By Ayai Tomisawa TOKYO Reuters Japan s Nikkei share average dropped on Friday as shares of automakers fell after Germany s Daimler cut its profit forecast citing tariff concerns while weak U S economic data dampened investor sentiment The Nikkei N225 fell 0 78 percent to 22 516 83 The index is down 1 46 percent this week The auto index down 1 58 percent was the worst performer on the board Daimler DE DAIGn cut its 2018 profit forecast on fears of tariffs on Mercedes Benz cars it exports from the United States to China Further BMW DE BMWG said it was looking at strategic options amid the trade dispute between the United States and China Toyota Motor Corp T 7203 dropped 2 66 percent Honda Motor Co T 7267 fell 1 97 percent and Mazda Motor Corp T 7261 shed 0 73 percent The Philadelphia Federal Reserve said its business conditions index fell to 19 9 in June the lowest level since November 2016 from 34 4 in May The weak U S economic data and trade war headlines are all hurting the Japanese market s sentiment and prompting a sell off in blue chip stocks said Yoshinori Shigemi global market strategist at JPMorgan NYSE JPM Asset Management Earlier this week U S President Donald Trump threatened to impose a 10 percent tariff on 200 billion of Chinese goods while Beijing warned it would fight back People have started to seriously worry that the global economy will falter Shigemi said Shippers also underperformed with Mitsui OSK Lines T 9104 declining 0 94 percent and Kawasaki Kisen T 9107 falling 1 percent on concerns that shipping demand will decline due to falling commodity prices Conversely consumer goods makers which are relatively immune to global woes attracted buying Cosmetics maker Shiseido Co T 4911 rose 0 72 percent Japan Tobacco T 2914 added 1 07 percent and diaper maker Unicharm Corp T 8113 advanced 1 9 percent
The broader Topix TOPX shed 0 33 percent to 1 744 83 |
JPM | Rebound in South powers U S new home sales dampens prices | By Lucia Mutikani WASHINGTON Reuters Sales of new U S single family homes increased more than expected in May as transactions in the South surged to near an 11 year high and dampened prices but the overall housing market remained constrained by a dearth of properties for sale The housing shortage has been worsened by rising material costs as well as a lack of land and skilled labor Housing is lagging other sectors of the economy and is not expected to contribute to economic growth in the second quarter The upward trend in the new home sales data contrasts with the signals from many other recent housing indicators which have turned weaker lately said Daniel Silver an economist at JPMorgan NYSE JPM in New York We still think that real residential investment will be close to flat in second quarter New home sales jumped 6 7 percent to a seasonally adjusted annual rate of 689 000 units last month the highest level since November 2017 the Commerce Department said on Monday Last month s surge in new home sales unwound April s drop Economists polled by Reuters had forecast new home sales which make up 11 percent of housing market sales rising only 0 7 percent to a pace of 667 000 units in May Sales in the South which accounts for the bulk of transactions rebounded 17 9 percent to a rate of 409 000 units in May the highest level since July 2007 The increase ended two straight months of declines Sales tumbled 10 0 percent in the Northeast and dropped 8 7 percent in the West They were unchanged in the Midwest New home sales are drawn from permits and tend to be volatile on a month to month basis They increased 14 1 percent from a year ago New home sales are getting a boost from an inventory crunch in the market for previously owned houses A report last week showed existing home sales falling for a second straight month in May Supply has trailed strong demand for housing which is being driven by a robust labor market leading to a sharp increase in home prices Economists say high mortgage rates so far do not appear to be diminishing demand The 30 year fixed mortgage rate averaged 4 57 percent last week and has risen more than 50 basis points this year Further increases are likely after the Federal Reserve raised interest rates earlier this month for a second time this year and forecast two more rate hikes by the end of the year The PHLX housing index HGX dropped sharply on Monday tracking a broadly weaker U S stock market Stocks on Wall Street tumbled as investors worried about escalating tensions between the United States and its trade partners The dollar DXY slipped against a basket of currencies while prices of U S Treasuries rose MEDIAN PRICE FALLS The median new house price fell 3 3 percent to 313 000 in May from a year ago That was the lowest price in a year and the result of sales being concentrated in the South House prices are generally lower in that region There were 299 000 new homes on the market in May up 1 0 percent from April Supply is just over half of what it was at the peak of the housing market boom in 2006 At current levels and controlling for population growth we re building roughly 2 7 homes for every 10 000 Americans well below historic averages from the 1980s and 1990s of about 4 2 homes per 10 000 residents said Aaron Terrazas senior economist at Zillow in Seattle Builders are struggling with higher lumber prices as well as labor and land shortages A survey last week showed confidence among single family homebuilders dipped in June with builders increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability The Trump administration in April 2017 imposed anti subsidy duties on imports of Canadian softwood lumber Residential investment contracted in the first quarter Growth estimates for the April June period are as high as a 4 7 percent annualized rate The economy grew at a 2 2 percent pace in the first quarter
At May s sales pace it would take 5 2 months to clear the supply of houses on the market down from 5 5 months in April Nearly two thirds of the houses sold last month were either under construction or yet to be built |
JPM | China Stock Rout May Worsen Analysts Warn No End in Sight | Bloomberg Chinese stocks sunk into a bear market Tuesday and analysts expect losses to deepen as concern over China s economy yuan weakness and a trade feud with the U S continue to rattle investors
The Shanghai Composite Index closed at 2 844 51 points 20 percent below a January high denoting a bear market A Hang Seng measure of Chinese companies in Hong Kong is down 19 percent from five months ago The yuan weakened 0 3 percent to its lowest since Dec 28
Read on for analyst views on the decline and where they see the market going from here
Hao Hong chief strategist at Bocom International Holdings Co
There s still a lot of selling pressure Investors are rushing to exit to avoid risk
Lots of people listened to brokers advice to build positions around 3 000 betting on a rebound They are now under big pressure to sell
Main reason for the plunge in Chinese stocks is slowing economic growth rather than pledged shares or the trade war
The key thing is that fundamentals in China are very bad The market started to correct even before the trade war flared up
Hard to say shares have hit a bottom And it s hard for the government to solve the issue as it can t flood the markets with new money
Tai Hui JPMorgan NYSE JPM Asset Management Inc chief APAC market strategist
Market volatility in China is brought about by combination of factors U S China trade tension concern over corporate bond defaults and uncertainty on the growth outlook
Corporate bond defaults are arguably biggest worry at this point Sentiment toward equities is likely to remain cautious for rest of this year
Many onshore investors are mindful that authorities have deleveraging and financial risk reduction as a long term objective despite their willingness to provide liquidity near term
Trade dispute impact is probably exaggerated Many Chinese companies focus domestically and don t have direct trade links with the U S
Consumer sentiment in China remains positive See structural demand for consumer services such as health care and education services
Sun Jianbo China Vision Capital president in Beijing
This is a typical bear market where the index keeps falling below supportive levels
Not the bottom yet Pessimism will keep growing as many companies are on the edge of margin calls and bond defaults Those will cause further selloffs
Shanghai Composite could fall at least another 10 percent
Some long term funds including the so called national team may be interested in buying in the bear market zone
Qian Qimin Shenwan Hongyuan Group Co strategist based in Shanghai
Plunge in U S stocks overnight hurt confidence NOTE S P 500 fell 1 4 Monday biggest loss since April 6
Liquidity usually very tight in banking system as end of June approaches
Weakening yuan is hurting companies with high levels of dollar debt and exporters dragging down some large caps such as airlines
Chinese Airlines Become Collateral Damage in Trade War With U S
Don t see the bottom yet The market may keep falling since it s still hard to gauge the impact of trade tensions and investors will keep cutting risk
Catherine Yeung investment director at Fidelity International
Markets initially rose Monday following RRR cut but the trade issue overhang is taking center stage and will probably see a lot more volatility
China may do more to support market potentially ramping up fixed asset investment though it still needs to go through the deleveraging process
The People s Bank of China is in a better place than other central banks because it still has the tool set Consumers are still spending
Not beyond the realm of possibility for China long term to do bilateral deals with everyone else outside of the U S which surely isn t good for American consumers
China could still be an outperforming market this year because we ve already seen it down and maybe developed markets will see some outflows due to ongoing tensions
The Chinese government has a flexible approach in terms of policy tools Data show economic slowdown but coming from a very high base
Lu Jie head of China research at Robeco Investment Management
Amid A share selloff foreign investors would favor defensive stocks such as consumer goods that benefit from consumption upgrade while avoiding hit from trade war
Upward trend in foreign fund inflows to China A shares is just beginning
I had roadshows in Singapore on June 19 when A shares tumbled none of the investors I met asked questions about the market slump
Foreign investors asked two questions if China will have an economic crisis and whether Chinese companies will improve corporate governance
Adds comments updates moves |
C | Meet the Man Who Will Run Mexico s Finance Ministry | Bloomberg International markets aren t familiar with Carlos Urzua the man who will lead Mexico s finance ministry come December The career academic s lack of global chops is a concern for some investors who would have preferred to see a financial heavyweight help steer the country s economy after leftist Andres Manuel Lopez Obrador won the presidency on Sunday
But Urzua isn t a rookie either The PhD in economics from the University of Wisconsin managed the finances of Mexico City the country s largest and wealthiest from 2000 to 2003 when Lopez Obrador was mayor He reined in expenditures then and the increase in the city s level of indebtedness in real terms during his boss s term was 3 3 percent compared with the previous administration s 19 percent according to data from the Mexico City government
Urzua himself was quick to tell investors on Monday that he intended to remain fiscally disciplined to respect the autonomy of the country s central bank and its floating exchange rate regime
Not everybody was convinced The debate about their fiscal policy in Mexico City is largely irrelevant said Alonso Cervera chief Latin America economist at Credit Suisse SIX CSGN Group AG It was the federal government that set the indebtedness limits to the city The mayor and his team had no say on this
Urzua will have to reconcile his fiscal discipline pledge with Lopez Obrador s campaign promises to boost social programs for youth and the elderly His team says Mexico could raise the 0 7 percent of GDP needed for those special programs by cutting graft and slashing salaries and benefits of Mexico s highest officials Citigroup Inc NYSE C s Mexico unit forecasts that along with other promises such as not raising gasoline prices in real terms for three years will swell Mexico s deficit to 4 percent of gross domestic product the widest in decades
While Urzua left the Mexico City administration halfway through its term and has worked in academia ever since including at Princeton and Georgetown he ll have a team with broader financial experience Arturo Herrera a World Bank executive and Harvard educated Gerardo Esquivel are expected to take leadership roles within the Finance Ministry he said Lopez Obrador and his cabinet don t take office until Dec 1st and need to pass next year s budget by mid December
Carlos Urzua is a respected academic and a fairly traditional economist but he does not necessarily carry the weight of more well known Mexican economists in terms of his ability to move markets said Christopher Wilson of the Woodrow Wilson International Center for Scholars in DC |
C | Glencore gives shares 1 billion buyback lift after U S subpoena | By Justin George Varghese and Zandi Shabalala Reuters Commodities trader and miner Glencore L GLEN will buy back shares worth 1 billion in a move analysts said looked timed to soothe investor nerves just two days after a subpoena from U S authorities rattled the stock Glencore s shares suffered their worst day in over two years following Tuesday s announcement of the U S subpoena They are down about 18 percent this year and hovering near one year lows This does not seem a coincidence and suggests management also believes the recent price moves are extreme analysts at Barclays LON BARC said in a note on Thursday Glencore shares rose on news of the buy back program which will run until the end of the year and were up 3 9 percent at 0740 GMT the top FTSE 100 index FTSE gainers Mining companies have recovered from the commodity price crash of 2015 16 allowing them to return cash to shareholders via share buy backs and higher dividends But Glencore is facing scrutiny from U S authorities who have demanded the company hand over documents about its business in the Democratic Republic of Congo Venezuela and Nigeria as part of a corruption probe The documents requested from its U S division related to Glencore s business in the three countries from 2007 to now The buyback will help at the margin but we do not expect Glencore s valuation to increase before the Department of Justice investigation is completed and that could take years Jefferies said in a note Some analysts believe the U S subpoena could be a result of Glencore settling a mining row in the DRC with Israeli billionaire Dan Gertler under U S sanctions since last year by agreeing to pay royalties in euros The buyback will be split into two halves one of 350 million pounds 463 million worth of shares to be bought by Aug 7 and the remainder at the discretion of Citigroup NYSE C which is Glencore s broker After outstripping rivals last year Glencore s share price has been hit by concerns about political risk in the DRC where it mines just over a quarter of the global output of cobalt The company has aggressively slashed its debt since 2015 when it faced a crisis
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C | How To Screen For Highly Ranked Undervalued Stocks | 0 30 Using Zacks Ranking System To Find Top Value Stocks 5 55 Screen Criteria For Undervalue Stocks 10 00 Tracey s Top Stocks Picks 17 45 Episode Roundup C CPA LPLA SNX FL BRK B Welcome to Episode 175 of the Value Investor Podcast
Every week Tracey Ryniec the editor of Zacks shares some of her top value investing tips and stock picks
Volatility has picked up to start 2020 with earnings season and the coronavirus grabbing the headlines
I know many investors like to use system style investing and that s where the Zacks Rank comes in
Why not use Zacks great Ranking systems to cut through the noise and find those cheap stocks
Screening for Highly Ranked Undervalued Stocks
The screens always start with the Zacks Rank in this case the highest ranks of 1 Strong Buy and 2 Buy It should hopefully mean rising earnings estimates
But investors can layer the Zacks Style Scores on top of it The Style Scores are included for an investing style which includes value growth or momentum The screen included the top two scores of A or B for the value category
The Zacks Industry Rank adds yet another layer of screening for the industries with rising estimates as you can screen for industry ranks in the top 50
Throw in the P E and PEG as the classic valuation metrics as well as a stock price over 5 to avoid those pesky penny stocks I know you like those 1 stocks but we re going to exclude them here
25 stocks made it through this tight screen including in a bunch of different industries such as financials drug makers transports retailers and energy
Here are five
5 Highly Ranked Undervalued Stocks for Your Short List
1 Citigroup NYSE C is a Zacks Rank 2 Buy This big international bank is cheap with a forward P E of just 8 9 It has a PEG ratio of 0 8 which indicates it has both value and growth It also pays a dividend yielding 2 6
2 Copa Holdings NYSE CPA is a passenger airline serving Latin America with its big hub in Panama It has an Industry Rank of 34 which is the top 13 of all industries It s trading with a forward P E of just 10 5
3 LPL Financial Holdings NASDAQ LPLA operates a financial advisory and brokerage business Shares are still attractively valued with a forward P E of just 12 It also has growth with a PEG ratio of just 0 8 Investors get a dividend currently yielding 1 1
4 SYNNEX NYSE SNX announced on Jan 9 that it would split into 2 companies Concentrix and SYNNEX It s a Zacks Rank 1 Strong Buy It s been cheap for some time and currently has a forward P E of just 10
5 Foot Locker NYSE FL is one of the cheap retailers on a valuation basis It trades with a forward P E of just 7 8 It s industry apparel and shoes ranks 94 out of 255 or in the top 37 of all industries Investors are rewarded with a dividend currently yielding 3 9
What else should you know about using the Zacks Rank to find undervalued stocks
Tune into this week s podcast to find out
5 Stocks Set to DoubleEach was hand picked by a Zacks expert as the 1 favorite stock to gain 100 or more in 2020 Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth Most of the stocks in this report are flying under Wall Street radar which provides a great opportunity to get in on the ground floor |
C | Zacks Value Trader Highlights Citigroup Copa LPL Financial SYNNEX And Foot Locker | For Immediate ReleaseChicago IL January 31 2020 Zacks Value Trader is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec Every week Tracey will be joined by guests to discuss the hottest investing topics in stocks bonds and ETFs and how it impacts your life To listen to the podcast click here
How to Screen for Highly Ranked Undervalues StocksWelcome to Episode 175 of the Value Investor Podcast Every week Tracey Ryniec the editor of Zacks shares some of her top value investing tips and stock picks Volatility has picked up to start 2020 with earnings season and the coronavirus grabbing the headlines I know many investors like to use system style investing and that s where the Zacks Rank comes in Why not use Zacks great Ranking systems to cut through the noise and find those cheap stocks Screening for Highly Ranked Undervalued StocksThe screens always start with the Zacks Rank in this case the highest ranks of 1 Strong Buy and 2 Buy It should hopefully mean rising earnings estimates But investors can layer the Zacks Style Scores on top of it The Style Scores are included for an investing style which includes value growth or momentum The screen included the top two scores of A or B for the value category The Zacks Industry Rank adds yet another layer of screening for the industries with rising estimates as you can screen for industry ranks in the top 50 Throw in the P E and PEG as the classic valuation metrics as well as a stock price over 5 to avoid those pesky penny stocks I know you like those 1 stocks but we re going to exclude them here 25 stocks made it through this tight screen including in a bunch of different industries such as financials drug makers transports retailers and energy Here are five 5 Highly Ranked Undervalued Stocks for Your Short List1 Citigroup NYSE C is a Zacks Rank 2 Buy This big international bank is cheap with a forward P E of just 8 9 It has a PEG ratio of 0 8 which indicates it has both value and growth It also pays a dividend yielding 2 6 2 Copa Holdings NYSE CPA is a passenger airline serving Latin America with its big hub in Panama It has an Industry Rank of 34 which is the top 13 of all industries It s trading with a forward P E of just 10 5 3 LPL Financial Holdings NASDAQ LPLA operates a financial advisory and brokerage business Shares are still attractively valued with a forward P E of just 12 It also has growth with a PEG ratio of just 0 8 Investors get a dividend currently yielding 1 1 4 SYNNEX NYSE SNX announced on Jan 9 that it would split into 2 companies Concentrix and SYNNEX It s a Zacks Rank 1 Strong Buy It s been cheap for some time and currently has a forward P E of just 10 5 Foot Locker NYSE FL is one of the cheap retailers on a valuation basis It trades with a forward P E of just 7 8 It s industry apparel and shoes ranks 94 out of 255 or in the top 37 of all industries Investors are rewarded with a dividend currently yielding 3 9 What else should you know about using the Zacks Rank to find undervalued stocks Tune into this week s podcast to find out 5 Stocks Set to DoubleEach was hand picked by a Zacks expert as the 1 favorite stock to gain 100 or more in 2020 Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth Most of the stocks in this report are flying under Wall Street radar which provides a great opportunity to get in on the ground floor Media ContactZacks Investment Research800 767 3771 ext 9339Past performance is no guarantee of future results Inherent in any investment is the potential for loss This material is being provided for informational purposes only and nothing herein constitutes investment legal accounting or tax advice or a recommendation to buy sell or hold a security No recommendation or advice is being given as to whether any investment is suitable for a particular investor It should not be assumed that any investments in securities companies sectors or markets identified and described were or will be profitable All information is current as of the date of herein and is subject to change without notice Any views or opinions expressed may not reflect those of the firm as a whole Zacks Investment Research does not engage in investment banking market making or asset management activities of any securities These returns are from hypothetical portfolios consisting of stocks with Zacks Rank 1 that were rebalanced monthly with zero transaction costs These are not the returns of actual portfolios of stocks The S P 500 is an unmanaged index Visit for information about the performance numbers displayed in this press release |
C | These 3 Financial Stocks Can Pay Out Returns Long Term | Returns of course are the name of the game Investors get into stocks as a way to grow wealth and are quick to exit any instrument that doesn t deliver The key is learning how to recognize the stocks that are going to gain and then staying in for the long haul Of the two long term investing is probably the more difficult It s tempting to dump a stock at a downturn or sell off underperforming assets But every stock market winner has seen periods of loss those blips are common Winning investors will remember Warren Buffett s advice If you aren t thinking about owning a stock for ten years don t even think about owning it for ten minutes Long term investing is based on time horizons measured in years As Buffett has also said the best holding period is forever Recognizing potentially strong stocks requires information and lots of it Fortunately TipRanks has built up just the database you need and provides a series of tools to make it easy to search and use the raw data We ve used the Stock Screener tool to find some interesting financial stocks that show signs of a potential breakout and are set to outperform in the years to come Let s look at the details OneConnect Financial Technology Company Ltd OCFT Up first is OneConnect a software company whose products offer digital transformation revenue increase and risk management applications for financial institutions The company s customer base is in China an important point as China has a rapidly emerging technology sector And with a growing urban population that already exceeds 800 million China s pool of potential tech sector customers is already larger than the entire US and EU populations combined The sheer size of China s potential market already gives OneConnect a huge potential for growth a potential that the company has begun to realize Founded as one of the Ping An Insurance Group s businesses OCFT shares went public in mid December The IPO was priced at 9 to 10 per share and the initial offering of 31 2 million shares met that target range That was seven weeks ago Since then OCFT shares have gained 27 and the market cap has risen to 4 7 billion It s an impressive out of the gate performance for OneConnect The company s early and rapid gains have caught the attention of Morgan Stanley analyst Yang Liu who writes of the stock We believe OCFT will be a long term winner in China s financial technology market given its early mover advantage unique value proposition recurring revenue model clear growth strategy and strong parent company support Liu puts a 16 price target on OCFT implying an upside potential of 26 in support of his Buy rating To watch Liu s track record click here Even though it hasn t been around long OCFT stock has garnered 5 Buy reviews giving it a unanimous Strong Buy analyst consensus Shares sell for 12 72 and the average price target of 17 18 suggests room for a 35 upside potential See OneConnect Financial Technology stock analysis on TipRanks LexinFintech Holdings Ltd LX The other Chinese fintech on our list LexinFintech is a holding company LexinFintech offers a range of services including wealth management and money loans to very much of the same customer base as OCFT above Also like OCFT LX stock had a successful IPO LX started trading in December 2017 with a list price of 9 that quickly settled at 11 80 The initial offering sold 12 million shares and raised over 130 million The company s current market cap is 2 3 billion and shares trade at 13 30 a gain of 48 from the opening price Lexin s earnings are strong with the last quarter report showing 245 million in gross profit from total revenues of 461 million The company consistently beats the earnings forecasts having exceeded expectations in the last five quarterly reports LX will report next on March 12 and the consensus is for EPS of 56 cents Wall Street likes what it sees in LX Writing on the stock after attending the company s first Investor Day Credit Suisse analyst Yiran Zhong said The positive outlook on loan volume growth is underpinned by record customer acquisition in 3Q19 We like the longer term strategy to build an ecosystem that serves the consumption needs of its young customers including through consumer finance membership benefits and a point redemption system We believe this helps Lexin tap into an expanded range of consumption scenarios which in turn enhances its capacity to provide consumer finance services Zhong s price target of 18 05 implies an upside of 36 from current price levels and supports his Outperform rating Shares in LX are selling for 13 30 a low cost for a stock with a 50 upside potential An analysis of the stock shows a set of strong data points all pointing to overperformance in coming months Financial bloggers are optimistic about the stock with 100 of recent reviews taking a bullish stance against the sector average of 72 See LexinFintech stock analysis on TipRanks Citigroup Inc C Third on our list is a staple of the markets and a component of the S P 500 index Citigroup with a market cap of 157 billion is the third largest American bank and is counted as one of the Big 4 along with JPMorgan Chase Bank of America and Wells Fargo Citi has over 200 million customer accounts does business in over 160 countries around the world and saw total revenues of 72 9 billion in fiscal 2018 In short it s a banking giant Citigroup shares gained 53 in 2019 outpacing the broader markets by a wide margin The stock also paid out a strong dividend of 51 cents per share quarterly The annualized payment 2 04 per share gives a yield of 2 74 significantly higher than the S P average This is a stock that has a proven record of returns for investors through multiple streams That proven record combined with an easy cost of entry generates lots of love among the Wall Street analyst corps 5 star analyst Chris Kotowski from Oppenheimer writes of this company Citi remains one of the cheapest banks in our universe of coverage at 1 16x tangible book value and 9 4x our 2020 EPS estimate Our 124 price target assumes a 70 relative P E multiple based on consensus estimates for the S P 500 and our estimates for Citi This is at the lower end of the 70 80 that we generally consider to be fair value for banks To this end Kotowski gave the price target a boost The new 124 price target implies an upside potential of 67 in the next 12 months and fully justifies his Buy rating To watch Kotowski s track record click here Citigroup is a stock that is primed for outperformance in 2020 too The analyst consensus is a Strong Buy based on 13 reviews including 11 Buys and 2 Holds Shares are priced low for a blue chip steadfast at 74 41 but the 93 71 average price target indicates room for a 26 upside potential See Citigroup stock analysis on TipRanks |
JPM | Earnings Wells Fargo Citigroup JP Morgan Chase | Earnings season has well and truly kicked off At the forefront of the reports are US financial Banks On Thursday JP Morgan Chase NYSE JPM Citigroup NYSE C and Wells Fargo NYSE WFC The roaring Trump rally that overtook the first half of 2017 means that there are lofty expectations for the first quarter earnings this year With such a buoyant and supportive economic backdrop investors will be unforgiving to any depletion of growth
JP Morgan Chase reported earnings and revenue which exceeded estimates underpinned by loan growth and trading sales
Earnings per share 1 65 beat expectations
Revenue 25 586 billion beat expectations
Loans Up 9 beat expectations
Once the US market opened JP Morgan Chase rose 1
The stock has jumped 20 since Donald Trump s election on hopes that deregulation of financial institutions would help stimulate growth
Wells Fargo reported strong earnings which surpassed forecasts however revenue disappointed traders
Earnings per share 1 beat expectations
Revenue 22 billion missed expectations
Loans Down 502 million from the last quarter missed expectations
The third largest US bank dropped about 1 once US trading got underway on Thursday
Citigroup s first quarter earnings beat expectations on Thursday
Earnings per share 1 35 beat expectations
Revenue 18 12 billion beat expectations
Loans Up 2 beat expectations
The bank rose more than 1 as trading got underway on Thursday |
JPM | Stocks Close At Lows Ahead Of Holiday Weekend | U S stocks finished the last session of the holiday shortened week lower despite some relatively upbeat results from JPMorgan and Citigroup to unofficially kick off 1Q earnings season Losses accelerated after news broke that the U S dropped the largest non nuclear bomb on a tunnel complex in Afghanistan Energy issues were among the largest decliners as crude oil prices were a bit volatile before finishing nearly where they started Treasuries were mostly flat in an abbreviated session the U S dollar extended losses and gold was higher In economic news wholesale inflation was cooler than expected but consumer sentiment popped above expectations
The Dow Jones Industrial Average DJIA declined 139 points 0 7 to 20 453 the S P 500 Index lost 16 points 0 7 to 2 329 and the NASDAQ Composite declined 31 points 0 5 to 5 805 In moderate volume 772 million shares were traded on the NYSE and 1 6 billion shares changed hands on the NASDAQ WTI crude oil added 0 07 to 53 18 per barrel and wholesale gasoline was 0 01 lower at 1 73 per gallon Elsewhere the Bloomberg gold spot price was 1 02 higher at 1 287 80 per ounce and the dollar index a comparison of the U S dollar to six major world currencies was 0 2 lower at 100 55 Markets were down for the week as the DJIA was 1 0 lower the S P 500 Index declined 1 2 and the NASDAQ Composite lost 1 3
Dow member JPMorgan Chase Co NYSE JPM 84 reported 1Q earnings per share EPS of 1 65 versus the 1 51 FactSet estimate as revenues rose 6 5 year over year y y to 24 7 billion compared to the projected 24 8 billion Fixed income and equity sales and trading revenues topped forecasts The company s Chairman and Chief Executive Officer CEO Jamie Dimon noted that JPM is off to a good start for the year and U S consumers and businesses are healthy and with pro growth initiatives and improving collaboration between government and business the U S economy can continue to improve Shares of JPM gave up early gains and finished lower
Citigroup Inc NYSE C 58 posted 1Q EPS of 1 35 compared to the expected 1 23 with revenues rising 3 0 y y to 18 1 billion versus the projected 17 7 billion The company said the momentum it saw across many of its businesses towards the end of the year carried into 1Q and revenue increased in both its consumer and institutional lines of business However the company s net interest margin declined C closed below the flatline in choppy trading
Wells Fargo Co NYSE WFC 51 announced 1Q profits of 1 00 per share above the expected 0 96 as revenues dipped 0 9 y y to 22 0 billion below the forecasted 22 3 billion The company said its diversified business model generated higher revenue and net income y y though expenses were elevated driven by typically higher 1Q personnel related expenses Shares traded solidly lower
Inflation cooler than expected jobless claims dip consumer sentiment surprisingly improves
The Producer Price Index PPI showed prices at the wholesale level in March dipped 0 1 month over month m m versus the Bloomberg expectation calling for a flat reading and compared to February s unrevised 0 3 rise The core rate which excludes food and energy came in flat versus forecasts of a 0 2 advance and February s unrevised 0 3 increase Y Y the headline rate was 2 3 higher below of projections of a 2 4 increase and the core PPI rose 1 6 last month south of estimates of a 1 8 gain In February producer prices were 2 2 higher and up 1 5 for the headline and core rates respectively
Weekly initial jobless claims dipped by 1 000 to 234 000 last week below forecasts of 245 000 with the prior week s figure being revised higher by 1 000 to 235 000 The four week moving average fell by 3 000 to 247 250 while continuing claims declined by 7 000 to 2 028 000 north of estimates of 2 024 000
The preliminary University of Michigan Consumer Sentiment Index improved this month to 98 0 from the prior month s 96 9 level and compared to expectations of a dip to 96 5 The current economic conditions component rose solidly m m while the outlook portion ticked higher The 1 year inflation and 5 10 year inflation outlooks remained at 2 5 and 2 4 respectively
Treasuries were little changed with the yields on the 2 Year and 10 Year notes flat at 1 21 and 2 24 respectively while the yield on the 30 Year bond ticked 1 basis point higher bp to 2 89
Bond yields have fallen as of late and the U S dollar dropped sharply yesterday after President Trump commented that he thought the currency was getting too strong
Please note All U S markets will be closed tomorrow in observance of the Good Friday holiday
U S stocks dipped on the week with geopolitical concerns continuing to fester toward North Korea and Syria while lingering uncertainty regarding President Trump s pro business policies appeared to foster a modest unwinding of the reflationary trade that fueled some of the post election rally As such the fall in Treasury yields pressured financials while materials industrials technology and health care issues were all lower for the holiday shortened week Energy stocks edged lower despite the modest extension of the recent surge in crude oil prices The markets also appeared to be treading lightly as earnings season shoved off against elevated growth expectations
European stocks see pressure on data and geopolitics Asia mixed
European equities finished lower with the markets digesting comments from U S President Trump regarding the strong U S dollar China and interest rates Financials saw pressure as the markets sifted through mixed results from major U S companies and as Spanish bank Banco Popular MC POP continued to fall amid concerns about its need to raise more capital Oil gas issues retreated from a recent rally as crude oil prices retreated modestly from a recent surge Geopolitical concerns remained toward North Korea and following last week s missile strikes by the U S in Syria while Brexit negotiations continued and a key French Presidential election moved closer
Action was likely muted by market closures tomorrow and Monday for the Easter celebration German and French consumer price inflation rose in line with forecasts The euro dropped and the British pound dipped versus the U S dollar while bond yields in the region were mixed
Stocks in Asia finished mixed with the markets continuing to grapple with heightened geopolitical concerns as well as digesting some Chinese trade data and comments from U S President Trump Japanese equities fell as the yen rallied and the U S dollar fell on the heels of Trump s comments that he thought the greenback was too strong Mainland Chinese stocks ticked higher and shares traded in Hong Kong declined following trade data that showed exports and imports both easily topped forecasts with the former jumping the most in two years per Bloomberg Also the markets reacted to Trump s apparent reversal noting that he will not brand China a currency manipulator
South Korean stocks advanced while the Bank of Korea left its benchmark interest rate unchanged Noticeable weakness in basic materials issues weighed on Australian securities and Indian equities dropped following yesterday s unexpected decline in industrial production Indian stocks have wavered somewhat recently after a run to record highs leading emerging markets strong 1Q rally
Housing and manufacturing data set to headline next week s calendar Next week s economic calendar will bring a glance at the housing market with some key reads in the form of housing starts building permits and existing home sales
Manufacturing data will also make an appearance with next Friday s release of the preliminary Markit Manufacturing PMI Index which will be preceded in the week by a couple of regional manufacturing reports
International releases of note are expected to include China retail sales industrial production and 1Q GDP Australia new vehicle sales and business confidence Japan industrial production and capacity utilization trade data and the Tertiary Industry Index UK retail sales Eurozone CPI construction output and consumer confidence Germany CPI PPI and preliminary Markit Manufacturing PMI Index |
JPM | John Bean Tech Texas Roadhouse Wells Fargo Citigroup And J P Morgan Highlighted As Zacks Bull And Bear Of The Day | For Immediate Release
Chicago IL April 17 2017 highlights John Bean Tech NYSE as the Bull of the Day Texas Roadhouse NASDAQ as the Bear of the Day In addition Zacks Equity Research provides analysis on Wells Fargo NYSE Citigroup NYSE and J P Morgan NYSE
Here is a synopsis of all five stocks
You may not have heard of John Bean Tech NYSE but you have probably been an indirect customer Let s take a look at this stock and why I have made it the Bull of the Day
Consistent Beats
JBT has a great earnings track record The company has topped that Zacks Consensus Estimate in each of the last four quarters These aren t small beats either with the average positive earnings surprise coming in at 21
The most recent quarter saw a beat of 0 18 when the company reported EPS of 0 85 when the Zacks Consensus Estimate was calling for 0 67 That translated to a positive earnings surprise of 26 8
Description
John Bean Technologies a leading global solutions provider to the food processing and air transportation industries The Company designs manufactures tests and services technologically sophisticated systems and products for regional and multi national industrial food processing customers through its JBT FoodTech segment and for domestic and international air transportation customers through its JBT AeroTech segments
New Coverage
Following a secondary offering of about 2M shares JBT saw new coverage from a few brokerages On March 13 the stock was rated a new Outperform at Wells Fargo and on the same day Robert W Baird started coverage as well
About a month later on April 10 JBT was initiated on as an outperform at BMO Capital Markets The brokerage put a 105 price target on the stock at that time
On April 12 CL King upgraded the stock to Buy
Estimates
The Zacks Consensus Estimate has risen over the last 60 days The number moved from 2 94 60 days ago to the present level of 3 05
The Zacks Consensus Estimate for 2018 has also moved higher 60 days ago the number was 3 35 and it has since moved to 3 56
Valuation
When you have a stock that has a good history of beating the number seeing earnings estimates increases you usually have a big multiple That is the case here with JBT as the stock trades at 34x trailing and 28x forward earnings estimates The price to book is also very stiff at 14x while the price to sales is only 2x
For a food delivery and logistics company JBT is still growing the top line at about 15 per year and that translates into earnings growth of more than 20 per year
Shareholders of Texas Roadhouse NASDAQ might have had some indigestion following the most recent earnings report TXRH missed the Zacks Consensus Estimate in each of the last two quarters Despite the near term bad news there is still growth on top and bottom to look forward to
Description
Texas Roadhouse is a growing moderately priced full service restaurant chain They offer an assortment of specially seasoned and aged steaks hand cut daily in every restaurant and cooked to order over open gas fired grills They also offer their customers whom they call their guests a selection of ribs fish chicken and vegetable plates an assortment of hamburgers salads and sandwiches
Recent Quarter
The most recent quarter was a big miss The company reported EPS of 0 29 when 0 37 was expected That miss of 0 08 translates into a negative earnings surprise of 21
The previous quarter was also a miss but a much smaller one The company missed the Zacks Consensus Estimate by a penny or about 2 7
Estimates
Following the miss the Zacks Consensus Estimate has dropped 60 days ago the number took at 1 97 for 2017 but has slipped by a dime The 2018 number moved from 2 24 to 2 11 over the same time period
Growth
Earnings may not be growing but the top line still shows some growth That has allowed the stock to maintain 23x forward earnings multiple The price to book multiple of 4 5x is a little high while the 1 6x price to sales multiple is pretty low The sector TXRH competes in has recently seen some big M A so there should be a mild M A premium priced into shares of TXRH
Additional content
3 Key Takeaways from JPMorgan NYSE JPM s Earnings
Thursday marked the first wave of the big banks quarterly earnings Wells Fargo NYSE Citigroup NYSE and J P Morgan NYSE all reported their earnings today Among them JPM is clearly leading the pack with its solid first quarter earnings
J P Morgan reported earnings of 1 65 per share beating the Zacks Consensus Estimate of 1 51 per share Revenues however fell short of expectations coming in at 24 67 billion
However a company s earnings report is much more than just these numbers especially from one of the giants of the banking industry
Here are three key takeaways from J P Morgan s Q1 earnings
Mobile Banking
The company reported having a 14 growth of active mobile users to 27 3 million
Just like almost all the other industry banking has adopted mobile options to keep up with the demand of today s highly mobile digital society Having a mobile banking app that works reliably and simply is more important ever as the number of consumers using mobile apps as the number is climbing fast
The use of mobile banking is projected to reach 25 of the global population by 2019 according to by KPMG and UBS Furthermore the PEW Charitable Trusts found in a that 46 of the U S population uses mobile payment app to shop pay bills and send or receive money
Having a reliable mobile app not only makes depositing checks easy and quick but it also creates customer loyalty according to a report by
Consumer Business is growing
U S consumers and business are healthy overall and with pro growth initiatives and improving collaborations between government and business the U S economy can continue to improve said J P Morgan CEO Jamie Dimon
The numbers are there to back up Dimon s statement In the first quarter the company had 622 9 billion in deposits increased 11 year over year Also the net revenue of J P Morgan s Consumer Business Bank division was 4 9 billion up 8 from a year ago
Interest Rates Hike
Shares of big banks have been among investors favorites following the election thanks to President Trump s promise of a new approach to bank regulation however it has yet to happen Instead of this policy change the recent interest rate hike by the Federal Reserve could actually help J P Morgan s long term profitability
Net interest income grew 6 to 12 4 billion compared to the same period a year ago The New York bank expects it to be up about 400 million for the second quarter 2017 and up to 4 5 billion for fiscal 2017
Bottom Line
The bank gave us a good start to the Q1 reporting season for the banking sector The earnings report showed solid performance by J P Morgan and moreover how the U S economy is doing and consumers needs Investors should still pay attention to policy and interest rate changes in the near future
J P Morgan is down 0 44 to 85 02 per share
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MPC | House Democrats ask Marathon Petroleum to detail White House talks on vehicle rules | By David Shepardson
WASHINGTON Reuters Three key U S House of Representatives Democrats on Wednesday asked Marathon Petroleum Corp NYSE MPC to disclose any communications between the White House and federal agencies on the Trump administration s proposal to freeze fuel efficiency standards at 2020 levels through 2026
Energy and Commerce Committee Chairman Frank Pallone and two subcommittee chairs asked Marathon in a letter for all documents it exchanged between the National Highway Traffic Safety Administration Environmental Protection Agency and White House and to disclose if the oil company was involved in the controversial rule s development
The proposal s preferred option announced in August 2018 but not finalized would boost U S oil consumption by about 500 000 barrels a day by the 2030s
Marathon did not immediately respond to a request for comment
The letter also signed by Representatives Paul Tonko and Jan Schakowsky said the oil industry stands to profit significantly from the proposed rollback It also seeks details of Marathon s social media efforts related to the proposed regulation
Pallone said Wednesday the oil industry is the only winner from the revised rules
In April EPA Administrator Andrew Wheeler denied the rules were written at the behest of oil industry lobbyists This has nothing to do with the oil industry We re not doing this for the oil industry I m not doing this for the oil industry Wheeler told Reuters
The Trump administration said in August that the freeze would save automakers more than 300 billion in regulatory costs and reduce the projected cost of a new vehicle by 1 850
Deputy National Highway Traffic Safety Administration chief Heidi King said at a congressional hearing that the agencies are still reviewing more than 650 000 comments and that the agency plans to finalize the rule soon
The Democrats also seek records from the American Fuel Petrochemical Manufacturers trade group and other groups |
MS | Kraft Heinz bids 143 billion for Unilever in global brand grab | By Martinne Geller and Pamela Barbaglia LONDON Reuters U S food company Kraft Heinz Co made a surprise 143 billion offer for Unilever LON ULVR in a bid to build a global consumer goods giant although it was flatly rejected on Friday by the maker of Lipton tea and Dove soap A combination would be the third biggest takeover in history and the largest acquisition of a UK based company according to Thomson Reuters data It would bring together some of the world s best known brands from toothpaste to ice creams and combine Kraft s strength in the United States with Unilever s in Europe and Asia The global packaged food industry is grappling with slowing growth new competition from upstart brands deflation in developed markets and more health conscious consumers Although Kraft which is controlled by U S billionaire Warren Buffett and private equity firm 3G Capital said it looked forward to talking terms Unilever said it saw no reason to discuss a deal without financial or strategic merit In its offer Kraft sought to provide assurances over maintaining its culture of innovation recognizing that this requires investment and acknowledged that there are limits to cutting costs according to a source familiar with the bid who requested anonymity to discuss it Kraft has also offered to keep three headquarters for the combined company in the United States Britain and the Netherlands the source added Kraft also expects the combined company to be well capitalized so that its debt is rated investment grade according to the source Kraft has until March 17 to make a final bid for Unilever under UK takeover rules Unilever shares rose to a record following news of the offer which analysts at Jefferies called a seismic shock and closed 15 percent higher short of Kraft s 50 per share offer price with the news lifting shares across the sector Unilever said Kraft s proposal included 30 23 per share in cash payable in U S dollars and 0 222 of a share in a new enlarged entity per Unilever share and represented an 18 percent premium to its share price on Thursday We believe Kraft will likely need to raise its offer substantially if it hopes to change the outcome RBC Capital Markets analyst David Palmer said in a research note Kraft s move could flush out other bidders for Unilever but of the potential rivals U S consumer giant Procter Gamble Co may face anti trust hurdles while pharmaceutical and consumer packaged goods company Johnson and Johnson would likely not be interested in household products UNILEVER S CHALLENGES Unilever which has struggled recently amid slowing growth and currency fluctuations saw its shares tumble 4 5 percent on Jan 26 its worst day in nearly a year when the company reported lower than expected fourth quarter sales The share plunge encouraged Kraft to make an approach another source familiar with the matter said asking not to be named because the matter is confidential Unilever has been hit by a slowdown in emerging markets which it and other consumer companies have long relied on for growth as well as in its home market where consumers have been rattled after Brexit Britain s decision to leave the European Union last year Brexit pushed down the value of the pound raising the cost of producing consumer goods in Britain and straining relations between the country s retailers and suppliers For Kraft its move comes as low interest rates and cheap debt have fueled big cross border deals making it the busiest start to the year for M A activity on record Still investors will look at Kraft Heinz s own track record of boosting sales when evaluating whether they can help Unilever cope with its own slowed growth Kraft s sales fell 3 8 percent to 6 86 billion in the fourth quarter ending Dec 31 and its U S sales which account for more than 70 percent of total sales fell 3 1 percent to 4 84 billion Kraft Heinz shares rose more than 10 percent in New York trading helping lift the Nasdaq to a record high 3G READY TO DEAL Although Kraft is smaller than Unilever with a market value of 106 billion as of Thursday it is 50 9 percent owned by Buffett s Berkshire Hathaway NYSE BRKa and 3G Capital which also controls Anheuser Busch InBev 3G known for driving profits through aggressive cost cutting has orchestrated a string of big deals rocking the food and drink industry including Anheuser Busch InBev s takeover of SABMiller LON SAB and the combination of Kraft and Heinz A deal would offer opportunities to combine marketing manufacturing and distribution in addition to cutting costs but some industry analysts said Kraft might not want Unilever s household and personal goods brands and could spin them off This is cheap money meeting industrial logic said Steve Clayton manager of the HL Select UK Shares fund at Hargreaves Lansdown LON HRGV which owns Unilever shares Kraft Heinz are attempting a massive push on the Fast Forward button To acquire the sheer scale of brands that Unilever represents through one off acquisitions could take decades Clayton added Britain s largest union Unite expressed immediate concern about potential job losses if Unilever fell under Kraft s control Unite urged Unilever to continue fending off the takeover attempt A recent wave of cross border deals in Europe is leaving British businesses vulnerable to possible job cuts PSA s proposed acquisition of General Motors Opel business may eventually lead to heavy restructuring at the Vauxhall brands which employ 4 500 people in Britain sources said
Centerview and Morgan Stanley NYSE MS are working with Unilever alongside UBS and Deutsche Bank DE DBKGn who are also acting as corporate brokers Kraft is working with Lazard |
MS | Japan export growth slows Trump s trade policies cloud outlook | By Stanley White
TOKYO Reuters Japan s exports rose in January at a slower pace than the previous month due to a decline in shipments to the U S and the Lunar New Year holidays and as concerns about growing trade protectionism cast doubts over the outlook
Exports in January rose 1 3 percent from the same period a year ago less than the median estimate for a 4 7 percent annual increase and slower than a 5 4 percent year on year increase in December It s the second month in a row exports have grown following 14 straight months of contraction
Meanwhile imports into the world s third largest economy posted their first increase since December 2014 as oil prices rose following the Organization of the Petroleum Exporting Countries agreement last year to cut production
Stronger economic growth in the United States suggests the decline in Japan s U S bound exports could be temporary but U S President Donald Trump s repeated pledges to pull back from free trade have raised concerns that protectionism will spread
The trend for exports remains strong because global demand is gaining strength said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities
If Japanese auto makers continue to take market share in the United States there will be complaints from the U S side This is a risk because Japan needs exports for growth
The increases in headline export and import numbers were driven in part by stronger trade prices masking a more mixed picture on volumes which were weaker among some product classes
Exports rose in January due to higher shipments of fuel car parts and steel but a decline in auto exports contributed to the slower pace of growth finance ministry data showed on Monday
Japan s exports to the U S fell 6 6 percent in January from a year ago due to fewer shipments of auto and electronic parts
Japan s trade surplus with the United States fell an annual 26 6 percent to 399 3 billion yen 3 54 billion following a 5 1 annual decline in the previous month
If the trade surplus with the United States starts rising again it could become a flashpoint after Trump singled out Japan China and Germany for their high exports into the U S market
Exports to China Japan s largest trading partner rose 3 1 percent year on year in January slower than a 12 4 percent annual increase in the previous month as factories slowed production before the Lunar New Year holidays
Imports rose 8 5 percent in the year to January faster than the median estimate for a 4 7 percent annual increase That marked the first increase in more than two years due to a surge in imports of crude oil from Saudi Arabia and coal from Australia the data showed
The trade balance came to a deficit of 1 09 trillion yen versus the median estimate for a 636 8 billion yen deficit |
MS | Saudi Aramco recruits JPMorgan Morgan Stanley for IPO HSBC a contender source | By Mike Stone Tom Arnold and Sumeet Chatterjee Reuters Oil giant Saudi Aramco IPO ARMO SE has asked JPMorgan Chase Co NYSE JPM and Morgan Stanley NYSE MS to assist with its mammoth initial public share offer and could call on another bank with access to Chinese investors a source with direct knowledge of the matter said The U S banks have joined boutique investment bank Moelis Co in winning coveted roles in what is expected to be the world s biggest IPO worth some 100 billion HSBC Holdings Plc LON HSBA has emerged as the leading contender for a role among a list of five banks that could provide a pipeline to Chinese investors an important part of the offering the source said adding that the other four are Chinese banks Industrial and Commercial Bank of China International Holdings a wholly owned Hong Kong based subsidiary of Industrial and Commercial Bank of China and China International Capital Corporation CICC are among the Chinese banks pitching for the deal two other sources familiar with the matter said This will give Chinese banks a bit of an opportunity to flex their muscles and show that they have the firepower to get involved in such a large global deal said Benjamin Quinlan CEO of financial services consultancy Quinlan Associates There will also be a strategic interest from the government side to have some China role in the IPO process given the role Saudi Aramco plays in the resources sector there So there is a political undertone to it as well The growing Chinese interest in Aramco s IPO comes ahead of King Salman s visit to Asia next week The final line up for banks working on the IPO could still be adjusted the first source said The IPO is the centerpiece of the Saudi government s ambitious plan known as Vision 2030 to diversify the economy away from oil Up to 5 percent of the world s largest oil producer is likely to be listed on both the Saudi stock exchange in Riyadh and on one or more international markets On Tuesday the Wall Street Journal said that JPMorgan Morgan Stanley and HSBC have been selected as lead underwriters Aramco formally known as Saudi Arabian Oil Co declined to comment as did JPMorgan Morgan Stanley and HSBC ICBC did not immediately respond to a Reuters request for comment and CICC declined to comment Citigroup Inc was also among those asked to pitch for an advisory position with Aramco Saudi based industry sources said last month The IPO plan has been championed by Deputy Crown Prince Mohammed bin Salman who oversees the country s energy and economic policies Last year he said he expected the IPO would value Aramco at a minimum of 2 trillion and that the figure might end up being higher Saudi Arabia is considering two options for the shape of Aramco when it sells shares next year either to develop it as a global industrial conglomerate or make it a specialized international oil company industry and banking sources have told Reuters Saudi Aramco has also appointed international law firm White Case which has a long established relationship with the state oil giant as legal adviser for its IPO sources familiar with the matter told Reuters this month Saudi Arabia is favoring New York for listing Saudi Aramco while also considering London and Toronto the Wall Street Journal reported on Monday
The oil giant also held discussions with the Singapore Exchange regarding a potential secondary listing sources have said |
MS | Activist investor Marcato turns up heat on Buffalo Wild Wings | By Michael Flaherty NEW YORK Reuters Activist investor Marcato Capital Management has ratcheted up its attack against Buffalo Wild Wings Inc seizing on the restaurant chain s weak earnings as further evidence to support the fund s goal of overhauling its strategy and board Buffalo Wild Wings O BWLD is failing to deliver on its promise of 20 percent profit margins international expansion and technology upgrade Marcato says in a new 51 page slide presentation headlined over promising and under delivering to be publicly released on Wednesday Marcato officially launched a proxy fight against the company earlier this month nominating four directors for its nine member board on Feb 6 The next day the company reported disappointing earnings Rather than articulating any real plan to address the weakness they instead put forth rosy views that they plan to fix everything but with no timeline no numbers Marcato founder and Chief Executive Officer Mick McGuire told Reuters The activist investor and the company have clashed since Marcato disclosed its stake of more than 5 percent last July Minneapolis based Buffalo Wild Wings stock has slid to 158 20 on Tuesday from 190 two years ago and has a market value of around 2 8 billion One of Marcato s original critiques was that Buffalo Wild Wings did not franchise out enough restaurants and the San Francisco based fund is pushing for a 90 percent franchisee model The franchisee versus company owned restaurant ratio is currently around 50 50 and the company has said the chain actively seeks out new franchisees In Marcato s slide presentation expected to be released on Wednesday it repeats its concerns about the board s lack of experience in the restaurant industry and casts doubt on Buffalo Wild Wings ability to reach key targets Marcato said the company has been unwilling to provide details on a timeline and how it would reach its stated promise of achieving 20 percent profit margins by 2018 Morgan Stanley NYSE MS also cast doubt on that goal While the company s margin goal remains in place the achievability of this goal appears less certain near term the investment bank said in a research note after the results were released citing challenges around the company s same store sales expectations and a rise in raw chicken wing prices A Buffalo Wild Wings spokesman said the company welcomed any input from shareholders and would respond to Marcato s presentation in due course
Buffalo Wild Wings annual meeting is expected in May |
JPM | Michaels perky after JPMorgan nod | JPMorgan NYSE JPM adds Michaels Companies MIK 2 6 to its Focus List The investment firm keeps an Overweight rating on Michaels Shares of Michaels are down 23 YTD Now read |
JPM | Spotlight on Australia as Banks Fuel Rally to Highest in Decade | Bloomberg The past few days have been tumultuous for global equities but Australia turned out to be one of the rare bright spots
Investors in the market have witnessed some of the world s biggest stock gains over the past four days with the S P ASX 200 Index surging to its highest level since January 2008 on Wednesday Financial firms which account for about a third of the benchmark gauge fueled the rally rebounding 5 2 percent from a 1 1 2 year low after a Federal Reserve rate hike and a decision by the European Central Bank to phase out asset buying
Here s where the market stands
While the S P ASX 200 Index s jump in recent days has been spectacular the measure remains 9 6 percent below the record it reached in November 2007 Its 96 percent rebound from the March 2009 low pales next to the three fold surge in the MSCI All Country World Index
With a valuation of 15 5 times estimated earnings Australia s benchmark gauge still trades around its five year average
Tony Brennan head of Australian equity strategy at Citigroup Inc NYSE C in Sydney sees the index rising another 5 3 percent to 6 500 by the end of the year thanks to earnings growth at commodity producers
While everybody keeps a close eye on the trade discussions between the U S and China here is what market watchers are saying about Australia
Rude Health
There s been a few shots on the trade side but nothing has fully broken out said Dermot Ryan a fund co manager at AMP Capital in Sydney Ultimately the stock market looks at the valuation and health of the sectors The resources sector is in rude health at the moment
Not as Sensitive
Australia sometimes acts as an EM by proxy but with one key difference it s not as sensitive to the potential negative impact from increasing tariffs on Chinese and U S goods said Kerry Craig global market strategist at JPMorgan NYSE JPM Asset Management in Melbourne We re not as crucial in the supply chain as many north Asian economies While there would be some impact on the materials sector if Chinese growth was expected to take a hit and metals demand fell it s more than likely that China would respond by increased infrastructure spend to keep the ship steady
Pretty Cheap
The banks look pretty cheap for a longer term investor said Don Hamson managing director at Plato Investment Management in Sydney It s been a bad 18 months but maybe we re coming toward the end of it |
JPM | Bank of England brings forward potential timing of QE bond sell off | By Andy Bruce LONDON Reuters The Bank of England said on Thursday it could start to sell the nearly half trillion pounds of assets it bought to boost the economy sooner than previously thought though analysts said a reduction still looked years away Like other central banks the BoE amassed huge sums of government bonds bought with newly created money to spur economic growth after the financial crisis but a decade later they are now working out how to unwind this stimulus While the U S Federal Reserve has already started this process the BoE still maintains a 435 billion pound 576 billion target for its stock of British government bonds bought through this stimulus known as quantitative easing QE It also holds 10 billion pounds of corporate bonds that it purchased to help the economy through the shock of the 2016 Brexit vote The BoE now says it plans to wind down its asset purchases when interest rates reach around 1 5 percent compared with previous guidance of around two percent Earlier on Thursday it left rates on hold at 0 5 percent but many economists think a rise to 0 75 percent is likely in August after chief economist Andy Haldane voted for a rise It s quite a strong signal that they believe now is the now is the time to start thinking about policy normalization Jason Simpson fixed income strategist at Societe Generale PA SOGN said The changed guidance reflects the BoE s belief that it can cut interest rates closer to zero than it thought possible a few years ago based on its experience after the Brexit vote when rates fell to a record low 0 25 percent Though some policymakers had mooted this before Thursday marks the first time the Monetary Policy Committee as a whole agreed that 1 5 percent was an appropriate level of Bank Rate at which to consider reversing QE Before it starts to reverse QE purchases the BoE wants to ensure it has sufficient margin to cut rates if the economy sours though on Thursday it also noted that it could undo future QE sales with fresh purchases if needed The BoE said unwinding its balance sheet would take place over a number of years at a gradual and predictable pace Although analysts expressed surprise that the BoE decided to publish the new guidance they said any reduction in the BoE s balance sheet could be years away JPMorgan NYSE JPM economist Allan Monks thought it could be around early 2020 until the process starts and a Reuters poll shows economists do not expect rates to exceed 1 0 percent next year The BoE also said it could make extra reserves available to banks through its regular repo operations to counterbalance any reduction through its sale of gilts |
C | 3 Investing Facts About Required Minimum Distributions You Need To Know January 22 2020 | Failing to withdraw a required minimum distribution RMD from your own or an inherited IRA by the deadline results in a big tax code penalty 50 That s right If you were supposed to take out a minimum of 4 000 and oops did not do so you have the privilege of writing the IRS a check for 2 000 It s important to remember that the rules related to RMDs changed on January 1 2020
Like the majority of investors you re most likely working on a retirement portfolio that will provide a large enough nest egg to give you a comfortable retirement Retirement financial planners refer to this as the accumulation phase Your goal in this phase is to choose investments with long term growth potential for example a current top ranked dividend stock like Citigroup C
But there is a second phase of retirement planning that gets less attention even though it s the more enjoyable part It s the distribution phase which simply means spending the assets you ve worked so hard to accumulate
Planning for the distribution phase is the time where you may make decisions about where you ll want to live in retirement whether you ll want to travel hobbies you may pursue and other decisions that will affect your retirement spending
In addition to these considerations it is essential to take into account the RMD that applies to most retirement accounts Basically this is an IRS requirement that you withdraw a certain amount from your qualified retirement accounts once you reach age 72
What is the point of this mandatory withdrawal by the IRS Not surprisingly it s to be sure that the government gets their tax money Without the RMD requirement individuals could live off other income and never pay tax on retirement account gains That cash could be left to family or friends as an inheritance and the IRS would not receive taxes from it
What You Need to Know About RMDs
What types of retirement accounts have RMDs Qualified retirement accounts such as IRA accounts 401 k s 457 plans and other tax deferred retirement savings plans like a TSP 403 b TSA SEP or SIMPLE IRA plan require withdrawals in retirement
When does it become necessary to begin taking distributions Your first distribution must be taken by April 1 of the year following the calendar year that you turn 72 for most accounts Also if you retire after that age you must take your first RMD from your 401 k profit sharing 403 b or other defined contribution plan by April 1 of the year after the calendar year in which you retire
For each year after your required starting date you must take your RMD by December 31 Note that you don t need to take an RMD on a Roth IRA since you covered taxes before contributing Other varieties of Roth accounts require RMDs But there are approaches to avoid them for instance you can roll your Roth 401 k into your Roth IRA
What happens if I don t take my RMD The penalty for not taking a required minimum distribution or not taking a large enough distribution is a 50 tax on the amount not withdrawn in time
How much cash do I need to withdraw To figure out a particular RMD you should divide your earlier year s December 31st retirement account balance by a distribution period factor dependent on your age
Example Ann is 71 and must take her first RMD in the year following the year she reaches age 72 Her year end IRA balance the prior year was 100 000 Her distribution period factor is 27 4 The result of dividing 100 000 by 27 4 is 3 649 63 the amount that Ann must withdraw for her first RMD
Learning about the distribution phase is just one aspect of preparing for your nest egg years
To learn more about the tax implications of retirement spending and much more about retirement planning download our free guide Retirement Made Easy You ll find useful detailed steps to help you navigate both the accumulation and distribution phases of retirement planning Get Your FREE Guide Now |
JPM | Earnings Results In Focus | Three of the biggest banks on Wall Street have reported earnings results for fiscal Q1 before the bell this Thursday JPMorgan Chase NYSE JPM Citigroup NYSE C and Wells Fargo NYSE WFC have all beaten or met bottom line earnings per share EPS estimates while topping slightly estimates for revenues in the quarter This tips off the unofficial Q1 earnings season which picks up momentum on Monday following the Good Friday holiday tomorrow JPMorgan put up 1 65 per share on 25 58 billion in quarterly revenues easily beating the 1 51 per share and 24 68 billion in the Zacks consensus estimate Average core loans rose 9 in the quarter This marks at least the fifth straight quarter of an earnings beat the previous 4 quarter average of 12 Citi s 1 35 per share beat the Zacks consensus by 9 cents in the quarter Its 18 12 billion in revenues topped the 17 81 billion from the Zacks consensus with a 4 quarter earnings beat average of 7 74 Wells Fargo met expectations of 97 cents per share but beat the Zacks consensus estimate of 22 13 billion in revenues to 22 315 billion in the quarter This is the third quarter in the past four where Wells Fargo has beaten estimates on the bottom line but only by an average of 1 Initial Jobless Claims fell by 1000 week over week from a previous week revision up 1K to 234K indicating continued strength in the U S labor market We remain at historic lows going back 40 years to when the U S had far few workers and industries in jobless claims with continuing claims remaining just barely above 2 million And all this before any new infrastructure or jobs growing legislation has even been presented to Congress Last week we saw the unemployment rate sink to 4 5 this looks to be justified in the jobs market going forward as well |
JPM | 3 Key Takeaways From JPM s Q1 Earnings | Thursday marked the first wave of the big banks quarterly earnings Wells Fargo NYSE WFC Citigroup NYSE C and J P Morgan NYSE JPM all reported their earnings today Among them JPM is clearly leading the pack with its solid first quarter earnings
J P Morgan reported earnings of 1 65 per share beating the Zacks Consensus Estimate of 1 51 per share Revenues however fell short of expectations coming in at 24 67 billion
However a company s earnings report is much more than just these numbers especially from one of the giants of the banking industry
Here are three key takeaways from J P Morgan s Q1 earnings
Mobile Banking
The company reported having a 14 growth of active mobile users to 27 3 million
Just like almost all the other industry banking has adopted mobile options to keep up with the demand of today s highly mobile digital society Having a mobile banking app that works reliably and simply is more important ever as the number of consumers using mobile apps as the number is climbing fast
The use of mobile banking is projected to reach 25 of the global population by 2019 according to by KPMG and UBS Furthermore the PEW Charitable Trusts found in a that 46 of the U S population uses mobile payment app to shop pay bills and send or receive money
Having a reliable mobile app not only makes depositing checks easy and quick but it also creates customer loyalty according to a report by
Consumer Business is growing
U S consumers and business are healthy overall and with pro growth initiatives and improving collaborations between government and business the U S economy can continue to improve said J P Morgan CEO Jamie Dimon
The numbers are there to back up Dimon s statement In the first quarter the company had 622 9 billion in deposits increased 11 year over year Also the net revenue of J P Morgan s Consumer Business Bank division was 4 9 billion up 8 from a year ago
Interest Rates Hike
Shares of big banks have been among investors favorites following the election thanks to President Trump s promise of a new approach to bank regulation however it has yet to happen Instead of this policy change the recent interest rate hike by the Federal Reserve could actually help J P Morgan s long term profitability
Net interest income grew 6 to 12 4 billion compared to the same period a year ago The New York bank expects it to be up about 400 million for the second quarter 2017 and up to 4 5 billion for fiscal 2017
Bottom Line
The bank gave us a good start to the Q1 reporting season for the banking sector The earnings report showed solid performance by J P Morgan and moreover how the U S economy is doing and consumers needs Investors should still pay attention to policy and interest rate changes in the near future
J P Morgan is down 0 44 to 85 02 per share
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JPM | Trump States He Would Prefer To Keep Interest Rates Low | DOW 59 20 591SPX 8 2344NAS 30 5836RUT 17 135910 Y 01 2 29 Oil 68 52 72Gold 12 60 1287 60
The S P 500 closed below its 50 day moving average for the first time since Nov 8 The 50 day moving average is a good indicator of the intermediate term trend
The dollar slumped and Treasury bond yields dropped to the lowest level this year after President Donald Trump said he will not brand China a currency manipulator and added that the greenback was getting too strong
Trump also told the Wall Street Journal that he would prefer the Federal Reserve keep interest rates low Trump also told the Journal he d consider re nominating Yellen to chair the Fed s board of governors after attacking her during his campaign I like her I respect her Trump said It s very early
Trump also voiced support for the Export Import Bank which helps subsidize some U S exports after opposing it during the campaign
Finally Trump said NATO is no longer obsolete during a press conference today with NATO Secretary General Jens Stoltenberg backtracking on his past criticism of the alliance During the campaign he frequently called the organization obsolete saying it did little to crack down on terrorism and that its other members don t pay their fair share
And that is all within the past 24 hours
U S stocks declined for a second day as volatility climbed again across asset classes Rising tensions with Russia North Korea and Syria after U S missile strikes in Syria last week and escalating posturing with North Korea have kept investors cautious
Today Russia blocked a Western effort at the U N Security Council on Wednesday to condemn last week s deadly gas attack in Syria and push Moscow s ally President Bashar al Assad to cooperate with international inquiries into the incident It was the eighth time during Syria s six year old civil war that Moscow has used its veto power on the Security Council to shield Assad s government
Secretary of State Rex Tillerson met Putin in the Kremlin after talking to the Russian foreign minister Sergei Lavrov for around three hours The White House claims Russia tried to cover up the Syrian chemical attack Putin said trust had eroded between the United States and Russia Tillerson said relations with Russia are at a low point
Meanwhile a U S Navy strike group is steaming toward the western Pacific in a show of force and North Korea is warning of a nuclear attack on the United States at any sign of American aggression
Even if geopolitical hotspots do not boil over they require attention that is not being put toward pro business policies such as tax cuts simpler regulations and higher infrastructure spending promises that helped power Wall Street to record highs
The S P financial index SPSY was down 0 9 percent a day ahead of results from three major banks in what will mark the start of the corporate earnings season Analysts are expecting earnings to have risen 10 percent for all S P 500 companies in the first quarter Wells Fargo NYSE WFC Citigroup NYSE C and JPMorgan NYSE JPM are due to report results on Thursday the last trading day of the week ahead of the Good Friday holiday
Berkshire Hathaway NYSE BRKa is dumping 9 million shares of Wells Fargo worth around 480 million to get around possible Federal Reserve regulations Warren Buffett s company owned more than 10 of the bank after Wells repurchased a large chunk of its shares in 2016
Any entity owning more than 10 of a bank like Wells is subject to increased regulation from the Fed Berkshire consulted with the Fed regarding the additional regulations and decided it did not want to deal with the trouble Additionally the company said it has no plans to sell any more Wells shares beyond the quantity required to provide a small safety margin below 10
The Labor Department said fell 0 2 percent last month the largest drop since August after a 0 4 percent increase in February That lowered the year on year increase in import prices to 4 2 percent from 4 8 percent in February
The cost of petroleum declined in March but the underlying trend points to a moderate rise in imported inflation as the dollar s rally fades Prices for imported petroleum fell 3 6 percent last month the biggest drop since August after increasing 1 3 percent in February
Import prices excluding petroleum increased 0 2 percent after rising 0 3 percent the prior month Import prices excluding petroleum have now increased for three straight months in part reflecting an ebb in the dollar s rally
Prices for imported capital goods edged up 0 1 percent in March after rising 0 2 percent in February
The drop in import prices is unlikely to be sustained with oil prices pushing higher in recent days following last week s U S missile strike on Syria and reports that Saudi Arabia wants to extend production cuts enacted in January for another six months
Despite weak imported price pressures domestic inflation is rising Most consumer inflation measures have pushed above the Federal Reserve s 2 percent target A report on Thursday is expected to show producer prices unchanged in March but rising 2 4 percent on a year on year basis
The U S government had a 176 billion budget deficit in March as spending outstripped revenue The budget deficit was 108 billion in March 2016 according to Treasury s monthly budget statement The fiscal 2017 year to date deficit was 527 billion compared with 459 billion in the same period of fiscal 2016
President Trump is issuing a that will call for a rethinking of the entire structure of the federal government a move that could eventually lead to a downsizing of the overall workforce and changes to the basic functions and responsibilities of many agencies
The order which will go into effect Thursday also will lift a blanket federal hiring freeze that has been in place since Trump s first day in office almost three months ago and replace it with hiring targets in line with the spending priorities the administration laid out in March
The move is a part of Trump s campaign pledge to drain the swamp and it is expected to hit strong resistance in Congress The budget already is facing opposition in Congress and many programs the administration would like to target could only be eliminated through legislation
is trying to push ahead with business as usual a day after a Supreme Court justice ordered corruption probes into 98 politicians including leading legislators and a third of his cabinet
Temer avoided commenting on the unprecedented wave of investigations triggered by plea bargain testimony from executives at engineering group Odebrecht but he made clear the government was committed to implementing its ambitious reform agenda which includes an overhaul of Brazil s pension system The investigation includes eight government ministers the heads of both chambers of Congress and dozens of senior lawmakers
Fewer Americans own homes than ever before and rising consumer confidence does not appear to be changing that The nation s home ownership rate dropped to a record low in 2016 from a record high in 2004 and even as home sales improve first time buyers are still missing out on much of the recovery
Some renters are staying put by necessity and some by choice it depends on who is asking them The number of renters who said they don t know when they expect to move rose to 37 percent in March compared with 30 percent in a survey conducted last September according to a survey released this week by Freddie Mac which helps finance the multifamily apartment market
Survey respondents who said they expect to move during the next two years fell to 33 percent from 38 percent since September In addition 55 percent of all respondents and 60 percent of 35 to 49 year olds said they like where they live and don t plan to move even if their rents rise
A separate survey by Zillow a real estate company which lists both rental and for sale properties found more than two thirds of renters said that saving for a down payment was keeping them from buying a home With home prices hitting new peaks in many markets a 20 percent down payment on a typical home costs more than two thirds of about 56 000 the national median annual household income according to Zillow
United Continental Holdings will compensate all passengers for the cost of the flight in which a man was forcibly removed by security officers A spokeswoman for the airline declined to say if the payment would be in cash frequent flier miles or some sort of weird voucher that nobody knows how to redeem
After the blunder of the initial incident was compounded by a series of botched public responses United is stepping up the effort to get back in consumers good graces The passenger who was dragged from the plane was treated at a Chicago hospital and his lawyers sought a court order in Chicago to preserve evidence including surveillance videos crew lists and other information that could be used in litigation A lawsuit hasn t been filed but it looks like it is on the way
The city of St Louis Missouri where the Rams were based for two decades before jilting it for Los Angeles last year filed a lawsuit Wednesday claiming the team and the NFL failed to use proper protocol when the Rams were relocated
The complaint also claims that moving the team improperly enriched Rams executives It notes that Forbes estimated the value of the team more than doubled after it moved to Los Angeles St Louis is seeking 1 billion in damages
I ve seen the Rams play No way the loss of that team is worth 1 billion |
JPM | Time For The Banks To Shine | Banks come in all shapes and sizes The one above is certainly one of the more unusual one s though Through my career I have worked for a few banks And I can say that they also have all sorts of shapes and sizes of offices within the same bank Take JP Morgan for example When I first started there it was Chase Manhattan then I worked 4 floors underground at 1 Chase Plaza later on the 14th floor on Park Avenue and 51st then back to the 3rd floor of the basement before I left They can show you whatever they want to show you
That goes for bank earnings as well And today they shine for the most part with JPMorgan NYSE JPM Citigroup NYSE C and Wells Fargo NYSE WFC posting better than expected EPS Like I said they can show you whatever they want to show you So when I look at the banks I look at the reaction the sentiment all contained in the price action to tell me what is happening A broader look at that comes from the S P Bank ETF NYSE KBE The chart below tells a story without the noise and glossy facade of a nice earnings report
The chart above shows the ETF from its all time high in early 2007 until today on a weekly basis Yes there is an index that has not made a new all time high After a bounce at the bottom of the financial crisis in 2009 to a short term peak in 2010 at a 38 2 retracement of the fall it floundered for several years When the 200 week SMA finally came to meet the price it started higher in August 2012 pushing to a new high and stalling at the 50 retracement of the fall From mid 2013 until the election last fall it basically moved sideways in consolidation That is a long consolidation
It jumped after the election racing higher to a top at the end of February A shooting star candlestick was a portend for a reversal and it has delivered that reversal since falling back to the 61 8 retracement of the big drop That pullback did a good job of resetting momentum indicators lower The RSI fell from being overbought to now at the mid line near the edge of the bullish zone And the MACD has also crossed down and moved lower It is nearly back to its 200 day 40 week SMA and at a crossroads
Technically this would be a great place for the ETF to bounce and with strong earnings reports that could be the course But a retracement back the prior consolidation zone would also keep the longer view bullish A cross down through that 50 level would turn the tide to bearish for the banks Which path will it take I do not know Prepare for all 3
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment I or my affiliates may hold positions or other interests in securities mentioned in the Blog please see my page for my full disclaimer |
JPM | Gold Advances Among Softer U S Yields | UK Europe closed due to Bank Holiday
FTSE 100 closed at 7327 59
DAX closed at 12109 00
CAC closed at 5071 10
Euro Stoxx 50 closed at 3448 26
European markets closed the week on a negative note
The FTSE 100 retreated 0 29 on Thursday as energy stocks 0 92 lead losses on softer oil prices The WTI retreated to 53 per barrel after the EIA stated that the oil inventories rose in the first quarter despite OPEC s efforts to reduce the global supply glut The positive momentum in oil markets eased The price of a barrel could pull back to 52 40 and 51 40 minor 23 6 and major 38 2 retracement on March 21st to April 11th rise Solid offers are eyed pre 55 00
Across the channel the stronger euro weighed on investor sentiment which was already weakened due to French political uncertainties and geopolitical tensions in North Korea and Syria The DAX closed the week softer for the second consecutive week 1 11 the CAC wrote off 1 10 over the week breaking the series of six consecutive weeks of gains
The EUR USD remained sold into 1 0700 major 38 2 retracement on March April slide and consolidated below the 100 day moving average 1 0624 in Asia
European markets will be closed today and on Monday
Risk appetite in Asia remained limited on Friday Nikkei 0 73 and TOPIX 0 81 extended losses on stronger yen The USD JPY hit 108 72 yesterday and remained capped below 109 23 in Tokyo More offers are eyed pre 200 day moving average 109 66 Light option barriers stand 109 35 and 110 00 for today s expiry
Gold advanced to 1290 10 Softer US yields meaning lower opportunity cost for holding gold should encourage a further rise in gold allocations The next natural target for gold bulls stands at 1300
Earnings season kicked off well in the US as JPMorgan NYSE JPM and Citigroup Inc NYSE C posted solid trading gains in the first quarter The reflation environment and improved yields benefited to the US banks Moving forward softening US yields could dent the enthusiasm in bank shares Nevertheless the Federal Reserve Fed is expected to proceed with two additional interest rate hikes in 2017 and start shrinking the size of its balance sheet by the end of the year Although Donald Trump voiced concerns about the strengthening US dollar and has the option to slow down the USD appreciation by an expansive fiscal policy the US interest rates are set to increase as the US monetary conditions will be tightened either way
The US 10 year yields stabilized at 2 22 2 23 the lowest levels since November Still they trade with more than 20 premium compared to the pre Trump levels As a quick reminder the US 10 year yields stood below 1 80 before Donald Trump was elected President of the United States
Although the US dollar s mid term term direction is contingent on the combination of fiscal and monetary policies the short term trend is driven by the information available to investors today Hence in the dirt of further details regarding the US fiscal policy we expect the USD s sell off to cool down The US Congress will be closed for the next two weeks As such the economic data should be in focus of short term traders
The US will release the March inflation figures before the weekly closing bell The inflation excluding food and energy could have advanced to 2 3 year on year from 2 2 printed a month earlier Solid read should revive the Fed hawks and help the US dollar paring losses across the board
Finally the Turkish lira pares gains as investors take profit and flatten their position before Sunday s constitutional referendum Turkey may be giving the most important decision of its modern history On Sunday April 16th Turkish citizens will say yes or no to the constitutional change aiming to consolidate President Erdogan s power at the heart of the government We are prepared for two sided volatility in TRY and TRY denominated assets at Monday s open
Quick glance at technical on LCG Trader
USD ZAR upside prevails with support at 13 0830 Below 13 0830 downside potential to 12 6300 12 3600
EUR SGD Downside prevails with resistance at 1 487 Above 1 487 upside potential to 1 489 1 490
GBP AUD downside prevails with resistance at 1 6580 Above 1 6580 upside potential to 1 6625 1 6651 |
JPM | Lira Eases Into Referendum USD Recovers | The Turkish lira pares the weekly gains as investors take profit and flatten their position before Sunday s constitutional referendum
Turkey may be giving the most important decision of its modern history On Sunday April 16th Turkish citizens will say yes or no to the constitutional change aiming to consolidate President Erdogan s power at the heart of the government We are prepared for two sided volatility in TRY and TRY denominated assets at Monday s open
Turkey to say Yes or No
Although the accuracy of the market polls are questioned Reuters has reported that the yes camp may have slightly taken the lead
While a no vote could trigger a relief rally across the Turkish lira and lira denominated assets the market reaction to an eventual yes vote is unpredictable
A yes victory could bring along a sharp sell off on Monday followed by a sharp rebound similar to the U S presidential election In fact Turkish companies were brought to comply with Erdogan s rule over more than ten years Specific sectors including the construction sector boomed under Erdogan s government Therefore a yes victory could mean a favorable playground for some of the Borsa Istanbul BIST companies although the fundamentals of the Turkish economy could be questioned in the medium to long term
A no vote could boost the appetite in the Turkish stock and currency markets Nevertheless there are rising speculations that a failure to pass the constitutional referendum could mean another referendum for Turkey hence the extension of political uncertainties through a progressively tenser political and social environment
On the run up to the referendum the USD TRY eased to its 100 day moving average for the first time since September 2016 A two sided volatility could hit the lira crosses on Monday In the aftermath of the election we will be monitoring the key technical levels
As the market absorbs the referendum results the only fact of having the vote behind could encourage further gains in the Turkish lira The lira could challenge the 3 55 3 50 support on the downside On the topside the key resistance is eyed at 3 80 and a significant break above this level should suggest a renewed anxiety regarding the Turkish lira increase the selling pressure and push the USD TRY toward the 4 00 mark
Japanese stocks extended losses on stronger yen
Risk appetite in Asia remained limited on Friday
Nikkei 0 49 and Topix 0 63 extended losses on stronger yen The USD JPY hit 108 72 yesterday and remained capped below 109 23 in Tokyo More offers are eyed pre 200 day moving average 109 66 Light option barriers stand 109 35 and 110 00 for today s expiry
UK and European markets closed the week on a negative note
The FTSE 100 erased 0 29 on Thursday as energy stocks 0 92 lead losses on softer oil prices The WTI retreated to 53 per barrel after the EIA stated that the oil inventories rose in the first quarter despite OPEC s efforts to reduce the global supply glut The positive momentum in oil markets eased The price of a barrel could pull back to 52 40 and 51 40 minor 23 6 and major 38 2 retracement on March 21st to April 11th rise Solid offers are eyed pre 55 00
Across the channel the stronger euro weighed on investor sentiment which was already weakened due to French political uncertainties and geopolitical tensions in North Korea and Syria The DAX closed the week softer for the second consecutive week 1 11 the CAC wrote off 1 10 over the week breaking the series of six consecutive weeks of gains
The EUR USD remained sold into 1 0700 major 38 2 retracement on March April slide and consolidated below the 100 day moving average 1 0624 in Asia
USD pares losses before March inflation data
Earnings season kicked off well in the U S as JPMorgan NYSE JPM and Citi posted solid trading gains in the first quarter The reflation environment and improved yields benefited to the U S banks Moving forward softening U S yields could dent the enthusiasm in bank shares Nevertheless the Federal Reserve Fed is expected to proceed with two additional interest rate hikes in 2017 and start shrinking the size of its balance sheet by the end of the year
Although Donald Trump voiced concerns about the strengthening US dollar and has the option to slow down the USD appreciation by an expansive fiscal policy the U S interest rates are set to increase as the US monetary conditions will be tightened either way
The U S 10 Year yields stabilized at 2 22 2 23 the lowest levels since November Still they trade with more than 20 premium compared to the pre Trump levels As a quick reminder the U S 10 year yields stood below 1 80 before Donald Trump was elected President of the United States
Although the U S dollar s mid term term direction is contingent on the combination of fiscal and monetary policies the short term trend is driven by the information available to investors today Hence in the dirt of further details regarding the U S fiscal policy we expect the USD sell off to cool down The U S Congress will be closed for the next two weeks As such the economic data should be in focus of short term traders
The U S will release the March inflation figures before the weekly closing bell The inflation excluding food and energy could have advanced to 2 3 year on year from 2 2 printed a month earlier Solid read should revive the Fed hawks and help the US dollar paring losses across the board
The Dow Jones is called 16 points firmer at 20 469 the U S open |
MPC | Marathon Galveston Bay workers to resume contract talks official | HOUSTON Reuters Union workers at Marathon Petroleum NYSE MPC Corp s Galveston Bay Refinery are preparing to resume negotiations with the company after rejecting the last contract offer a United Steelworkers USW official said
The Galveston Bay Refinery located in Texas City Texas was the site of a bitter strike in 2015 which began over a breakdown in national contract talks but lasted almost five months because of disagreements on local terms
On Monday Marathon spokesman Sid Barth said Negotiations continue operations continue
No date has been set for the talks said David Jankowski vice president of USW Local 13 1 which represents workers at the refinery
We re waiting on the company for dates and times Jankowski said
The Galveston Bay workers rejected Marathon s contract offer in voting last week
One reason for the overwhelming vote against Marathon s offer was a proposed change in leadership on the production units to salaried staff from hourly chief operators Jankowski said
Marathon is also seeking changes in time off and sick leave
Negotiators for the USW International union reached agreement on Jan 31 with Shell LON RDSa Oil Co representing oil companies on wages increases and benefits for 30 000 refinery chemical plant pipeline and terminal workers represented by the union including the hourly employees at the Galveston Bay Refinery
That agreement which provides an 11 percent pay raise over its three year length will be paired with the agreement on local issues at Galveston Bay to make the contract for workers at the refinery |
MPC | U S Renewable Fuel Standard is not working Marathon CEO | HOUSTON Reuters The U S Renewable Fuel Standard RFS laws are not working and there is an opportunity for a reset of the standard in Washington Marathon Petroleum Corp NYSE MPC Chief Executive Gary Heminger said on Tuesday The RFS requires refineries to blend fuels with ethanol to reduce pollution or pay for credits to subsidize those that do that blending Heminger said that the standard has caused very volatile prices of those credits and that it needs reform The Trump Administration has attempted to reform the standard but has maintained much of the existing framework of the law due to support from corn producers in Iowa and other farming states |
MPC | IMO 2020 fuel switch won t be shock to globe s refiners Marathon CEO | HOUSTON Reuters Marathon Petroleum Corp NYSE MPC Chief Executive Gary Heminger said the switch to ultra low sulfur diesel fuel for ships scheduled for Jan 1 2020 would not be a shock to the global oil refining industry Speaking at the CERAWeek energy conference Heminger said he expected U S refiners would begin building an inventory of the new diesel fuel for ships by the middle of 2019 to be prepared for the change in marine fuels mandated by the International Maritime Organization IMO |
MPC | Marathon Petroleum s midstream units to merge in 9 billion deal | Reuters U S oil refiner Marathon Petroleum Corp NYSE MPC said on Wednesday MPLX would buy Andeavor Logistics LP for 9 billion merging its two midstream units that transport store and market crude oil and refined products through pipelines terminals and trucking operations
In October the refiner said it planned to assess options for the two master limited partnerships which could include either one buying the other
Under the terms of the agreement Andeavor shareholders will receive 1 135 common units of MPLX for each common unit held and Marathon will receive 1 0328 MPLX common units for each ANDX common unit held
The deal has a total enterprise value of 14 billion
By buying rival Andeavor last year for over 23 billion the refiner gained more exposure to the areas where Andeavor Logistics held its assets including the Bakken region and the largest oilfield in the United States the Permian basin
Mike Hennigan will remain President of the combined entity and lead all midstream activities the company said |
MS | Tone of British EU divorce talks to decide path for UK growth poll | By Jonathan Cable LONDON Reuters The tone of Britain s divorce negotiations with the European Union will be the main factor influencing the economy this year according to economists polled by Reuters who also say the Bank of England will leave policy steady at least until 2019 Prime Minister Theresa May has said she wants to trigger formal Brexit negotiations beginning a two year countdown to leaving the EU by the end of March May has promised tighter control over immigration when Britain leaves the bloc even if it means the country losing its unfettered access to the EU s single market and has said she would prefer no deal to a bad deal When asked by Reuters to name the biggest downside risks to the British economy nearly all the respondents in the poll conducted in the past week cited fractious Brexit negotiations Similarly the joint most popular factor that could cause British growth to be stronger than expected was a smooth running of the negotiations along with consumer spending remaining strong Brexit will dominate the UK s markets economy and politics Jacob Nell at Morgan Stanley NYSE MS said Bank of England Governor Mark Carney said this month there would be twists and turns on the road to Brexit as the central bank kept interest rates at their record low Since the June vote to leave the EU Britain s economy has fared much better than was feared outpacing its peers last year owing in large part to strong consumer spending and increased consumer borrowing The Bank of England made a sharp increase to forecasts for economic growth in 2017 earlier this month jacking up its 2017 growth projection to 2 0 percent from 1 4 percent Only one of the 61 economists in the latest Reuters poll was that optimistic Instead the median forecasts say the economy will grow 1 5 percent this year and 1 3 percent next Quarterly growth will be between 0 2 and 0 4 percent through to end June 2018 the poll found KEEP CALM AND CARRY ON Sterling has fallen around 15 percent against the U S dollar since the vote making UK exports cheaper But it has also driven up import costs contributing in large part to a 20 percent annual jump in producer input costs in January Consumer prices are now rising 1 8 percent year on year faster than shoppers have been used to in recent years Inflation is predicted to average 2 6 percent this year and next the poll found similar to the BoE s forecasts Real consumption growth is set to slow as real wage gains slow and employment stabilizes said Kallum Pickering at Berenberg The inflation forecasts exceed the Bank of England s 2 percent target But policymakers who failed to get inflation close to their goal in the years after the global financial crisis are likely to ignore the temporary impact of Britain s weak pound and maintain their ultra loose policy stance After the referendum the BoE cut interest rates to a new record low of 0 25 percent and expanded its asset purchase program Only a few economists polled expect any further change in policy before 2018 is over Those who did expect change were divided over whether the BoE s stimulus for the economy would be curtailed or expanded On Feb 2 the BoE also said it now believed the unemployment rate could fall to 4 5 percent down from a previous estimate of 5 percent and below the current rate of 4 8 percent before it starts to push up inflation Economists taking part in the Reuters said it could only dip to 4 7 percent based on the median forecast It is plausible that unemployment could fall some way below 5 percent in the current environment without generating a significant increase in wage inflation so the direction of change in the Bank s estimate seems reasonable said John Hawksworth at PwC For other stories from the global poll Polling by Sarmista Sen Eiting by Ross Finley William Schomberg and Alison Williams |
MS | Morgan Stanley to pay 8 million to settle SEC charges | Reuters Morgan Stanley NYSE MS has agreed to pay 8 million to settle charges related to single inverse exchange traded fund investments that the firm had recommended to clients U S financial regulators said on Tuesday In a statement the Securities and Exchange Commission said Morgan Stanley admitted to wrongdoing adding that the company had from 2010 to 2015 recommended securities with unique risks and failed to follow its policies and procedures to ensure they were suitable for all clients Unlike a normal index fund inverse ETFs aim to deliver the opposite of the return of a market benchmark on a given day using futures contracts and other financial derivatives For instance an inverse fund could go up by 5 percent on a day the index it tracks declines by 5 percent Over longer periods of time the funds performances often differ dramatically from the indexes they track Morgan Stanley solicited clients to purchase single inverse ETFs in retirement and other accounts the securities were held long term and many of the clients experienced losses the SEC said Morgan Stanley spokeswoman Bernadette Rhodes said the firm was pleased to have resolved the matter but had no further comment
Regulators have previously penalized companies including Morgan Stanley for selling the funds without what it said were properly disclosing the risks or for not considering the appropriateness of the products for clients |
MS | Morgan Stanley s chief U S equity strategist to join hedge fund source | By Olivia Oran NEW YORK Reuters Morgan Stanley s chief U S equity strategist Adam Parker is leaving the firm according to an internal memo from the company on Tuesday seen by Reuters Parker is joining hedge fund Eminence Capital as its director of quantitative strategy according to a person familiar with the matter who declined to be identified because the matter was private Parker had also served as the director of quantitative research while at Morgan Stanley NYSE MS Mike Wilson Morgan Stanley s chief investment officer of wealth management will assume an expanded role which includes Parker s responsibilities as well as serving as chief investment officer of institutional securities Wilson joined Morgan Stanley in 1989 as an investment banker and held various positions including head of content distribution In 2012 he was appointed chief investment officer of wealth management
A Morgan Stanley spokesman confirmed the contents of the memo Parker could not be reached immediately for comment |
MS | Italy court seeks 1 4 billion from Treasury executives over Morgan Stanley derivatives | ROME Reuters An Italian audit court prosecutor said on Friday that Treasury officials should pay around 1 3 billion euros 1 38 billion in damages over derivatives contracts with U S bank Morgan Stanley N MS The claim relates to contracts originated between 1995 and 2005 and terminated in December 2011 and January 2012 which the Lazio regional court s prosecutor says were unfairly weighted in the bank s favor Deputy prosecutor Massimiliano Minerva said 70 percent of a total 4 1 billion euros in damages should be paid by the bank and the rest by Italian Treasury officials He did not say which officials he wanted the payment from Morgan Stanley said in a securities filing last year the prosecutor had proposed it pay 2 9 billion euros to settle the transactions A spokesman for the bank said the claim was groundless
1 0 9397 euros |
JPM | JPMorgan Says These Stocks Can Save You From OPEC Volatility | Bloomberg Yes oil will very likely slump after this Friday s OPEC meeting according to JPMorgan But stock investors can protect themselves by betting on the industry s best cash flow generators
JPMorgan which expects Brent to drop to the mid 60s a barrel from 75 in the near to medium term as the cartel shifts toward production increases says it prefers sector stocks that aren t directly tied to the oil price but rather reflect the industry s lowest break even cash flow levels Royal Dutch Shell LON RDSa BP LON BP and Galp Energia LS GALP are companies with the highest proportion of high margin barrels according to the bank
If oil trends lower following the OPEC meeting the companies that investors should be buying are the ones that are structurally well placed to manage a lower oil price because they re starting at lower cash break evens Christyan Malek an analyst at JPMorgan NYSE JPM in London said by phone Our preference is not for companies that are geared to the oil price because we aren t that bullish oil but for companies who offer the lowest cash break evens they ve got the best cash flow per barrel
Brent has retreated as much as 8 percent from the 2014 high reached last month dragging down the Stoxx 600 Oil Gas Index as Organization of Petroleum Exporting Countries now appear to be aiming for a modest production boost to bridge the gap between Russia s push for a big ramp up and Iran s insistence that no change is needed The sector is among the region s best performers this year and is seen increasing 2018 earnings by 36 percent At the same time analysts have reduced projections for profit growth in 2019 to 6 3 percent from 12 percent at the start of the year
Oil stocks have performed well this year but on a multi year basis they re still underperforming Malek said Investors remain skeptical that the oil price that they see is the real oil price as this week has proved |
JPM | Strike seen lifting Brazil monthly inflation to two year high | By Bruno Federowski BRASILIA Reuters Product shortages driven by an 11 day truckers strike in late May likely lifted Brazilian consumer prices in the month to mid June by the most in more than two years driving the annual inflation rate comfortably back to the official target range The benchmark IPCA index probably rose 1 00 percent from mid May according to the median of 21 forecasts compiled in a Reuters poll of economists That would be the fastest monthly pace since mid February 2016 after truckers protesting high diesel prices blocked major roadways nearly paralyzing key sectors and forcing farmers to cull their flocks and dump spoiled milk Yet the estimates for the release scheduled for Thursday at 9 00 a m local time 1300 GMT covered a wide interval highlighting how economists who were caught off guard are now struggling to calculate the economic impact of the strike The spread between the highest and lowest estimates 0 50 percent and 1 40 percent was the widest since Reuters began compiling the statistic in November 2014 It s clear that the strike had a major economic impact most significantly on inflation but exactly how large remains to be seen said Fernando Rocha an economist at JGP Gest o Consumer prices likely rose 3 52 percent from the year before based on the median of 20 forecasts as higher power costs also helped drive inflation sharply higher from a 2 86 percent reading at the end of May Estimates ranged between 2 85 and 3 63 percent That would lift the 12 month rate back to the central bank s target range for 2018 4 5 percent plus or minus 1 5 percentage points for the first time since mid January Policymakers have struggled to reignite price hikes amid double digit unemployment Coupled with a currency selloff that drove the Brazilian real to the weakest in two years raising import costs that could lead the central bank to take a more hawkish stance We do not expect the central bank to hike rates for now as inflation remains low expectations well anchored and the output gap wide However we think it is appropriate to shift toward more hawkish rhetoric given the change in the balance of risks for inflation JPMorgan NYSE JPM economists wrote in a report
A Reuters poll last week showed the central bank is likely to hold off on raising rates until 2019 despite the currency selloff The bank is widely expected to hold interest rates at a record low on Wednesday |
JPM | JPMorgan identifies a catch all trade that will profit from the biggest issues confronting investors including a trade war | s equity strategists have advised clients to be overweight small cap companies that do much of their business in the US and aren t as exposed to global trade This group of stocks is a catch all trade for profiting from higher economic growth and inflation while guarding against the downside of a trade war said Dubravko Lakos Bujas JPMorgan s head of US equity strategy in a note on Tuesday Year to date the Russell 2000 small cap index has gained nearly 10 The on Tuesday wiped its 2018 gains on but the same couldn t be said of the This difference between the two indexes of major companies and small cap stocks shows that smaller companies are benefitting more from the biggest issues on investors minds including trade regulation and inflation The Russell 2000 has outperformed both the Dow and the S P 500 to gain nearly 10 this year Foreseeing this JPMorgan s equity strategists advised clients late last year to tilt portfolios toward companies that do much of their business in the US By being overweight small caps the bank said investors were poised to benefit from favorable growth policies in the US and stronger growth After the JPMorgan doubled down on its counsel We continue to recommend small caps as a catch all trade for its higher cyclical reflation and tax policy exposures as well as lower sensitivity to ongoing risk said Dubravko Lakos Bujas JPMorgan s head of US equity strategy in a note on Tuesday Importantly domestic companies are more insulated from trade headlines and USD volatility Lakos Bujas recommendation for smaller domestic companies is pegged to the belief that stronger economic growth would benefit them more even if it causes the inflation that some investors dread Multinationals he said are exposed to negative economic revisions in the euro area and in emerging markets This year s tax cuts are another tailwind behind small caps Their effective tax rate fell to 22 from 32 in the first quarter Lakos Bujas said That s almost double the benefit for large caps where the effective rate is expected to fall to 21 from 27 he said But small cap companies don t have the all clear From a technical standpoint Lakos Bujas said the Russell 2000 s outperformance over the S P 500 is likely to slow down Also sustained wage growth would hurt many of these smaller labor intensive companies as would waning support for the Trump administration s economic agenda As it relates to trade small cap companies that import goods subject to tariffs could be hurt by rising costs said Rich Sega the global chief investment strategist at Conning which has 122 billion in assets under management A trade war would also hurt companies that export products subject to Chinese import taxes We d rather not have it Sega said But it s not enough to offset the very strong current and I think potential future benefits of tax reform regulatory reform and fiscal stimulus |
C | Citigroup C Moves To Buy Rationale Behind The Upgrade | Citigroup C could be a solid choice for investors given its recent upgrade to a Zacks Rank 2 Buy This upgrade primarily reflects an upward trend in earnings estimates which is one of the most powerful forces impacting stock prices
A company s changing earnings picture is at the core of the Zacks rating The system tracks the Zacks Consensus Estimate the consensus measure of EPS estimates from the sell side analysts covering the stock for the current and following years
Individual investors often find it hard to make decisions based on rating upgrades by Wall Street analysts since these are mostly driven by subjective factors that are hard to see and measure in real time In these situations the Zacks rating system comes in handy because of the power of a changing earnings picture in determining near term stock price movements
As such the Zacks rating upgrade for Citigroup is essentially a positive comment on its earnings outlook that could have a favorable impact on its stock price
Most Powerful Force Impacting Stock Prices
The change in a company s future earnings potential as reflected in earnings estimate revisions and the near term price movement of its stock are proven to be strongly correlated The influence of institutional investors has a partial contribution to this relationship as these big professionals use earnings and earnings estimates to calculate the fair value of a company s shares An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock and institutional investors typically buy or sell it Their bulk investment action then leads to price movement for the stock
Fundamentally speaking rising earnings estimates and the consequent rating upgrade for Citigroup imply an improvement in the company s underlying business Investors should show their appreciation for this improving business trend by pushing the stock higher
Harnessing the Power of Earnings Estimate Revisions
As empirical research shows a strong correlation between trends in earnings estimate revisions and near term stock movements tracking such revisions for making an investment decision could be truly rewarding Here is where the tried and tested Zacks Rank stock rating system plays an important role as it effectively harnesses the power of earnings estimate revisions
The Zacks Rank stock rating system which uses four factors related to earnings estimates to classify stocks into five groups ranging from Zacks Rank 1 Strong Buy to Zacks Rank 5 Strong Sell has an impressive externally audited track record with Zacks Rank 1 stocks generating an average annual return of 25 since 1988 You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
Earnings Estimate Revisions for Citigroup
This U S bank is expected to earn 8 65 per share for the fiscal year ending December 2020 which represents a year over year change of 14 1
Analysts have been steadily raising their estimates for Citigroup Over the past three months the Zacks Consensus Estimate for the company has increased 1 2
Bottom Line
Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations the Zacks rating system maintains an equal proportion of buy and sell ratings for its entire universe of more than 4000 stocks at any point in time Irrespective of market conditions only the top 5 of the Zacks covered stocks get a Strong Buy rating and the next 15 get a Buy rating So the placement of a stock in the top 20 of the Zacks covered stocks indicates its superior earnings estimate revision feature making it a solid candidate for producing market beating returns in the near term
You can learn more about the Zacks Rank here
The upgrade of Citigroup to a Zacks Rank 2 positions it in the top 20 of the Zacks covered stocks in terms of estimate revisions implying that the stock might move higher in the near term |
JPM | What Bond ETF Inflows Are Saying About Fixed Income Trade | Fixed income investing in the U S seems caught between two opposing forces lately On the one hand flared up of geopolitical risks and downbeat job data for the month of March may trigger market risks and safe haven rally On the other hand moderately upbeat U S economic sentiments and the Fed s policy tightening attempt to push up bond yields which are weighing on bond prices
As per an article published on investors yanked over 18 billion from bond mutual funds and ETFs in the one week following last November s election marking the biggest one week outflow in over three years
The outflow was prompted by a spike in bond yields caused by rising inflationary expectation Trump s pro growth promises and deregulations basically boosted stocks and hurt fixed income investing
Trend Reversal in 2017
Barring some occasional pull backs investors interest in fixed income investing returned in the first quarter of 2017 Over 112 billion was inserted into fixed income funds since January 1 and the benchmark 10 year Treasury yield touched 2 31 on February 24 read
However the possibility of a rate hike in the Fed s March policy meeting took bond yields to this year s high of 2 62 on March 13 But the Fed s dovish guidance on the future rate hike trajectory rise of geopolitical threats and market slump on Trump s policy concerns charged up bond investing once again
Plus the highly watched out meeting between Trump and Chinese president Xi Jinping kept Wall Street on the edge for the most part of last week which is why stocks remained volatile pushing up safe haven bets like benchmark U S Treasuries
If this was not enough the Fed indicated deleveraging of balance sheet to start this year This could keep the Fed from hiking rates fast this year The overall impact took the yield on the 10 year U S Treasury note to 2 38 on April 7 2017
U S Treasuries in Focus
Long term U S Treasury bond fund iShares 20 Year Treasury Bond ETF V TLT has added about 680 million net so far this year The fund yield 2 56 annually read
Emerging Market Bonds in Focus
Not only U S bonds emerging markets bonds are also on investors radar Emerging market companies and governments sold 178 5 billion of dollar denominated debt in Q1 marking the highest quarterly amount ever
iShares JPMorgan NYSE JPM USD Emerging Markets Bond ETF AX EMB hasgathered ever more 1 95billion in assets so far this year EMB which gives an exposure to U S dollar denominated government bonds issued by emerging market countries yields about 4 72 annually
EM economies are much more protected from Fed tightening shocks this time than they were in 2013 which is remembered for the taper tantrum As a result strong fundamentals call for EM investing lately And since fixed income securities are less risky than equities and offer solid yield investors are all the more keen on these products read
U S Corporate Bondsin Focus
The trend is also bullish for U S corporate bonds iShares iBoxx Investment Grade Corporate Bond ETF has raked in about 3 46 billion in assets so far this year as of April 7 2017 LQD yields about 3 28 annually
To Sum Up
A still low interest rate environment and a muddle through economy indicate that investors still favor fixed income investing for a regular source of current income but with relatively less risk
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JPM | Q1 Earnings Parade Begins JPM C WFC | Thursday April 13 2017Three of the biggest banks on Wall Street have reported earnings results for fiscal Q1 before the bell this Thursday JPMorgan Chase NYSE JPM Citigroup NYSE C and Wells Fargo NYSE WFC have all beaten or met bottom line earnings per share EPS estimates while topping slightly estimates for revenues in the quarter This tips off the unofficial Q1 earnings season which picks up momentum on Monday following the Good Friday holiday tomorrow JPMorgan put up 1 65 per share on 25 58 billion in quarterly revenues easily beating the 1 51 per share and 24 68 billion in the Zacks consensus estimate Average core loans rose 9 in the quarter This marks at least the fifth straight quarter of an earnings beat the previous 4 quarter average of 12 Citi s 1 35 per share beat the Zacks consensus by 9 cents in the quarter Its 18 12 billion in revenues topped the 17 81 billion from the Zacks consensus with a 4 quarter earnings beat average of 7 74 Wells Fargo met expectations of 97 cents per share but beat the Zacks consensus estimate of 22 13 billion in revenues to 22 315 billion in the quarter This is the third quarter in the past four where Wells Fargo has beaten estimates on the bottom line but only by an average of 1 Initial Jobless Claims fell by 1000 week over week from a previous week revision up 1K to 234K indicating continued strength in the U S labor market We remain at historic lows going back 40 years to when the U S had far few workers and industries in jobless claims with continuing claims remaining just barely above 2 million And all this before any new infrastructure or jobs growing legislation has even been presented to Congress Last week we saw the unemployment rate sink to 4 5 this looks to be justified in the jobs market going forward as well Mark VickerySenior Editor |
MPC | Marathon Petroleum Earnings Revenue miss in Q3 | Investing com Marathon Petroleum NYSE MPC reported third quarter earnings that missed analyst s expectations on Thursday and revenue that fell short of forecasts
The firm reported earnings per share of 1 7 on revenue of 23 1B Analysts polled by Investing com expected EPS of 1 72 on revenue of 23 84B That compared to EPS of 1 77 on revenue of 19 39B in the same period a year earlier The company had reported EPS of 2 27 on revenue of 22 45B in the previous quarter
For the year Marathon Petroleum shares are up 6 77 outperforming the S P 500 which is up 1 04 year to date
Marathon Petroleum follows other major Energy sector earnings this month
On Thursday Royal Dutch Shell LON RDSa ADR reported third quarter EPS of 0 68 on revenue of 100 2B compared to forecasts of EPS of 1 48 on revenue of 92 05B
PetroChina ADR earnings beat analyst s expectations on Tuesday with third quarter EPS of 1 65 on revenue of 86 19B Investing com analysts expected EPS of 1 55 on revenue of 91 07B
Stay up to date on all of the upcoming earnings reports by visiting Investing com s earnings calendar |
MS | U S charges fired Morgan Stanley wealth manager with theft | By Jonathan Stempel
NEW YORK Reuters A former Morgan Stanley NYSE MS wealth manager in New Jersey has been criminally charged with stealing about 5 million from clients and then going on a spending spree including private jet service luxury cars and country club memberships
Barry Connell 50 was arrested early Friday in Henderson Nevada a Las Vegas suburb and charged with wire fraud and aggravated identity theft according to the office of U S Attorney Preet Bharara in Manhattan
The U S Securities and Exchange Commission filed related civil charges against Connell a resident of Chester New Jersey
A lawyer for Connell could not immediately be identified No one could be reached at the defendant s home for comment
Morgan Stanley is not named in court papers but a person familiar with the matter said it was Connell s employer for the period in question The bank was not accused of wrongdoing
Authorities said Connell who worked in a Morgan Stanley office in Ridgewood New Jersey stole money from accounts belonging to a married couple and their daughter from December 2015 to November 2016
Connell made more than 100 unauthorized transfers but told his employer that he had client permission authorities said
Much of the money went to funding his lavish lifestyle which also included a rental home in Henderson the authorities said
Morgan Stanley fired Connell in November citing his alleged unauthorized withdrawals from client accounts for his own apparent benefit brokerage industry records show
We have been cooperating with law enforcement regarding this matter the bank said in a statement on Friday
Before joining Morgan Stanley in 2008 Connell worked for a decade at UBS Group AG industry records show
The cases are U S v Connell U S District Court Southern District of New York No 17 mag 00694 and SEC v Connell in the same court No 17 00831 |
MS | Trump makes Mexican peso great again investors see more gains ahead | By Dion Rabouin
NEW YORK Reuters Mexico s peso has improbably been the world s top performing currency since Donald Trump s presidential inauguration and an increasing number of emerging market fund managers said it could rebound further from its nosedive following the U S election
Even before its inauguration comeback a number of emerging market fund managers were betting that the peso had seen its worst days and was poised to outperform in 2017 along with other Mexican assets
We ve gone from an outright short late last year to an overweight position relative to the index just because there s a lot of bad news priced in said Jim Barrineau Schroders LON SDR head of emerging markets debt and portfolio manager for its multi sector bond fund
The real exchange rate is very very cheap relative to history and at this point the bond yields are competitive with the higher yielding countries in EM
The peso was up 8 percent since Trump s inauguration on Jan 20 despite his proposal last week of a 20 percent border tax on Mexican imports and the collapse of a scheduled face to face meeting with Mexican President Enrique Pena Nieto
The peso also made a technical breakout Friday rallying through a resistance point at the 20 56 level around where it closed on Thursday That level marks a 38 2 percent Fibonacci retracement of its sell off since the Nov 8 election
Perceiving the 20 percent import tax comment as a starting point for negotiations the market took some solace because it could have been much higher say 30 percent or 35 percent said Gordian Kemen global head of emerging market fixed income strategy for Morgan Stanley NYSE MS
The peso has continued its tear even as Trump has reiterated concerns about the North American Free Trade Agreement saying on Thursday he would like to speed up talks to either renegotiate or replace the deal
Kemen said investors were relieved Trump did not move to unilaterally withdraw from NAFTA or rule out talks entirely
PRICED IN
And though investors have in the past wagered at their peril that Trump s often extreme rhetoric would not be matched by his real world actions many are betting that the current price of Mexico s peso already reflects the worst of any potential U S action against the country
Deutsche Bank DE DBKGn asset managers said earlier this week they believed the peso had hit a near term bottom
Similarly Michael Gomez PIMCO s head of emerging markets portfolio management said that while he expects the background to remain noisy Mexican assets and the peso specifically already incorporate much of the expected downside risk
UBS strategists recently said in a research note that even the border tax had been 70 percent priced into the peso s value
That s not to say big risks do not remain especially given the recent bounce
The peso is cheap certainly and absent a big unfavorable change to NAFTA you will make great money investing in Mexican bonds But a change to NAFTA that s unfavorable and who knows said Kieran Curtis investment director at Standard Life LON SL Investments in London adding that he still sees Mexico as a deteriorating credit
Each firm calculates a currency s fair value differently but generally valuations are derived by comparing the ability to buy the same goods in different countries or measuring the value of income and investment an economy takes in against what it spends
Fund managers interviewed by Reuters largely agreed that the peso was at a level inconsistent with the reality of its economy but some remained wary of further Trump related surprises
While he holds slightly overweight positions in Mexican debt including local currency bonds Gorky Urquieta co head of emerging market debt at Neuberger Berman said aggressive unilateral U S imposition of tariffs or an unwind of NAFTA would likely hit the peso again
As much as we think the currency is undervalued it could become even more undervalued before it begins a sustained recovery he said |
MS | Boutique bank Moelis wins advisory role for mammoth Saudi Aramco IPO | By Lauren Hirsch Clara Denina and Hadeel Al Sayegh NEW YORK LONDON DUBAI Reuters New York based boutique investment bank Moelis Co N MC has been chosen as an adviser by Saudi Aramco IPO ARMO SE on its plans for what is expected to be the world s biggest initial public share offer sources familiar with the matter told Reuters The IPO which officials expect to value the oil producer at a minimum of 2 trillion is the centrepiece of a Saudi Arabian government plan to transform the economy by attracting foreign investment and diversifying away from a reliance on oil Moelis will be the internal independent advisor as part of a team preparing for the share offer and conducting regulatory discussions ahead of the roadshows and execution the sources said A decision is expected by early next week on appointing international and local banks for preparatory work they added Moelis s appointment is a big win for the bank which itself went public less than three years ago having been founded by veteran U S dealmaker Ken Moelis in 2007 The Saudi Aramco mandate dwarfs previous IPO advisory roles which include luggage maker Samsonite HK 1910 on its 1 3 billion IPO in 2011 and last year s flotation of Extraction Oil Gas O XOG which valued the company at 3 23 billion But senior dealmakers at the bank which has offices across the world have been working on winning a role with Saudi Aramco for years according to a source familiar with the matter The bank has an experienced team of advisers based in the Middle East making its name in the region by advising the Dubai government on the 25 billion debt restructuring of conglomerate Dubai World in 2011 Local and major international banks including Morgan Stanley N MS HSBC L HSBA Citi N C were among those that had been asked to pitch for an advisory position with Aramco three weeks ago Saudi based industry sources said last month Wall Street bank JPMorgan N JPM and independent boutique bank Michael Klein had already been picked to advise the country ahead of any listing Generally government work across the world is poorly paid but banks often vie for the contracts simply to build a relationship with the state in the hope of getting future business The listing of Aramco is slated to take place in 2018 so the appointment of banks to run the share sale as lead managers and book runners is still some way off the sources said Saudi Energy Minister Khalid al Falih said last week the company was evaluating concurrent listings on more than one exchange
A Moelis spokesperson declined to comment and Saudi Aramco was not immediately available to comment |
MS | Global Economy Weekahead Soon time to watch for rising global inflation | By Ross Finley LONDON Reuters The global economy has weathered the new U S administration s sweeping challenges to the status quo with surprising aplomb given serious threats made to world trade but what is not so clear is how much longer inflation will remain stubbornly low Nearly a decade since the start of the financial crisis and an avalanche of emergency monetary stimulus that ensued inflation is only just now close to the 2 percent target many of the world s biggest central banks still keep But there have been stirring signals on inflation elsewhere in the world suggesting a turning point may be closer The Reserve Bank of India just dropped its bias to ease policy citing global inflation pressures as one reason for a sudden volte face Mexico s central bank grappling with a falling peso hiked rates on Thursday to a near eight year high Key releases on inflation for the United States Britain and China are due next week forecast at 2 4 1 9 and 2 4 percent respectively according to Reuters polls The worry is with growth holding up and commodity prices giving inflation a nudge up now the last thing needed with most major central bank rates still near zero is more fuel poured onto to an already raging fire An expected announcement from the Trump administration on plans for sweeping tax cuts is likely only weeks away and has again boosted already lofty stock prices despite widespread worries about the barriers to trade that may come later Federal Reserve Chair Janet Yellen is due to testify to Congress next week for the first time since Donald Trump moved into the White House She doesn t appear ready to signal a major step up in the Fed s glacial pace of rate rises yet either Inflation in the economy is picking up but so far not because spare capacity has been eaten up in product and labour markets triggering price rises driven by demand outstripping shortages of supply Instead the latest rise has to do with rising costs particularly energy costs leaving central bankers notably European Central Bank President Mario Draghi saying they will instead focus on the next round of inflation pressures The main impediment to higher inflation rests in one of the side effects from the free flow of labour a lack of wage pressure What had appeared to be a promising trend of stronger wage growth broadening out to include more higher paying industries has reversed since late last year notes Morgan Stanley NYSE MS U S economist Robert Rosener Wage pressures remain predominately in low wage industries limiting gains in overall aggregate wage growth The U S unemployment rate is below 5 percent close to where most economists say is the lowest it can go before shortages start to drive up the cost of labour Despite this latest setback in the official data the general expectation is that wage inflation will soon take off especially given that it is one of President Trump s stated aims to hire American The talk of wage inflation has been less robust in the Britain however Britain is facing an imported inflation challenge following Britons majority vote last June to leave the European Union that caused a 15 percent fall in sterling That could send inflation to 3 percent or higher later this year The Bank of England just cut its estimate of the unemployment rate it thinks will generate inflation to 4 5 percent from 5 0 percent based on recent evidence that already low unemployment isn t boosting wages much Its latest agents survey of businesses shows very modest expectations for pay settlements in the coming year only slightly above 2 percent Average UK weekly earnings excluding bonuses are forecast to rise 2 7 percent in the three months to December on a year ago steady compared with the last official set of data It is clear that going forward there is still plenty of uncertainty over what Britain s future trading relationship will be with the EU and how long that will take
But if the unemployment rate keeps falling it should soon be time for a trend of rising wages to re establish itself so long as basic laws of economics still apply There seems to be a real inconsistency between the way the U S is being analysed and the way the UK is being analysed said Charles Goodhart former member of the BoE s Monetary Policy Committee at a recent conference hosted by Fathom Consulting and Thomson Reuters That means that there must be to my mind at least a 50 percent possibility that wages will go up in line with inflation in which case interest rates in the UK will go up So it all depends on wages Watch wages like a hawk |
JPM | U S consumer spending accelerating labor market robust | By Lucia Mutikani WASHINGTON Reuters U S retail sales increased more than expected in May as consumers bought motor vehicles and a range of other goods even as they paid more for gasoline the latest indication of an acceleration in economic growth in the second quarter Other data on Thursday showed a further tightening in labor market conditions with first time applications for unemployment benefits unexpectedly falling last week and the number of Americans on jobless rolls declining to a near 44 1 2 year low The reports came a day after the Federal Reserve raised interest rates for a second time this year and offered an upbeat assessment of the economy The U S central bank described economic activity as rising at a solid rate and the labor market as continuing to strengthen The Fed forecast two more rate hikes in the second half of 2018 In short the Fed was right to upgrade its assessment of economic growth to solid in yesterday s statement said Paul Ashworth chief U S economist at Capital Economics in Toronto The Commerce Department said retail sales jumped 0 8 percent last month the biggest advance since November 2017 Data for April was revised up to show sales rising 0 4 percent instead of the previously reported 0 2 percent gain Economists polled by Reuters had forecast retail sales rising 0 4 percent in May Retail sales in May increased 5 9 percent from a year ago Excluding automobiles gasoline building materials and food services retail sales rose 0 5 percent last month after an upwardly revised 0 6 percent increase in April These so called core retail sales correspond most closely with the consumer spending component of gross domestic product They were previously reported to have risen 0 5 percent in April The strong retail sales report added to data ranging from the labor market to manufacturing and trade in suggesting the economy was regaining momentum in the second quarter after growth slowed at the start of the year amid a sharp step down in consumer spending Based on the core retail sales data for April and May economists said consumer spending was so far in the second quarter rising at an annualized rate of at least 3 5 percent Consumer spending which accounts for more than two thirds of U S economic activity increased at an anemic 1 0 percent pace in the first quarter Another Commerce Department report showed a rebound in business inventories in April Following Thursday s data growth estimates for the April June quarter were raised to as high as a 4 8 percent rate which would be the best performance in four years The dollar rallied against a basket of currencies also as the European Central Bank signaled it would hold rates low through mid 2019 Prices for U S Treasuries rose Stocks on Wall Street were higher TIGHT LABOR MARKET Retail sales are being underpinned by a 1 5 trillion income tax cut which economists said was helping to blunt some of the hit to household budgets from pricey gasoline A robust labor market is also lifting wage growth supporting spending In a separate report on Thursday the Labor Department said initial claims for state unemployment benefits dropped 4 000 to a seasonally adjusted 218 000 for the week ended June 9 Economists had forecast claims rising to 224 000 in the latest week The number of people receiving benefits after an initial week of aid declined 49 000 to 1 70 million in the week ended June 2 the lowest level since December 1973 The claims data suggest that the labor market is healthy and that job growth will remain strong said Daniel Silver an economist at JPMorgan NYSE JPM in New York The labor market is considered to be close to or at full employment with the jobless rate at an 18 year low of 3 8 percent The unemployment rate has dropped by three tenths of a percentage point this year It is near the Fed s forecast of 3 6 percent by the end of this year Layoffs have remained very low amid signs of growing worker shortages across all sectors of the economy There were a record 6 7 million job openings in April The number of unemployed people per vacancy slipped to 0 9 from 1 0 in March indicating that most people looking for a job are likely to find one Retail sales in May were buoyed by a 0 5 percent rise in receipts at auto dealerships Auto sales rose 0 2 percent in April Sales at service stations surged 2 0 percent last month reflecting higher gasoline prices Prices at the pump have risen by 15 5 percent this year according to U S Energy Information Administration data Building material store sales rebounded 2 4 percent last month after declining 0 8 percent in April Receipts at clothing stores surged 1 3 percent the largest gain since March 2017 There were also hefty gains in sales at restaurants and bars as well as general merchandise stores but receipts at furniture stores fell 2 4 percent the largest drop since December 2013
Consumers also continued to cut back on spending on sports and hobbies |
JPM | Argentine Peso Resumes Slide Yield on Century Bonds Tops 9 | Bloomberg The Argentine peso resumed its slide to a historic low as a major shakeup that put a former Wall Street trader at the helm of the nation s central bank failed to curb the currency s massive volatility
Investors initially cheered the fact that Luis Caputo who held roles at JPMorgan Chase Co NYSE JPM and Deutsche Bank DE DBKGn will take over the post following Federico Sturzenegger s surprise resignation All that enthusiasm sent the peso up more than 4 percent in the first hour of trading Friday before a reality check kicked in sinking the currency to an all time low The yield on Argentina s 100 year bond jumped to a record 9 percent
Traders have been desperate for policy makers to lay out a strategy to curb the peso volatility complaining that all they got in response was disjointed and unpredictable policy Investors had expected that a 50 billion deal with the International Monetary Fund last week would return calm to the market Instead the peso collapse has added to the woes of a country already under siege from double digit inflation and a ballooning current account deficit
The policy outlook for the Argentine peso remains challenging and the shakeup in central bank leadership doesn t change that said Erik Nelson a currency strategist at Wells Fargo NYSE WFC in New York We would still expect Argentine peso weakness over time but the question for us is how significant that weakness will be and whether the currency can eventually stabilize or recover he said
The peso dropped 1 4 percent to 28 10 per dollar Friday leading losses among the world s major currencies The Merval gauge of stocks extended a four day slide
In May officials sought to arrest the peso decline by jacking up interest rates to the highest in the world at 40 percent intervening directly in the market and using a 5 billion offer at 25 pesos per dollar to contain the currency while the government negotiated the deal with the IMF The day of the announcement Sturzenegger said that the bank would only intervene in the market in disruptive situations Still the central bank spent 794 million over two days to curb losses as volume plummeted
The changes at the helm of the central bank which included the departure of several high ranking officers capped a dramatic day in local markets Thursday with the peso plummeting and the monetary authority refraining from an intervention
It s rushed and sloppy to change the president of the central bank who signed an agreement with the IMF that hasn t even started according to a note by Perspectiv s Economicas a research firm led by Luis Secco former cabinet chief at state run Banco de la Nacion
In the next few days we will know what the market reaction is and to what extent the problem was due to management by the central bank s trading desk or if it s a deeper problem that goes beyond individuals the note said
Caputo took the helm of the Finance Ministry in December 2016 after serving as a key figure in securing an agreement with investors holding debt the country defaulted on in 2001 a truce that allowed the country to return to global capital markets
The one person on Macri s team they have confidence in is Toto Caputo said Walter Stoeppelwerth the chief investment officer at Balanz Capital Valores in Buenos Aires Toto is a trader by nature He s going to have a clear trading plan He s somebody the market knows in New York in Buenos Aires He s somebody that people trust to make the right decisions and who s going to be decisive
Here s what traders and analysts are saying
Delphine Arrighi portfolio manager at Old Mutual Global Investors in London
The appointment of Caputo doesn t change the medium term challenges
At the end of the day the BCRA will still have to find the right balance between letting the FX adjusting to a market equilibrium while intervening just enough to avoid another wave of panic selling from the locals
Ilya Gofshteyn an analyst at Standard Chartered LON STAN in New York
The resignation of Sturzenegger isn t meaningfully positive
A change was needed at the top as a matter following norms and because BCRA credibility had been eroded so badly
He was perceived as having failed at his job But this is no way makes the BCRA s job easier
The peso weakness has been function of fundamental vulnerabilities in Argentina and difficult EM environment Neither has changed overnight
Italo Lombardi economist for Latin America at Credit Agricole PA CAGR in New York
The situation in Argentina is not going to be solved overnight but markets will continue to adjust
It is more likely that the currency will stabilize at 28 29 even 30 now than it was at the beginning of the week at 25
Gustavo Rangel chief economist for Latin America at ING Financial Markets LLC in New York
This should work better now but the market has been so anxious and much of the success of the new team depends on credibility and preventing a perception that authorities lack a strategy to effectively re anchor FX dynamics
Mohamed El Erian chief economic adviser to Allianz DE ALVG SE and a Bloomberg Opinion contributor writes on Twitter
Stabilization in peso is important to avoid contaminating Argentine growth prospects or undermining IMF program |
JPM | Asian shares oil fall as U S China trade spat escalates | By Hideyuki Sano and Swati Pandey TOKYO SYDNEY Reuters Asian shares fell to a 2 1 2 week low on Monday after U S President Donald Trump cranked up trade tensions by going ahead with tariffs on Chinese imports prompting Beijing to immediately respond in kind Fears of a global trade war added to pressure on oil prices which extended Friday s big fall while the dollar retreated from near 3 week highs against the safe haven yen Spreadbetters suggested a subdued start for European shares with FTSE futures off about 0 1 percent U S E Mini S P futures ESc1 stumbled 0 5 percent suggesting a weaker start on Wall Street MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS slid 0 5 percent to its lowest level since May 31 Financial markets in China and Hong Kong were closed for Dragon Boat festival holiday Japan s Nikkei N225 sank 0 8 percent as worries over growing protectionism overshadowed stronger than expected export data The on again off again possible global trade war is looking to be back on again as the U S and China announced tariffs on each other s imports said Nick Twidale Sydney based analyst at Rakuten Securities Australia This looks set to be the main theme that investors will focus on with any further escalation in tension adding to the downside risk Trump announced hefty tariffs on 50 billion of Chinese imports on Friday laying out a list of more than 800 strategically important imports from China that would be subject to a 25 percent tariff starting on July 6 including cars China said it would respond with tariffs of the same scale and strength and that any previous trade deals with Trump were invalid The official Xinhua news agency said China would impose 25 percent tariffs on 659 U S products ranging from soybeans and autos to seafood China s retaliation list was increased more than six fold from a version released in April but the value was kept at 50 billion as some high value items such as commercial aircraft were deleted However many market watchers believe there is still room for compromise suspecting Trump s announcement was a negotiating tactic to wring faster concessions from Beijing Ultimately a negotiated solution is likely and this is what both the U S and China want but the risks are high and the tariffs could well be implemented before the issue is resolved said Shane Oliver Sydney based chief economist at AMP LIMITED IMPACT Analysts say the direct impact of the tariffs may be limited especially for the U S economy which is in strong shape But Asia s other trade reliant economies and companies plugged into China s supply chains are worried they will suffer collateral damage if world trade slows down hurting global growth and dampening business confidence Shares of Japanese construction equipment makers Komatsu Ltd T 6301 and Hitachi Construction Machinery T 6305 tumbled 3 9 percent and 2 8 percent respectively Both are vulnerable to any downturns in Chinese and global capital spending There are trade frictions not only between the U S and China but also between the U S and its allies Trump could put more pressure on other countries like Japan and NATO courtiers said Yoshinori Shigemi global market strategist at JPMorgan NYSE JPM Asset Management in Tokyo So far investors have been escaping to high tech shares and small cap shares After all money is still abundant But investors should be cautious In the currency market the dollar eased to 110 33 yen having hit a three week high of 110 905 on Friday The euro traded at 1 1597 EUR not far from a recent two week low of 1 1543 after the European Central Bank suggested it would hold off raising interest rates through the summer of next year The Australian dollar a liquid hedge for risk slipped to a six week trough while its New Zealand cousin fell to the lowest since end May Oil prices were under pressure as China s retaliatory tariffs included U S crude oil O R U S crude futures CLc1 dropped 1 6 percent to 63 99 per barrel briefly touching their lowest levels since April 10
Brent LCOc1 fell 0 7 percent to 72 93 in response to reports that top suppliers Saudi Arabia and Russia would likely increase production |
C | Easterly Government to offer shares to fund 430M acquisition | Easterly Government Properties NYSE DEA agrees to buy a 1 479 762 square foot portfolio of 14 properties 94 leased to the U S federal government and 99 leased overall for about 430M from an undisclosed third party DEA shares fell about 2 8 in after hours trading on trading of about 806 shares Based on DEA s underwriting it believes the aggregate purchase price represents a weighted average underwritten capitalization rate of about 6 5 DEA expects to close the acquisition on a rolling basis in H2 of this year We are expecting to scale the Company through an approximately 4 accretive deal to our run rate FFO per share on a fully diluted basis says Meghan Baivier DEA s CFO and COO To help fund the acquisitions DEA is starting a public offering of 15 5M with 8 5M directly offered by the company and 7 0M offered on a forward basis in connection with forward sales agreements Easterly plans to enter forward sales agreements with Citigroup NYSE C and Jefferies Separately the company expands its senior unsecured credit facility to 600M with an accordion feature that allows it to increase up to 250M more The revolving credit facility will initially mature in June 2022 with options that allow extending it to June 2023 the term loan portion matures in June 2023 The revolver will bear interest at rate of LIBOR 1 25 1 80 and the term loan at 1 20 1 75 Initial spread is set at 1 30 for the revolver and 1 25 for the term loan Previously Easterly Government misses by 0 01 misses on revenue May 8 Now read |
C | Singapore Set to Cut Cash Checks on Path to Digital Economy | Bloomberg Singapore set targets to reduce cash and check usage as it prepares to allow companies to use its digital payments service in a move towards a digital economy
Checks will no longer be in use by 2025 while cash withdrawals from automatic telling machines will come down significantly Education Minister Ong Ye Kung who sits on the Monetary Authority of Singapore board said in a speech Wednesday at the annual Association of Banks dinner in the city state The government backed payments platform called PayNow will be available for companies starting Aug 13
Singapore has embraced technology to reduce cash usage and promote a digital economy Today there are more than 1 4 million PayNow registrations and nearly 900 million have been transferred via PayNow since its launch last year Ong said Both local and international firms including DBS Group Holding Ltd and Grab Inc are also vying to offer digital payment options to residents and tourists in Singapore
The aim is not to force a cashless society but to enable everyone to enjoy the convenience and efficiency of e payments simple swift safe and seamless Ong said When the level of convenience and confidence crosses a critical tipping point adoption will rise across our population within a short time and become pervasive
READ Singapore unveiled initiatives to push for financial technology
Both check usage and ATM withdrawals have been declining Ong said The share of checks as a proportion of all payments using some other forms of electronic payments known as FAST and GIRO was about 28 percent in 2017 down from 37 percent in 2015 That may come down to 15 percent in 2020 according to Ong
Sweden has done it We can too Ong said referring to becoming a check free society
Corporate clients of seven banks will be able to transfer funds via PayNow in Singapore They are DBS Oversea Chinese Banking Corp United Overseas Bank Ltd Standard Chartered LON STAN Plc HSBC Holdings Plc LON HSBA Malayan Banking Bhd and Citigroup Inc NYSE C according to the association
Ong also said while Singapore is encouraging competition among digital payment service providers to give consumers choices it will also ensure the various systems can inter operate under a plan called SG QR which is being implemented later this year
In China Ant Financial and Tencent Holdings have vast online payments businesses as they control 92 percent of the market
Our goal is to allow for a variety of payment solutions that are competing yet inter operable and convenient providing choice to consumers and encouraging innovation Ong said That is the key principle in our approach to e payment |
JPM | 4 Best Large Cap Value Mutual Funds To Invest In | Large cap funds are better than small or mid cap funds for risk averse investors These funds have exposure to large cap stocks with a long term performance history and more stability than what mid cap or small caps offer Companies with market capitalization of more than 10 billion are generally considered large cap However due to their significant international exposure large cap companies might be affected by a global downturn Meanwhile investors looking for a bargain i e stocks at a discount are mostly interested in in value funds which pick stocks that tend to trade at a price lower than their fundamentals i e earnings book value debt equity and pay out dividend In the long run value stocks are expected to outperform growth ones across all asset classes and are less vulnerable to trending markets However investors interested in choosing value funds for yield should check the mutual fund yield as not all value funds comprise solely companies that primarily use their earnings to pay out dividend Below we share with you four top rated large cap value mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can Vanguard Equity Income seeks to provide a high level of income and growth of capital for the long run VEIPX invests heavily in mid cap and large cap equity securities which generally provide above average dividend income Companies with growth potential are also considered for investment Vanguard Equity Income returned 15 6 in the last one year VEIPX has an expense ratio of 0 26 compared with the category average of 0 74 Transamerica Large Cap Value I2 invests the major portion of its assets in securities of large cap companies that are believed to be undervalued TWQZX seeks appreciation of capital for the long run by focusing on securities of large cap companies included on the Russell 1000 Value Index The fund may also invest around one fifth of its assets in foreign companies Transamerica Large Cap Value I2 returned 20 5 in the last one year Jack Murphy is one of the fund managers of TWQZX since 2012 TIAA CREF Large Cap Value Premier seeks return over the long run primarily through growth of capital TRCPX invests the lion s share of its assets in equity securities of large cap companies which are expected to be undervalued The fund invests in companies as defined by the fund s benchmark index the Russell 1000 Value Index TIAA CREF Large Cap Value Premier returned 21 7 in the last one year TRCPX has an expense ratio of 0 54 compared with the category average of 0 74 Principal LargeCap Value J invests the majority of its assets in equity securities of large cap companies from the Russell 1000 Value Index According to the index large cap companies are those whose market cap ranges between 394 9 million and 634 4 billion PVLJX seeks capital appreciation for the long run Principal LargeCap Value J returned 12 1 in the last one year As of February 2017 PVLJX held 76 issues with 5 68 of its assets invested in JPMorgan Chase Co NYSE JPM To view the Zacks Rank and past performance of all large cap value mutual funds investors can Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | Economic Risk Assessment Looking For Clues For What Might Be Next | What s next This question continues to resonate in hallways We are already one quarter in but market uncertainty is still the new normal With each passing week of the Trump administration the complexities of the future keep getting well more complex Foreign policy issues are now coming to the forefront that if not handled correctly could lead to a host of consequences not least of which might be a race for safe havens and a burst of volatility in the foreign exchange markets
Industry pundits are actively searching for clues wherever they can find them of what the road ahead might bring Search as they may these analyses cannot avoid the fact that our present global economic situation may just be too unique in just too many ways Although analysts can point to several similarities from times gone by there are without a doubt quite a few rather spurious characteristics that defy legitimate forecasting techniques Modeling wizards can only guess how certain dependent variables might react to specific risk factors whether domestic or geopolitical in nature The end result is a constant guessing game
The winner of this perennial guessing game if there is one may gain a host of new subscribers to his or her newsletter but the losers will simply withdraw to guess again on another day Financial markets will assimilate the latest guesstimates form a new narrative jostle about to reach consensus and then move on to the next phase As for the forex market we have been anticipating a jostling of the deck chairs for some time Tight ranging markets are no fun although there have been significant movements in the major pairs to warrant a reasonable level of net trading gains For example here is a recap of the first quarter s action
The U S Dollar retreated versus each of its major brethren to the tune of 3 3 over the first three months of 2017 There were a variety of causes but the general overarching reason was that the market had sold on the news after December s Fed rate hike and discounted the Fed s projection of another two rate hikes to come There was also the unexpected market reaction to Trump s promises of more economic stimulus programs which sent positive jolts across the globe that demand in the U S A would soon raise the tides for everyone s economic ship
The mood however has darkened over the first week in April The greenback recovered a full percentage point on average over its rivals The Euro Pound and Aussie lost 70 180 and 140 pips respectively while capital flows to Japan boosted the Yen by a mere 30 pips Analysts believe that a gradual shift is taking place in the background as smart money starts to react to a new risk assessment of the months ahead Brexit is now official as formal papers were finally submitted to the EU Things are heating up in Syria enough so that Trump s generals launched a missile attack on one of its primary fighter jet squadrons Is the global politic about to unwind Is chaos imminent
March Non Farm Payroll figures were unimpressive
Quite a few analysts were dismayed by Friday s release from the Department of Labor The prevailing takeaway was that the data might be an early signal that recession is on the way As has been the trend for quite some time the Street was expecting another round of 200 000 net job additions but unfortunately the figure came in at 89 000 for private sector job additions governments added another 9 000 and the two previous months were downgraded by 38 000 Layoffs have been commonplace in the retail sector a sign that consumers are shifting their favor from brick and mortar shopping malls Nearby service companies bank lending portfolios and counties that depend on related property taxes will be at risk going forward
If there was any good news it was that unemployment dipped to 4 5 and a measure of discouraged workers fell by 125 000 its largest decline since the financial crisis took hold in 2008 As noted above the U S Dollar regained ground on many of its major pairing partners and the obvious slowing of the U S economy prompted another open debate as to whether the Fed would continue tightening anytime soon The Trump administration s short lived euphoria over February job additions faded like snow in the desert as reality set in that massive job growth may be a tougher nut to crack
One analyst tried to explain away conflicting stories behind household and firm survey data as follows This divergence sometimes occurs because the data come from two different surveys From other data on economic activity such as factory orders it is likely that the payroll survey which will be revised over the next two months as more data come in is temporarily out of line with the household survey But no one knows for sure Another analyst had other worries Poor jobs creation and downward revisions from the prior two months are early signs of recession
What is an assessment of the major risks that could reshape market directions
The prevailing narrative in the investment community for some time has been that the U S economy will pull the rest of the world out of its current GDP growth malaise Add to this scenario that President Trump will reform taxes cut regulations and expand infrastructure spending and you have the latest justification for market exuberance that has reached a potential crescendo
Risk however never sleeps It has been building on several fronts necessitating a brief re assessment if we are to be prudent in the days that lie ahead With a primary focus on the U S market and what could derail its train there are four significant risk areas that cannot be ignored Section headings provided by one concerned analyst
1 Reflation Frustration The Trump Trade as it has been called is beginning to fade into the sunset Momentum is waning as enthusiasm is attacked from all sides i e the failure to adopt a healthcare replacement bill dismal jobs report data and firing missiles into Syria If you get behind the data there are significant indications that a shift in loyalties is occurring The Yen has strengthened beyond anticipated resistance levels Treasury yields are in decline and equity positions are being unwound The race is on although very quietly at the moment to determine who the greater fool will be that is left holding this market s bag of air One can easily make an argument that the bulls will be in charge for a while longer but smart money is not buying that proposition Caution is advised
2 Car Mageddon U S auto sales figures cratered last week This bad report should not have come as a surprise Although auto sales had been a strong underpinning of the U S economic recovery auto lot inventories have been gradually expanding over the course of the past few years The inventory to sales ratio recently surpassed three months a level not seen since the late eighties if you exclude the Great Recession period Low sales will force discounts from automakers to make up lost ground but the issue is primarily poor credit scores for the populace at large A dramatic increase in non performing loans in this sector is a real possibility The chart below depicts the erosion in this industry
3 Retail Apocalypse What is going on in the retail sector The U S economy is well known to be consumer driven by as much as 70 by some estimates Household disposable income growth on an inflation adjusted basis has been nearly flat for fifteen years Household debt has climbed in order to fill the gap and maintain existing standards of living but a ceiling is forming that will stop this trend in its tracks As a result retail spending has been imploding for several months Once again this situation should come as no surprise as the chart below will attest The downward trend in brick and mortar malls and department stores is palpable Yes there will be winners in e commerce but will gains in that division offset the debilitating losses in others Consumers need to have more money to spend and want to spend it but where will that stimulus come from Tax cuts for the wealthy will not do it More jobs would help but expanding wage bases are the solution and leaders in the corporate world are continuing to outsource and offshore labor intensive activities to cheaper regions i e not here
4 Geopolitics If everything else had been sweet then we might expect geopolitics to raise its ugly head and scare weak handed investors into predictable safe havens Syria is heating up a bit of a bad pun after Trump and his henchmen delivered 59 Tomahawk missiles onto an offending airstrip last week For every action there is always a reaction and although most global leaders applauded the show of force the U S has come down on the side of the Sunnis while Russia Iran and Syria are decidedly in the Shiite camp What will happen next Expect more volatility as traders panic on every possible sign of tension
There is one more disturbing tend related to employment data
Labor participation rates for men between the ages of 25 and 54 are in decline
With the exception of Finland the U S rate is lagging behind every other developed nation on the planet If the rate returned to only 93 the average for those nations presented then there would be ten million more men in the workforce earning salaries and spending their new found cash hopefully at the mall and in department stores
A full 57 of the non working males are on some form of disability Others lack the skills to tackle today s modern job needs These are the so called left behind members of our society that have fueled populist movements across the globe and were grist for Trump s mill of campaign slogans When Jamie Dimon the CEO of JP Morgan Chase NYSE JPM was asked to comment on the current milieu he responded It is understandable why so many are angry at the leaders of America s institutions including businesses schools and governments Collectively we are the ones responsible
Concluding Remarks
And the beat goes on but are we hearing ominous drumbeats in the distance It remains to be seen but there are a number of disturbing trends that are causing analysts and investors to lose sleep at night The world is looking for positive signs not political rhetoric that things will definitely get better and that we are on the right track If not then to be forewarned is to be forearmed Stay cautious
Risk Statement Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors The possibility exists that you could lose more than your initial deposit The high degree of leverage can work against you as well as for you
by Tom Cleveland |
MPC | In Response to Trump Saudis Ramp Up Oil Exports Into the U S | Bloomberg Saudi Arabia has markedly increased oil exports to America a sign OPEC s leading producer is responding to pressure from U S President Donald Trump to cool down the energy market
While the export boost started earlier this year it accelerated over the past three months after Trump repeatedly both through private diplomacy and public Twitter harangues asked the Saudis to lift production to keep energy prices in check
Saudi oil shipments into the U S reached a four week average of one million barrels a day last week for the first time since late 2017 according to government data and are up roughly 250 000 barrels a day since late May
The Middle East producers are becoming much more aggressive wanting to bring their barrels back into this market Gary Heminger the chief executive of Marathon Petroleum Corp NYSE MPC the second largest U S refiner by distillation capacity said at an investor conference earlier this week
The increase in Saudi exports into the U S equates to almost half the overall output increase the kingdom has implemented since late May after the Organisation of Petroleum Exporting Countries and allies including Russia agreed in June to boost output
Saudi oil shipments into the U S plunged to a 30 year low in October last year This prompted talk that America s freedom from Saudi oil a rhetorical aspiration for generations of American politicians from Jimmy Carter to George W Bush was within reach even if it was largely the choice of supplier rather than customer
In late October the four week average of U S imports of Saudi crude hit a low of 506 000 barrels a day compared with last week s four week average surge to 1 009 000 barrels a day according to government data
OPEC Undertaking
Last year the Saudi export drop was part of a wider undertaking by OPEC to fight a global glut that weighed on oil prices Because the U S is the most transparent oil market with the government publishing weekly data about the size of crude stockpiles the Saudis specifically targeted the American market trying to reduce the inventories
Saudi Arabia has been able to entice U S refiners to buy more crude in part by lowering the price it charges to customers in America In June Riyadh sold its flagship export grade Arab Light at just 60 cents a barrel above a basket of crude pumped in the U S Gulf of Mexico down from 1 30 a barrel in late 2017 The kingdom lowered even more the price of its lower quality crude Arab Medium and Arab Heavy
The surge in Saudi exports has returned Riyadh to the second position in the ranking of top U S crude oil suppliers which it briefly lost to Iraq and Mexico in late 2017 and early 2018 Historically the American market has long been Saudi Arabia s most prized both for economic and political reasons Aramco the kingdom s state owned company controls the largest refinery in the U S the Motiva plant in Port Arthur Texas
Traditional Diet
Motiva cut its imports of Saudi crude sharply last year at one point even importing more Iraqi crude than Saudi But in recent months the company owned 100 percent by Aramco has returned to a more traditional diet According to data from the U S Energy Information Administration Motiva bought more than 70 percent of its crude from Saudi Arabia
As Saudi Arabia has regained its market share in the U S Iraq the Middle East s number two exporter lost out The four week average of Iraqi shipments into the U S has dropped to less than 400 000 barrels a day down from 500 000 to 800 000 in late 2007 and early 2008 Kuwait has also lost market share
In ramping up shipments into the U S the Saudis also appear to be responding to American lawmakers threats to resurrect the so called No Oil Producing and Exporting Cartels Act or NOPEC which proposes making the cartel subject to the Sherman antitrust law used more than a century ago to break up the oil empire of John Rockefeller |
MPC | Oil Rebounds After Rick Perry Rules Out Tapping Strategic Crude | Bloomberg Crude erased most of the day s losses after U S Energy Secretary Rick Perry said the nation s strategic oil reserves won t be tapped to expand global supplies
Selling some of those reserves would have a fairly minor and short term impact Perry told reporters in Washington on Wednesday As sanctions squeeze Iranian crude out of global markets there are opportunities for other major crude producers to fill supply voids he said
This is a situation where the market expected U S President Trump to release oil from the reserves in November but that s not going to happen said Phil Flynn senior market analyst at Price Futures Group in Chicago The market all of a sudden looks a lot tighter
Prior to Perry s remarks futures closed down 1 percent in New York after crude stockpiles expanded for the first time since early August according to the Energy Information Administration Refiners are buying less crude as post summer maintenance work ramps up The government s weekly assessment wasn t entirely bearish however Overseas demand for American oil jumped to a two month high
Refining rates in the world s biggest economy underwent a pretty big change said Matt Sallee who helps manage 16 billion at Tortoise in Leawood Kansas Still we are seeing exports continue to increase so that is more of a permanent trend
Iran s Isolation
U S efforts to isolate Iran OPEC s No 3 producer are beginning to tighten worldwide crude markets South Korea s biggest refiner SK Innovation Co is increasing purchases of American crude after shunning Iranian cargoes India also is cutting crude imports from the Islamic Republic to zero
West Texas Intermediate crude for November delivery rose 50 cents to 72 01 a barrel on the New York Mercantile Exchange in the first 10 minutes after Perry s comments
Brent for November delivery rose 42 cents from the settlement to 81 76 after the energy secretary spoke
The EIA reported American oil inventories rose last week by 1 85 million barrels confounding most analysts in a Bloomberg survey who were expecting a decline Meanwhile U S refinery utilization rates dropped to the lowest since May At the key pipeline hub in Cushing Oklahoma crude inventories expanded for the first time in three weeks
Other oil market news
Gasoline futures fell 0 4 percent to 2 0585 a gallon
As sanctions on Iran begin to bite higher commodity prices may cause the convergence of U S markets with the rest of the world
Marathon Petroleum Corp NYSE MPC is in talks to buy a storage terminal on the U S Gulf Coast according to a person familiar with the matter in a deal that would expand its ability to tap into booming oil exports |
MS | Fed s message on portfolio trimming prepare don t fret | By Ann Saphir and Richard Leong SAN FRANCISCO NEW YORK Reuters Federal Reserve policymakers are putting markets on notice that the central bank s 4 5 trillion balance sheet is back on the agenda in an apparent effort to give investors time to prepare for changes rather than to signal any action is imminent Policymakers want to minimize any volatility that slimming the Fed s massive balance sheet might cause and have said they will only do so after interest rate increases are well underway The central bank is expected to keep that line in its statement on Wednesday following this year s initial policy meeting and the first one under Donald Trump s administration The Fed amassed the bonds during and after the financial crisis to inject cash into the economy and put downward pressure on long term rates and has been keeping its portfolio steady since December 2013 While the Fed has only raised rates twice since the crisis a number of Fed policymakers are already voicing support for allowing the debt holdings to shrink by letting bonds mature without reinvesting the proceeds Some have argued the process or at least the debate over how to proceed should begin later this year Only a few months ago several voices from within the Fed suggested the balance sheet could remain big for many years to come But with labor markets continuing to tighten and Trump promising tax cuts and more spending inflation and rates may rise faster than last year Trimming the balance sheet would be the Fed s next step in normalizing monetary policy Most Wall Street investors do not expect it until mid 2018 policymakers are playing it safe keen to avoid a repeat of the 2013 taper tantrum when bond yields surged after then Fed Chair Ben Bernanke hinted at cutting the pace of bond buying They don t want to shock the market said Robert Tipp chief investment strategist at PGIM Fixed Income They want to prepare the market he said commenting on a slew of comments from Dallas Fed s Robert Kaplan San Francisco Fed s John Williams and Philadelphia Fed s Patrick Harker WEAKER ANCHOR The Fed is also putting investors on notice in case the slimming could come up faster if the rate hikes were faster said Tim Duy a professor at the University of Oregon While giving markets plenty of time the Fed is also laying out evidence why they do not need to be unduly concerned As Fed Chair Janet Yellen pointed out in a speech in January one reason is that the average maturity of the securities in the Fed s portfolio has declined while that of the overall Treasury market has increased Graphic Essentially that means the Fed s portfolio has become less influential as an anchor for long term rates than in the past In addition the overall bond market has grown reducing the relative size and impact of the Fed s holdings Bernanke for one argues the economy is growing into the Fed s expanded portfolio and there is no need to bring it back to pre crisis levels of around 800 billion In fact several Wall Street banks suggest the Fed only needs to cut its bond holdings by 1 billion to 1 5 billion One tricky question the Fed will face is what to cut first The Fed s 1 76 trillion mortgage backed securities holdings account for about a quarter of that market compared to the Fed s 12 percent share of the Treasury market Any marked change in the Fed s MBS ownership could have a greater impact on that market and consequently housing borrowing costs On top of that in contrast to the Fed s 2 46 trillion of Treasuries which mature according to a set calendar the pace at which mortgage bonds mature can vary substantially It slows down when rates rise and homeowners stick with current loans and accelerates when rates fall and borrowers rush to refinance debt which increases the technical challenge for the Fed in engineering a wind down Some analyst argue that shrinking the Treasury portfolio would be the least disruptive given its diminished share of the overall market Others like Morgan Stanley NYSE MS say the Fed should trim MBS because it wants to return to a Treasuries only portfolio anyway and its size would cease to be an issue over time The economy should grow into the Fed s Treasury portfolio within about a decade the bank s analysts wrote in a note on Friday
This version of the story was refiled to add new name of Prudential s business in paragraph 9 |
MS | U S tax plan would break WTO rules lawyers say as EU business frets | By Tom Bergin and David Morgan LONDON WASHINGTON Reuters A proposed U S corporate tax reform would almost certainly contravene international trade rules if implemented lawyers told Reuters risking the biggest dispute in the history of the World Trade Organization With signs growing that the United States may become more protectionist under President Donald Trump European business groups said the tax plan which could impose de facto import tariffs of up to 20 percent raised the danger of a trade war Republican GOP members of Congress are pushing to replace the existing tax on corporate income with one linked to turnover This would allow firms to deduct their costs for purchasing goods and services produced in the United States but would give no such deduction for purchases of imports Trump has criticized the complexity of the plan but also said such a measure could help to cut the U S trade deficit Kevin Brady head of the tax writing House of Representatives Ways and Means Committee brushed off suggestions that it would fall foul of the World Trade Organization While there were 1 000 different opinions on whether this is WTO compliant Brady said he was confident the reform did comply with the body s rules However six trade lawyers with experience in litigating WTO disputes said they believed the plan would likely be deemed an unlawful subsidy on domestic goods export subsidy or a de facto tariff on imports All the lawyers based in the United States Britain and continental Europe said the destination based cash flow tax would fail WTO rules on more than one legal basis So serious were the breaches that any challenges might be handled under WTO mechanisms that allow legal processes which normally take years to be short cut they said It would be plainly WTO inconsistent said Philippe De Baere Brussels based partner at Van Bael Bellis It has manifest violations which could even justify the use of the expedited procedure for dispute settlement in the WTO said De Baere who has also advised governments on accession to the WTO and negotiations on new WTO deals as well as fighting trade cases Trade experts said any legal case would be the biggest WTO dispute ever since it could involve all products imported into the United States and all U S exports Previous WTO cases have involved narrow market sectors or individual companies European business groups said the plan threatened to upend the international system of trade rules and expressed hope that their governments could help to persuade the United States not to adopt it The Ways Means Committee declined to answer detailed legal questions about the plan A spokesman for the WTO said the organization didn t comment on whether planned taxes conformed to its rules OLD IDEA WITH A NEW TWIST The House Republican plan involves abolishing corporate income tax and replacing it with a tax of 20 percent levied on revenues less allowable deductions A border adjustment would be applied whereby companies which import products for resale or use in a manufacturing process would not receive a tax deduction for the cost Domestic purchases and labor costs could be deducted while U S exports would be exempt from the tax No major economy has adopted a corporate cash flow tax Former Bank of England governor Mervyn King is among those to support such a tax saying in a 1987 study that it could reduce excessive corporate debt and encourage better investment King who retired from the bank in 2013 told Reuters in an email this week that he still believed the idea had its merits provided it does not have to have the impact on imports that seems to be implied by the proposed scheme in the U S Lawyers said the impact of the border adjustment and deductions for U S costs meant that imports would face an effective tariff of up to 20 percent The total tax rate on the 100 percent domestically produced good is going to have a lower effective tax rate than the rate on the import said Scott Lincicome counsel with White Case in Washington That would breach Article 3 of the General Agreement on Tariffs and Trade which is policed by the WTO This allows signatory states to impose permitted tariffs on goods entering their country but precludes them from treating a domestic item more favorably than an imported one when it comes to internal taxes like sales or income taxes The WTO Agreement on Subsidies and Countervailing Measures also provides a basis for challenging the U S plan the lawyers said While this treaty allows border adjustments it bars them in relation to direct taxes such as income or profit taxes Hence the plan could be deemed a subsidy on domestic production in the United States and on U S exports Folkert Graafsma with VVGB Avocats in Brussels said The Ways and Means Committee says the cash flow tax is an indirect tax and therefore legal Lawyers say that argument would be hard to sell to WTO judges or trade partners because the tax is calculated on a business entity s revenue less the allowable input costs rather than being applied to the product being traded You re still essentially taxing the entity and that s where the problem comes said Iain MacVay partner at King Spalding in London EUROPEAN BUSINESS WORRIED The BDI the trade body for Germany s largest businesses said the plan risked introducing double taxation on imports A border tax adjustment would be a deviation from the existing system on corporate taxation BDI chief Markus Kerber said in a statement Robin Winkler a strategist at Deutsche Bank DE DBKGn said the growing protectionist mood in the United States meant politicians there could adopt the plan even if they didn t believe it complied with WTO rules A border tax akin to the GOP proposal remains more likely than the market appreciates he said in a note to clients on Wednesday The British German and French governments said they didn t comment on other countries tax proposals A spokesman for the executive arm of the European Union said The Commission expects all its trade partners to abide by and uphold the international rules Andy Goss board member and global sales boss for carmaker Jaguar Land Rover one of Britain s biggest exporters said he expected the government from Prime Minister Theresa May down to be active on the issue Our expectation when potential policies like this are mooted is that the prime minister and those in government can represent us in the right places in the U S and we are confident that they would do that he added Some economists said the border adjustment would increase the value of the dollar easing the actual impact of the tax on foreign exporters Others doubted this partly because of Trump s statements about the trade benefits of weak currencies The WTO allows countries to impose retaliatory measures against offending trade partners but it can take years to get a ruling Some countries may not wait that long or may not use only WTO authorized retaliatory measures For example China could simply order its massive state owned enterprises to adopt a Buy No America policy analysts at Morgan Stanley NYSE MS said The Chinese Ministry of Finance did not respond to requests for comment Edward Roosens Chief Economist with Belgium s Federation of Enterprises said that if companies in Europe started to lose U S contracts and shed jobs as a result Europe could also act rashly
The political pressure would be really strong to go for an all out trade war It s a bizarre idea to be involved in a trade war with Europe s closest ally but political pressure would grow he said |
MS | Chinese bankers brace for bonus blues | By Engen Tham HONG KONG Reuters Bankers and brokers in China are expecting a brutal bonus season over the next few weeks as business dwindled on local stock markets last year dragging industry profits down by half Data from headhunters and industry sources suggest an equities trader in China would have earned between 500 000 and 850 000 yuan 73 000 124 000 in 2016 with a 12 month bonus paid in the first half But this year the industry is struggling after the stock market boom came to a turbulent end in 2015 and regulators stepped in to manage the turmoil hitting local banks and global players trying to boost their Asia business According to Brett Rose head of the Shanghai branch of recruitment firm Robert Walters around 40 percent of investment bankers on the mainland are expecting no bonus at all Some brokers are also planning lay offs having already pared back some of the perks that staff have long taken for granted people at five brokerages and analysts said Shanghai based Orient Securities which reported a 68 percent drop in 2016 profit has already signaled its belt tightening two executives at the brokerage said First the free sweet treats and coffee disappeared from the pantry then half year bonuses were scrapped they said and most recently the cash advance on the annual bonus customarily paid ahead of Lunar New Year was slashed to a quarter for one of the sources This year performance was broadly speaking very bad so it s possible that the year end bonus will only be half or a third of last year s said the source Orient Securities has yet to respond to a request for comment A source at Shenwan Hongyuan Group the fifth largest mainland listed brokerage said a new policy sacking the bottom fifth of last year s performers on the business side would take effect by end March Shenwan Hongyuan did not return requests for comment Many Chinese brokers highly dependent on trading fees were badly hit by a 50 percent fall in average daily turnover in stocks and funds to 500 billion yuan last year according to a January report by Haitong Securities Government restrictions on margin financing continued to weigh on trading while crackdowns on property related and other structured products also hit revenues Industry profits fell 50 percent to 123 4 billion yuan according to the Securities Association of China GLOBAL KNOCK ON Staff at global banks that have bet on China to drive growth in their Asian equities trading franchises are also due to receive news of their bonuses in coming weeks They typically earn as much as twice their Chinese counterparts basic pay but they will also have to pull in their horns Global banks Asian revenues had been propped up by China s massive stock market rally in 2015 but the secondary market is down considerably from its amazing bull run which means sales and trading compensation should be lower said Benjamin Quinlan CEO of Hong Kong consultancy Quinlan Associates The slump in secondary market business together with cost pressures is likely to drag down average investment banking bonuses in Asia by 20 to 30 percent at the worst performing global banks said Quinlan Even the best performers are likely to see bonuses fall 10 to 15 percent he added An employee at Credit Suisse SIX CSGN Founder Securities said he was expecting a bonus of three to four months salary down from seven last year The firm also canceled its annual party and halved employees phone allowance he said A spokesman for the Swiss bank s joint venture firm said it canceled the party in favor of team building events and the new phone allowance was adequate for all but a few He said the firm planned to expand this year A source at Morgan Stanley NYSE MS Huaxin said some staff there were expecting a 50 percent fall in annual bonuses Morgan Stanley Huaxin declined to comment For Chinese bankers working in the primary equity markets such as initial public offerings IPO and private share placements the situation is less dire with profits from IPOs falling just 5 percent last year to 10 3 billion yuan according to Haitong estimates At Beijing based UBS Securities UBSS some IPO and private placement bankers received 12 months bonus last year but are expecting around 10 months this year two people at UBSS said Staff in the firm s primary equity markets team are divided into three levels with the most junior making around 420 000 yuan a year in basic pay while a managing director could command up to 2 5 million yuan according to one banker UBS declined to comment
Primary markets executives are likely to outdo their colleagues on the trading desks again in the coming year as money flowing into several expected IPOs may drain liquidity from the broader market said Jiahe Chen chief economist at Cinda Securities 1 6 8768 Chinese yuan renminbi |
MS | Dollar recovers slightly ahead of payrolls earnings support stocks | By Vikram Subhedar LONDON Reuters The dollar recovered from 12 week lows but was poised for a fourth straight weekly loss in cautious trading on Friday ahead of U S payrolls data while a set of healthy corporate results underpinned gains across European equity markets Earlier in the day an unexpected tightening of policy by China s central bank put Asian markets already on the back foot on growing concerns about U S President Donald Trump s aggressive policies under further pressure While a set of well received corporate results helped prevent the weakness from spilling over into European stocks the focus now shifts to the U S labor market report which comes ahead of next week s U S Federal Reserve rate decision The dollar rose to its session high against a basket of six major currencies with the dollar index up 0 17 percent to 99 962 According to a Reuters survey of economists nonfarm payrolls probably increased by 175 000 jobs last month picking up from the 156 000 jobs added in December The unemployment rate is expected to be unchanged at 4 7 percent in January near a nine year low The next hurdle for the USD to overcome is the Fed said analysts at Morgan Stanley NYSE MS led by strategist Hans Redekker in a note to clients adding however that conditions for a resumption of the dollar to resume its rally have improved Reiterations of continued monetary policy in Europe the Bank of Japan s commitment to control the JGB yield curve and weaker yuan fixings by the People s Bank of China are three pluses for the US dollar Morgan Stanley said Also in FX markets sterling steadied after its worst fall since October while the euro was set for its sixth week of gains in seven at 1 0745 and having gone as high as 1 0829 after the latest signs growth and inflation is rising in the euro zone A healthier outlook for the euro zone economy and for its banks has lifted analyst sentiment on regional corporate results to its brightest in 6 years Meanwhile in commodities oil prices edged up on threat of U S issuing new Iran sanctions while comments by Russian energy minister Alexander Novak that oil producers had cut their output in accordance with a pact agreed in December also helped support prices Brent crude futures were up 17 cents or 0 3 percent to 56 72 a barrel Brent is set to gain more than 2 percent for the week Front month U S West Texas Intermediate crude futures climbed 15 cents or 0 3 percent to 53 69 a barrel
London copper fell however after China s policy tightening spooked metals markets |
JPM | Trump s trade war is about to kick into high gear | President Donald Trump has opened up trade fights on numerous fronts including with Canada Europe and China There are several deadlines coming up in June and July that could determine whether Trump imposes more tariffs According to analysts the deadlines could ramp up the risk of a full blown trade war President Donald Trump has opened around the world and the next two months could decide whether the US ends up in a on several different fronts The slew of trade related tiffs means various deadlines for possible tariffs on and are all approaching quickly Libby Cantrill the head of public policy for investment giant Pimco highlighted the pile up of trade deadlines warning that they could intensify the battle Given President Trump s deep seated belief that the US is getting shortchanged on trade combined with the executive branch s enormous flexibility around trade policy and a staff such as US Trade Representative Bob Lighthizer who largely shares his views we do not see trade policy risk diminishing at least in the foreseeable future Indeed with the number of potential catalysts in the next month or so we could see it escalate Daniel Silver an economist At JPMorgan NYSE JPM wrote that the upcoming deadlines aren t the only trade moves that the Trump administration is navigating Apart from these listed tariffs that have received the most attention the US International Trade Commission constantly is reviewing cases that could lead to tariffs being implemented on other narrow product categories and the Trump Administration could also start to focus on new areas for protectionist policies Silver wrote in a note to clients Here s a rundown of the major catalysts in Trump s ongoing trade disputes Friday The Trump administration will finalize the list of Chinese goods subject to the new 25 tariffs with items expected to be on the list The tariffs will go into effect soon after per administration guidance June 22 Deadline for public comments on auto restrictions This is the first major deadline in a Section 232 investigation into auto imports That s the same method used to impose steel and aluminum tariffs The investigation could end in tariffs on foreign cars and trucks June 30 The Treasury Department is scheduled to release a list of investment restrictions that will apply to Chinese businesses Measures under consideration include limits on visas to Chinese citizens and limits on tech investment by Chinese firms July 1 by Canada Goods ranging from hairspray to raw aluminum will get hit by the restrictions July 1 The Mexican presidential election is held It could have serious ramifications for trade policies and the North American Free Trade Agreement or NAFTA negotiations Early July EU tariffs on US goods will go into effect Goods ranging from hairspray to raw aluminum will get hit July 19 20 Public hearings on the Section 232 investigation into auto imports will be held |
JPM | Euro falls one percent versus dollar and bond yields tumble on dovish ECB interest rate guidance | By Dhara Ranasinghe and Tommy Wilkes LONDON Reuters Euro zone bond yields tumbled and the euro headed for its biggest daily loss versus the dollar in eight months on Thursday after the European Central Bank indicated it would not be raising interest rates through the summer of 2019 The bank s unexpectedly dovish guidance on interest rates overshadowed at least for the time being its statement that it aimed to wrap up its stimulus program at the end of this year marking the biggest step in dismantling crisis era stimulus quantitative easing The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the program though ECB President Mario Draghi stressed that the governing council stood ready to adjust all its instruments as appropriate However investors seized on comments indicating that the end of QE would not be followed by rapid policy tightening and that interest rates would stay at record lows at least through the summer of 2019 Some market players now reckon rates may not rise even in the months immediately after next summer noting that Draghi s tenure at the ECB would end in October 2019 Although we now know that QE is scheduled to end under Draghi s watch we think the ECB could wait a little longer before starting to raise interest rates said David Zahn head of European fixed income for Franklin Templeton With Draghi s term of office due to expire at the end of October 2019 we feel the ECB is unlikely to start increasing interest rates until the new ECB president is firmly in place The single currency EUR EBS is currently on track for its biggest one day loss since October against the dollar while it also fell one percent to the yen and half a percent to the Swiss franc EURJPY EURCHF EBS Bond investors meanwhile drew comfort from the dovish interest rate outlook with 10 year government bond yields in Germany the euro zone benchmark falling around four basis points to 0 44 percent DE10YT RR Analysts also noted that there were no changes to the ECB s plan to reinvest funds from maturing bonds providing a layer of support for bonds markets even as the central bank winds down QE ECONOMIC GROWTH Bond yields from Italy the country seen as the most vulnerable to higher borrowing costs also fell with short dated yields down 7 basis points at 0 89 percent IT2YT RR having been 9 bps higher shortly before the ECB statement Italian 10 year yields were down around 2 bps at 2 80 percent IT10YT RR Draghi noted that volatility in Italy had ebbed in the past two weeks but revised down economic growth forecasts for the euro zone for 2018 while noting that inflation after accounting for higher oil prices remained muted Karen Ward chief market strategist at JPMorgan NYSE JPM Asset Management said the move to end QE by end year as previously signaled was significant in light of the recent Italian mini crisis that saw bond yields there soar to multi year highs Stepping back from QE will insulate the ECB from potential criticism that it is funding the fiscal largesse associated with certain populist policies But the ECB stance has surprised markets partly because ECB policymakers such as chief economist Peter Praet have in recent weeks indicated the central bank remained undeterred by events Italy or economic data indicating a slowdown in euro zone growth momentum The hawks had been guiding for a June hike before the meeting and given the clear guidance the ECB gave today on interest rates it had to be priced out said Arne Petimezas an analyst at AFS Group an Amsterdam based brokerage Money market pricing accordingly reflected a scaling ack of rate hike bets over the next year Investors now price less than a 30 percent chance of a 10 basis point rate hike in June 2019 compared with a roughly 80 percent chance before the ECB announcement On equity markets an index of euro zone stocks which benefit from a weaker euro jumped 0 8 percent STOXXE to a 2 1 2 week high having languished in negative territory before the announcement The biggest beneficiaries were interest rate sensitive sectors such as autos SXAP which rose 1 8 percent while shares in utilities rose 0 6 percent SX86P Bank stocks which tend to gain from higher interest rates fell 0 5 percent on the day SX7E but JPM s Ward played down that move If low interest rates support the health of the economy not least via a weaker exchange rate then that will help demand for lending and volume bank lending she said For graphic on markets react to the end of ECB stimulus click For graphic on investors scale back rate hike bets click
For graphic on Euro set for biggest one day fall in nearlt 8 months click |
JPM | ECB to end bond buying but pushes out first rate hike | By Gederts Gelzis Balazs Koranyi and Francesco Canepa RIGA FRANKFURT Reuters The European Central Bank will shut its hallmark bond purchase scheme by the close of the year it said on Thursday taking its biggest step yet toward dismantling crisis era stimulus a decade after the start of the euro zone s economic downturn But in a balanced announcement reflecting the uncertainties hanging over the economy it signaled that any interest rate hike is still distant raising the prospect that ECB chief Mario Draghi might leave office in October 2019 without having raised rates in his eight year term The timid move to roll back stimulus contrasted with the U S Federal Reserve s rate hike a day earlier which signaled a break from policies used to battle the 2007 2009 financial crisis and a return to normalized central banking The new rates guidance sent the euro down over one percent against the dollar to 1 1644 EUR EBS and pushed bets by investors on the timing of a first deposit rate increase back by three months to September 2019 While yesterday s Fed hike was very much hawkish in our view the ECB opted to announce the end of its net asset purchases with a dovish flavor BNP economist Luigi Speranza said The ECB will halve its bond buys to 15 billion euros a month from October then shut the program at the end of the year It also sees interest rates steady at least through the summer of 2019 a vague definition that gives policymakers a wide window and the flexibility to push back any move Through the summer is intentionally not precise Draghi told a press conference after policymakers met in Riga Latvia s capital There is a desire to maintain optionality in each and every part of this decision Adding a surprisingly dovish tinge to the decision Draghi emphasized that uncertainty and risks were increasing comments taken to indicate that risks were skewed toward a later hike rather than an earlier move This decision has been taken in the presence of a strong economy with increasing uncertainty he said of a political landscape characterized notably by rising trade tensions between the United States Europe and China For graphic on ECB policy and bond yield developments click HURDLE We suspect the hurdle to deviating from the intention on QE is probably pretty high JPMorgan NYSE JPM economist Greg Fuzesi said The decision on rates is dovish but likely with more flexibility in both directions than the decision on QE Highlighting the risks to the outlook the ECB downgraded its euro zone growth forecast for this year to 2 1 percent from 2 4 percent previously while upgrading its inflation forecast to 1 7 percent from 1 4 percent largely as a result of rising oil prices By putting a specific end date on its stimulus the ECB is nevertheless taking a more decisive step than the Fed did when it started its own taper in December 2013 without committing to a specific end or any subsequent steps For the ECB the biggest complication could be a murky economic outlook muddied by the developing trade war a populist challenge from Italy s new government and softening export demand Draghi a former Italian central bank governor downplayed Italy s turbulence as a pretty local episode arguing that government policy shifts are normal market events Contagion was not significant if there was any at all he said emphasizing differences with the widespread market panic seen around the peak of the euro zone debt crisis We haven t seen really any redenomination risk Italian bond yields rose sharply this month as a new government of anti establishment parties promised higher spending That threatens a clash with Brussels which is pushing Rome to cut the euro zone s second biggest debt pile But a broader slowdown could make it harder for the ECB to cut support if lower growth eases pressure on inflation a threat to the bank s credibility as it has missed its inflation target of almost 2 percent for over five years For graphic on Euro zone inflation vs wage growth click INFLATION While inflation has remained weak higher oil prices increasingly evident wage pressures and record employment suggest that prices will be moving up in the coming years even if more slowly than the ECB had originally hoped The euro s more than 6 percent fall against the dollar since April is helping the ECB as the weaker currency is increasing the cost of imports and boosting inflation While a rebound is likely the Fed s tightening stance will limit the potential for a big rise in the euro Projections for underlying inflation excluding volatile food and energy prices barely moved in the bank s new forecasts however rising only 0 1 percentage point for next year and 2020 The end of net purchases does not mark the end of very loose policy In fact Draghi sounded dovish today and we still expect the first rate hike only in December 2019 Nordea economist Jan von Gerich said |
JPM | U S Economy Now World s Bright Spot as Europe China Cool | Bloomberg The U S economy is sprinting ahead of the rest of the world at least for now
Spurred by solid consumer spending including May retail sales that topped forecasts on Thursday the U S is increasingly likely to rack up growth of at least 4 percent in the current quarter after a so so expansion at the start of the year In contrast euro area central bankers trimmed their outlook for 2018 while China showed signs of slowing and emerging markets from Brazil to Indonesia have been buckling
The U S is accelerating and just about everyone else is decelerating said Nariman Behravesh chief economist at IHS Markit in Cambridge Massachusetts There s no question in my mind that the U S is leading the pack and it s both a consumer and business story here
That contrasts with last year s picture of synchronous growth across the world which has given way to uneven paths for major economies amid trade tensions and rising global oil costs It also comes on the heels of diverging monetary policy actions by central banks this week
The Federal Reserve raised interest rates on Wednesday for the second time this year with Chairman Jerome Powell saying the economy is in great shape Then on Thursday the People s Bank of China kept the cost of reverse repurchase agreements steady defying predictions it would track the Fed s hike
Hours later the European Central Bank decided to taper bond purchases and pledged to keep interest rates unchanged at current record lows at least through the summer of 2019 a longer timeframe than investors had priced in ECB President Mario Draghi pointed out that the recent economic soft patch may last longer even as he said the economy is in a better situation
Consumption Engine
In the U S the world s largest economy lower taxes enacted by the Trump administration a strong labor market and elevated confidence are helping cushion the pinch to shoppers from higher fuel expenses That s bolstering prospects for household consumption which accounts for about 70 percent of the economy
Retail sales the latest snapshot of how U S households are doing rose 0 8 percent in May according to a Commerce Department report on Thursday That topped forecasts and prompted IHS Markit to boost its projection for second quarter growth to a 4 4 percent annualized pace from 4 2 percent JPMorgan Chase Co NYSE JPM s chief U S economist Michael Feroli pushed up his estimate to what he called a boomy 4 percent from 2 75 percent while also lifting his forecast for annual U S growth
President Donald Trump is officially targeting sustained 3 percent growth but has often talked about an even faster pace At the same time some analysts see the pace of growth cooling in the second half and next year as the effects of tax cuts ebb and many see the economy s speed limit as closer to 2 percent
The International Monetary Fund warned on Thursday that U S fiscal actions are actually increasing the risks to the global economy by boosting debt potentially stoking inflation and pushing the dollar higher That follows IMF chief Christine Lagarde s comment this week that clouds over the world economy are getting darker by the day
Meanwhile the ECB s updated forecasts for the euro area showed economic growth should slow to 2 1 percent this year compared with its previous estimate of 2 4 percent In China the world s second largest economy May data for industrial output retail sales and investment all came in below analyst projections
Behravesh of IHS Markit expects global growth of 3 3 percent this year based on market exchange rates with the U S making a 0 6 percentage point contribution the heftiest one among developed economies and just behind the 0 8 point contribution he s penciled in from China
The decoupling by the U S follows an acceleration in growth last year across about 120 economies accounting for three fourths of world GDP which the IMF described as the broadest synchronized global upsurge since 2010
Adds IMF comments in fourth paragraph from end |
C | Citigroup to pay 100 million in rate rigging settlement | NEW YORK Reuters Citigroup Inc N C has agreed to pay 100 million to settle charges by most U S states that it rigged the Libor benchmark interest rate to boost profit at the expense of investors The settlement was announced by New York State Attorney General Barbara Underwood whose office has led a probe by 41 U S states and Washington D C into rate manipulation by banks
Libor is short for the London Interbank Offered Rate |
C | Peace economy pose challenges for Colombia s new president | By Julia Symmes Cobb BOGOTA Reuters Colombian President elect Ivan Duque has promised to unite a divided country behind his plans to toughen a peace accord with Marxist rebels and rekindle economic growth but he will face major challenges when he takes office in August The right wing former senator comfortably won Sunday s election with 54 percent of votes against leftist rival Gustavo Petro who garnered 42 percent with his pledge to shake up Colombia s economic model and tackle inequality Both the Colombian peso and local Treasury bonds fell on Monday due to external factors analysts said though in the medium term investment flows are expected to increase based on support for Duque s business friendly policies The peso was down 0 95 percent to 2 923 05 per dollar while the yield on local Treasury bonds known as TES coming due in July 2024 rose to 6 17 percent from 6 14 percent on Friday It was the first presidential election since a 2016 peace agreement with the Revolutionary Armed Forces of Colombia FARC which ended its part in a five decade conflict that has killed more than 220 000 people and displaced millions Duque 41 pledged in his victory speech to unite the polarized Andean country and tackle corruption improve security and increase educational opportunities Peace is something all Colombians yearn for and peace means that we turn the page on the fissures that have divided us Duque told cheering crowds at his celebration party on Sunday night in Bogota as confetti rained down Duque a prot g of hard line former President Alvaro Uribe first grabbed attention railing from Congress against the peace deal which he believes is too easy on former rebel leaders Striking a conciliatory tone on Sunday he promised to guarantee justice for victims and the reintegration of rank and file rebels into Colombian society His aim of revamping the agreement to impose tougher punishment on FARC leaders for war crimes will face considerable opposition from the Constitutional Court and Congress where most parties favor implementing the existing accord The FARC has invited Duque to discuss the accord He is going to have a harder time passing reforms to the peace agreement than he would have his supporters believe said Sergio Guzman Colombia lead analyst for consultancy Control Risks singling out the Constitutional Court which has already ruled that the deal cannot be changed The nine judge court is responsible for deciding whether laws passed by Congress are in line with the constitution Duque needs to include politicians from centrist parties in his cabinet if he wants to unite the country Guzman said He is likely to reveal the names of some ministers this week Duque will face no shortage of security challenges Crime gangs allied with Mexican drug traffickers the National Liberation Army ELN the remaining rebel group as well as FARC dissidents who have refused to demobilize have moved into territory left behind by the FARC Only 19 3 million people just over half of eligible voters participated in the election suggesting some centrist did not like either choice SAFE PAIR OF HANDS Duque has promised to bolster Colombia s 324 billion economy with tax cuts and support for extractive industries such as oil and coal the country s top exports The government expects the economy to grow 2 7 percent this year With the election of Ivan Duque the business sector made up of both local and foreign investment will see fiscal reforms that will seek a reduction of the tax burden for businesses and the simplification of administrative processes said Ciro Meza of law firm Baker McKenzie Some economists are concerned that Duque s proposed tax cuts may worsen the budget deficit and force him to push through unpopular reforms including a pension overhaul to preserve Colombia s investment grade credit rating Ratings agency Fitch said on Monday that Duque s victory signals a continuation of economic policies but added that a fiscal consolidation and encouraging growth are his government s key challenges While oil has been the main driver for peso movements the election has added to the currency s volatility according to Kenneth Lam a New York based Latin America foreign exchange strategist at Citigroup NYSE C Now that we got the electoral outcome we expected oil reverts to be the main driver for the peso which has been outperforming other Latin American currencies he said Alberto Carrasquilla who served as finance minister during Uribe s first term and was Duque s economic adviser during the campaign could reprise the finance minister role Capital Economics said in a note and would be a safe pair of hands Duque has said he will curb ELN attacks on pipelines and invest in state run oil company Ecopetrol s refineries to allow exports of more higher value crude derivatives Although Petro a former M19 rebel won a majority in only eight provinces and the capital Bogota the fact that a leftist received 8 million votes versus 10 3 million for Duque is historic in traditionally conservative Colombia The fractured left has failed for decades to come close to winning Colombia s presidency overshadowed by right wing contenders who promised security Yet the FARC deal has shifted priorities for many of Colombia s more than 50 million people Voters are interested in tackling inequality corruption and inadequate social services which could create opportunities for the left If Duque is not able to get moving on his promises and see concrete results and if he doesn t look for reconciliation the left could win in 2022 said Andres Pardo head of investment holding company Corficolombiana |
C | Citigroup s C Q4 Earnings Revenues Beat Estimates | Have you been eager to see how Citigroup NYSE C performed in Q4 in comparison with the market expectations Let s quickly scan through the key facts from this New York based money center bank s earnings release this morning An Earnings BeatCitigroup came out with adjusted earnings per share of 1 90 surpassing the Zacks Consensus Estimate of 1 82 Rise in revenues were partially offset by higher operating expenses How Was the Estimate Revision Trend You should note that the earnings estimate for Citigroup depicted neutral stance prior to the earnings release The Zacks Consensus Estimate remained stable over the last seven days Also Citigroup has an impressive earnings surprise history Before posting earnings beat in Q4 the company also delivered positive surprises in the prior four quarters Overall the company surpassed the Zacks Consensus Estimate by an average of 3 2 in the trailing four quarters Citigroup Inc Price and EPS Surprise
Revenue Came In Better than ExpectedCitigroup s revenues of 18 4 billion beat the Zacks Consensus Estimate of 17 7 billion Moreover revenues grew 7 year over year Key Takeaways Net income stood at 5 billion up 15 from the prior year quarter Cost of credit rose 15 year over year to 2 2 billion Fixed income markets revenues jumped 49 year over year to 2 9 billionEquity markets revenues of 516 million declined 23 from the prior year quarterInvestment banking revenues grew 6 year over year to 1 4 billionReturned 6 2 billion to shareholders as common stock repurchases and dividends during the quarter What Zacks Rank SaysThe estimate revisions that we discussed earlier have driven a Zacks Rank 3 Hold for Citigroup However since the latest earnings performance is yet to be reflected in the estimate revisions the rank is subject to change While things apparently look favorable it all depends on what sense the just released report makes to the analysts You can see How the Market Reacted So FarFollowing the earnings release Citigroup shares were up nearly 1 in the pre trading session This is in sync with to what the stock witnessed in the prior day s session Clearly the initial reaction shows that the investors have considered the results in their favor However the full session s price movement may indicate a different picture Check back later for our full write up on this Citigroup earnings report Breakout Biotech Stocks with Triple Digit Profit PotentialThe biotech sector is projected to surge beyond 775 billion by 2024 as scientists develop treatments for thousands of diseases They re also finding ways to edit the human genome to literally erase our vulnerability to these diseases Zacks has just released Century of Biology 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance Our recent biotech recommendations have produced gains of 50 83 and 164 in as little as 2 months The stocks in this report could perform even better |
C | Commodities Weekly Oil Slides As U S Iran Tensions Abate | Oil prices fell from nine month highs last week and have extended losses into this week as escalating tensions between the US and Iran subsided Gold also fell as safe haven plays were scaled back while agricultural commodities are higher awaiting the signing of phase one of the US China trade deal tomorrow
WTI Daily Chart
Energy
CRUDE OIL prices have fallen for the past six sessions as the threat of escalating retaliation attacks in the Middle East appear to have disappeared Last week saw the biggest weekly drop since mid July for West Texas Intermediate WTI which touched the lowest level since December 6 yesterday
Saudi Arabia has vowed to maintain stable oil markets and we are due to hear the demand outlooks for 2020 from three institutions over the next three days OPEC the International Energy Agency and the Energy Information Administration China is scheduled to release its oil output data on January 17 On the US supply front the number of US oil rigs in production fell for a third week last week dropping to the lowest since March 2017
Speculative investors remain bullish on the prospects for oil having increased net longs for a fifth straight week to January 7 according to the latest data from CFTC Net longs are now at the highest since August 2018
WTI opened below the 50 retracement level of the rally from October to January at 58 36 this morning the first time it has done so since December 6 The 100 day moving average is at 57 14 and has supported prices for six weeks
NATURAL GAS fell for the first time in six days yesterday which came on the back of the largest weekly advance in nine weeks last week Investors are assessing whether the frigid temperatures that are currently hitting the Northern US the reason behind the recent rally will continue Natural gas inventories fell by 44 billion cubic feet in the week to January 3 less than the 58 billion expected and a reduction from the previous week s 58 billion
Precious metalsGOLD prices also succumbed to the better risk appetite after the apparent cessation of hostilities with Iran Gold looks poised to fall for the first time in six weeks this week barring any new flare up in the Middle East bringing the longest rising streak since June to an end
Speculative investors also pared back long positions turning net sellers for the first time in four weeks in the week to January 7 CFTC data show
SILVER has echoed gold s movements dropping this week for the first time in six weeks The gold silver Mint ratio has been relatively stable for the past week capped on a closing basis by the 200 day moving average at 86 797 since December 17
Speculative investors were net sellers of silver for the first time in four weeks to January 7 pulling net long positions from 28 month highs
PALLADIUM had another push to record highs last week posting the biggest weekly gain since June in the process Investors are still focusing on stretched supply versus anticipated rising demand as the automotive industry pushes toward greener emissions notably in China Speculative investors are still enthusiastic about palladium s prospects as they were net buyers for a second straight week to January 7 according to CFTC
PLATINUM looks set to slide for a second consecutive day today amid some mild profit taking on long positions The prospects still look rosy however according to speculative accounts positioning Speculators increased their net long positions for an eighth straight week in the week to January 7 according to the latest report from CFTC though the magnitude of those additions slumped to just 118 contracts worth 11 800 troy ounces
Base metals
COPPER prices jumped the most since December 6 yesterday after China s exclusion from the US currency manipulator report paved the way for an unobstructed signing of the Phase one US China trade deal tomorrow The bounce caught some speculative investors unawares as they had turned net sellers for the first time in three weeks in the week to January 7 CFTC data showed
A recent Bloomberg survey concluded that copper might maintain a bid bias through 2020 as capital spending for new production slows and stockpiles see drawdowns as US China trade tensions ease
The metal is heading toward the 78 6 Fibonacci retracement of the April September decline at 2 88 while the 100 month moving average is at 2 917
Copper Daily Chart
AgriculturalsCORN is hovering near the 200 day moving average at 3 8201 after closing slightly above it yesterday for the first time in almost two weeks The bid tone is rather surprising given the USDA s WASDE report World Agricultural Supply and Demand Estimates on Friday suggested higher yields for US corn acreage for the current season
Speculative investors were net buyers of the commodity for a fourth week to January 7 boosting net long positions to levels not seen since August 20
SOYBEAN prices have traded in a relatively tight range so far this year trapped in a 9 25 9 45 range The 9 25 base line appears to be quite strong after it resisted a few tests since December 23 Hopes are for renewed orders from China the world s biggest soybean importer once the trade deal is signed
Speculative investors turned net sellers for the first time in four weeks according to the latest report from CFTC as at January 7
WHEAT prices hit a 17 month high last week following reports that US planting this season was at the lowest in a century French exports of soft wheat hit a seven year high last month despite intermittent strikes at some ports which disrupted loadings Exports hit 134 million tonnes the highest December total since 2013 according to Bloomberg calculations The boost in exports comes as a result of a record harvest combined with less competition from Russia and increased demand from China
Sugar Monthly Chart
SUGAR prices hit a 22 month high yesterday as investors continue to focus on the expected supply demand mismatch for this season In a recent client note Citigroup NYSE C estimated the shortfall for this year at 7 6 million tons with crop risks in India and Thailand and lower output from Brazil as a result of higher ethanol demand adding to the bid bias
Speculative investors scaled back net long positions for a second straight week to January 7 latest CFTC data show
The 55 month moving average is at 0 1426 and has capped prices since May 2017 There is also the upper band of a rising channel around the 0 1415 level |
C | Citigroup C Surpasses Q4 Earnings And Revenue Estimates | Citigroup C came out with quarterly earnings of 1 90 per share beating the Zacks Consensus Estimate of 1 82 per share This compares to earnings of 1 61 per share a year ago These figures are adjusted for non recurring items
This quarterly report represents an earnings surprise of 4 40 A quarter ago it was expected that this U S bank would post earnings of 1 96 per share when it actually produced earnings of 1 98 delivering a surprise of 1 02
Over the last four quarters the company has surpassed consensus EPS estimates four times
Citigroup which belongs to the Zacks Banks Major Regional industry posted revenues of 18 38 billion for the quarter ended December 2019 surpassing the Zacks Consensus Estimate by 3 80 This compares to year ago revenues of 17 12 billion The company has topped consensus revenue estimates two times over the last four quarters
The sustainability of the stock s immediate price movement based on the recently released numbers and future earnings expectations will mostly depend on management s commentary on the earnings call
Citigroup shares have added about 1 since the beginning of the year versus the S P 500 s gain of 1 8
What s Next for Citigroup
While Citigroup has underperformed the market so far this year the question that comes to investors minds is what s next for the stock
There are no easy answers to this key question but one reliable measure that can help investors address this is the company s earnings outlook Not only does this include current consensus earnings expectations for the coming quarter s but also how these expectations have changed lately
Empirical research shows a strong correlation between near term stock movements and trends in earnings estimate revisions Investors can track such revisions by themselves or rely on a tried and tested rating tool like the Zacks Rank which has an impressive track record of harnessing the power of earnings estimate revisions
Ahead of this earnings release the estimate revisions trend for Citigroup was mixed While the magnitude and direction of estimate revisions could change following the company s just released earnings report the current status translates into a Zacks Rank 3 Hold for the stock So the shares are expected to perform in line with the market in the near future You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead The current consensus EPS estimate is 2 12 on 18 90 billion in revenues for the coming quarter and 8 51 on 74 96 billion in revenues for the current fiscal year
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well In terms of the Zacks Industry Rank Banks Major Regional is currently in the top 15 of the 250 plus Zacks industries Our research shows that the top 50 of the Zacks ranked industries outperform the bottom 50 by a factor of more than 2 to 1 |
JPM | Twitter Stock Price Target Cut On Mixed Engagement Data | has been moving on user growth or lack thereof and engagement since the company went public more than three years ago so analysts have been keeping close tabs on it watching for signs pointing to life or death The first sets of numbers pertaining to engagement and users in the first quarter are in and it s a mixed picture In short usage among U S users and Twitter s core user base is still solid but on an international basis and among new users the story isn t good
Weak user growth for Twitter again
In a research note dated April 3 Canaccord Genuity analyst Michael Graham said he trimmed his price target for Twitter stock from 15 to 14 per share and maintained his Hold rating based on his latest proprietary data regarding users and engagement on the social platform He tracked average engagement of users in about 100 countries and then compared that with past results
Based on his latest sampling he believes the micro blogging platform added about 3 6 million net new users during the first quarter representing a 1 1 sequential increase This would be a slight miss off the consensus of 4 million new users
Engagement on Twitter improves
In the U S Graham found a slight bump in the growth rate in the U S in February and he suggested that this could be due to events related to the Presidential inauguration He also found a 5 2 increase in his engagement index marking a sequential acceleration from the 3 9 increase recorded in the fourth quarter
Internationally however Twitter s user growth slowed and Graham feels that the better monthly active user growth in the U S might help curb some of the downside risk to revenue because average ad revenue per user is nearly six times higher in the U S
Cutting estimates for Twitter
The analyst also spoke with the company itself and his own sources within the industry and he reported several headwinds For example he feels that video ad prices might need to come down by as much as 50 to 66 in order to bring them in line with competitor pricing He added that video ads make up 20 to 30 of ad units
He also noted that the company plans to discontinue some direct response ads that have low return on investment and he said this headwind may end up being of significant magnitude and last two or three quarters As a result he cut his revenue estimate for this year from 2 6 billion to 2 5 billion
Twitter users generally less engaged
JPMorgan analyst Doug Anmuth also released his firm s latest engagement data on major social media networks including Twitter in a note dated March 31 In the firm s proprietary social networking survey analysts found that of the major social networks they looked at Twitter users are the least engaged
Anmuth said 35 of respondents to their survey use the micro blogging platform and of that group only 33 use it very frequently and 47 use it only on occasion From this he concludes that the platform s users are generally less engaged than users of other social networks
The social network s user base also tends to be older than the user base of the other platforms as only 13 are in the critical 18 to 24 age group advertisers are desperate to reach so desperate that they re trying to reach them Twenty four percent of the platform s users are between the ages of 25 and 34 while 37 are ages 35 to 54 and 26 are 55 years and older
The JPMorgan NYSE JPM team also found that users of Facebook NASDAQ FB Instagram and Snap Inc NYSE SNAP said they use Twitter less now than they did a year ago
Shares of Twitter stock fell by as much as 1 1 to 14 78 during regular trading hours on Monday |
JPM | JPM Likes This Software Play Technical Set Up | JPMorgan Chase NYSE JPM upgraded Twilio Inc NYSE TWLO to overweight from neutral and has a 36 dollar price target which would position the price structure as a substantial base like accumulation pattern see chart below
The upturn off of Thursday s low at 26 76 may be a successful retest of the Jan low at 26 41 and represents the second price coordinate in a developing Double Bottom in TWLO
That said TWLO still has plenty of work to do preserving Friday s 4 4 up gap gains and thereafter to claw its way above its down sloping 20 day MA now at 29 41
Keep your eye on Twilio |
MPC | Big crude oil margins should boost U S refiner earnings | By Jarrett Renshaw and Stephanie Kelly NEW YORK Reuters U S refiners ran full tilt in the second quarter fueled by cheap domestic crude and fat margins that should boost earnings though their heavy activity could eventually saturate the market with gasoline sapping profits down the road U S independent refiners including Phillips 66 NYSE PSX and Marathon Petroleum Corp NYSE MPC are expected to announce strong results due to the heavy discounts for U S and Canadian crude along with strong fuel demand and lower costs to comply with the nation s biofuel laws analysts said Strong crack spreads the margin on turning crude oil into diesel gasoline and other products have spurred refiners to keep production high That margin averaged about 21 07 per barrel in the second quarter its highest since 2015 For a graphic on daily crack spreads see Among the largest independent refiners Marathon CVR Energy and Hollyfrontier Corp rank in the top 10 percent in Thomson Reuters analyst revisions models which weighs recent changes in estimates for revenue and per share earnings suggesting positive trends headed into reporting season for refiners which begins next week The discount on crude prices in Midland Texas widened by nearly 10 a barrel against benchmark futures during the second quarter as production in the Permian surged beyond pipeline capacity to move oil out of the region Increased export demand also led to high utilization rates a positive said Sandeep Sayal vice president in the refining and marketing group at IHS Markit The United States exported about 5 1 million barrels per day bpd of products through the second quarter according to data from the U S Energy Information Administration Refinery utilization rates hit their highest levels since 2005 in June as they processed record amounts of crude oil in June according to the EIA However high utilization rates could lead to oversupply of gasoline in the coming months which would dampen refiners future profit margins The next month or month and a half you might have some question marks around the gasoline market Justin Jenkins lead refining analyst at Raymond James in Houston said BIG GASOLINE STOCKS LOW ON DISTILLATES The outlook is a tale of two stories analysts said Gasoline inventories have swelled amid high runs and tepid demand growth which will hurt the margin for further processing of gasoline However stockpiles of distillates which include diesel and heating oil have sunk below four year lows this summer amid surprising domestic demand and continued pull from Latin America As the winter approaches the traditional season for heating oil demand that could again help refining margins It s going to be a real tug of war the higher price of diesel versus a weakening gasoline market Zachary Rogers a refining analyst at Wood Mackenzie said Refiners have already begun switching yields to distillates to chase margins despite being in the heart of the busy summer driving season Rogers said However they can only alter their yield by a few percent particularly because refiners are flush with light U S crude that produces gasoline friendly naphtha Rogers said Refiners such as Delek US Holdings Inc and HollyFrontier which source a majority of their crude from the Permian and are capable of processing mostly light sweet crude stand to benefit from cheap feedstock U S gasoline days of supply stood at 24 40 days last week just shy of the highest on record for this time of year EIA data showed Overall inventories are 4 percent above the historical average data shows Refiners may have to consider more dramatic measures such as refinery run cuts if gasoline inventory does not clear out At the same time U S distillate inventories are at their lowest seasonally since 2014 and about 20 percent below the same time last year |
MPC | Andeavor easily tops Q2 estimates as refining income soars shares flat AH | Andeavor NYSE ANDV is little changed after hours despite easily beating consensus expectations for Q2 earnings and revenues as EBITDA came in at 1 15B compared to 479M in the year ago quarter ANDV s Q2 refining income totaled 607M compared to 45M in the year ago quarter with refining margins of 14 26 bbl vs 9 45 bbl a year ago and refining utilization of 96 compared to 91 for Q2 2017 Q2 logistics segment operating income increased to 193M from 163M a year earlier while marketing segment operating income fell to 209M from 240M last year as overall fuel margins were 0 116 gallon compared to 0 132 gallon a year ago ANDV also says it completed a 1 55B dropdown to Andeavor Logistics NYSE ANDX adding 2019 expected annual net earnings of 105M 115M and EBITDA of 195M 205M ANDV s ownership in ANDX rises to 64 from 59 as a result of the deal Marathon Petroleum NYSE MPC is in the process of acquiring ANDV for 23 3B in a deal that is expected to be completed on Oct 1 Now read |
MS | Dollar recoups losses shares lower as banks weigh | By Vikram Subhedar LONDON Reuters The dollar extended its recovery against a basket of other currencies on Friday while banks dragged European shares slightly lower following underwhelming results from Swiss major UBS The two day recovery comes after the dollar suffered a 4 percent drop in the three weeks from Jan 3 reflecting doubts about how U S President Donald Trump s policies will play out for the currency particularly after both Trump and Treasury Secretary designate Steven Mnuchin hinted at concerns over its strength The dollar index which measures its strength against a basket of six major currencies rose 0 2 percent to 100 54 Trump suggested overnight he would push ahead with a 20 percent border tax on Mexico spurring a slump on the peso and refocusing market expectations on his pro business policies which along with healthy corporate results helped stocks on Wall Street to fresh record highs Some U S protectionism is seen as dollar positive as it may bring capital home The dollar has experienced a powerful rebound re establishing post U S election relationships between the performance of risk assets and U S bond yields on the one hand and the dollar on the other hand said Morgan Stanley NYSE MS FX strategists led by Hans Redekker in a note to clients Benchmark German bonds are headed for their worst week since the aftermath of November s U S election on Friday as Trump s first week in office fuels expectations of inflation and growth boosting policies in the world s biggest economy Investor flows continue to point to a preference for so called reflation trades according to the latest weekly data from Bank of America Merrill Lynch and fund tracker EPFR Funds investing in TIPS which offer protection against rising inflation high yield bonds and Japanese equities attracted inflows over the past week the data showed But the re positioning feels grudging and flows have yet to show big asset allocation capitulation out of bonds into stocks Bank of America Merrill Lynch strategists said European stocks were headed for a weekly gain of about 1 percent though were slightly lower on Friday as weakness in the banking shares weighed A fall in profits sent UBS shares down more than 3 percent as investors locked in some gains following a strong rally in financials stocks following the U S election The European banking index fell 1 2 percent In the UK the FTSE was also slightly lower but outperformed other regional benchmarks supported by merger activity as leading supermarket operator Tesco LON TSCO snapped a smaller wholesaler Tesco shares surged 10 percent In commodity markets oil prices gave up earlier gains as rising crude output from the United States was seen offsetting efforts by OPEC and other producers to prop up the market by cutting supplies Trading was choppy however as volumes were lighter than average with much of Asia closed due to the start of the Lunar New Year holiday Brent crude futures the international benchmark for oil prices were trading at 55 98 per barrel down 0 5 percent from their last close
U S West Texas Intermediate WTI crude futures were down 0 2 percent at 53 67 a barrel |
MS | BNP Paribas poaches three senior bankers for ECM cash equities teams | PARIS Reuters BNP Paribas PA BNPP has poached three senior bankers for its equity capital markets ECM and cash equities teams and the French bank added that global head of ECM Thierry Olive would take a new role with BNP Paribas in Asia Andreas Bernstorff has been appointed head of ECM in Europe Middle East and Africa while Benedicte Thibord and Phil Griffith have also joined Exane BNP Paribas Bernstorff joins from Citigroup NYSE C Thibord arrives from Kepler Cheuvreux while Griffith joins from Morgan Stanley NYSE MS Thierry Olive will take a new investment banking role for BNP Paribas in Asia
These major hires reinforce our commitment to building a top quality capital markets advisory and execution platform said Sophie Javary head of Corporate Finance EMEA at BNP Paribas and Vincent Rouviere Head of Cash Equities at Exane BNP Paribas in a joint statement |
MS | Fed to stop mortgage reinvestments in 2018 Morgan Stanley | NEW YORK Reuters The U S Federal Reserve will stop reinvestments of its mortgage backed securities holdings in April 2018 in an attempt to shrink its 4 2 trillion balance sheet that had ballooned from bond purchases to combat the last recession Morgan Stanley NYSE MS analysts said on Friday Speculation about the timing and framework on the U S central bank s plan to pare its holdings of MBS and U S Treasury securities was rekindled after the Fed s policy meeting on Dec 13 14 at which they raised interest rates by a quarter point In the statement issued after that meeting the Federal Open Market Committee the Fed s policy setting group said it will continue to reinvest principal payments from its MBS and Treasuries until normalization of the level of the federal funds rate is well under way Morgan Stanley analysts arrived at their call on the timing of the Fed ending its MBS reinvestments based on the Fed s projected 3 percent longer run equilibrium interest rate together with their own forecast of two rate hikes in 2017 and three in 2018 Applying this informal guidance to our expectation for the rates path leads us to believe the Fed will halt its reinvestments of MBS in April 2018 they said The Fed has maintained the size of its bond holdings at the current level through principal reinvestments since 2014 after its third round of large scale bond purchases or quantitative easing ended We believe the FOMC will halt its reinvestments of MBS in April 2018 preceded by a ramp up in messaging and announcement in the March 2018 FOMC statement Morgan Stanley analysts wrote in a research note on Friday The Fed s Treasuries and MBS holdings are about 2 46 trillion and 1 76 trillion respectively The Fed s balance sheet size is equivalent to about 22 percent of gross domestic product according to the analysts Ending Treasury reinvestments is not necessary for a gradual normalization of the balance sheet the economy should grow into the Fed s Treasury portfolio within about a decade said Morgan Stanley economists and strategists While the Fed holds more Treasuries than MBS the analysts said halting reinvestment of MBS is easier operationally though it may result in modestly higher mortgage rates for consumers
It is also harder for the Fed to control the outcome if it stops reinvestments in Treasuries namely that the impact on financial conditions and the economy would be out of the Fed s hands they said |
MS | Cautious BOJ raises growth forecast as economy shows flickers of life | By Leika Kihara
TOKYO Reuters The Bank of Japan kept monetary policy steady and maintained its optimistic price forecasts on Tuesday signaling its confidence that a steady economic recovery will accelerate inflation to its 2 percent target without additional stimulus
Markets are focusing on what BOJ Governor Haruhiko Kuroda has to say on U S President Donald Trump s protectionist trade stance particularly with Trump taking direct aim at Japan s powerful auto industry a mainstay of its economy
As widely expected the BOJ maintained a pledge to guide short term interest rates at minus 0 1 percent and the 10 year government bond yield to around zero percent
It also left unchanged a loose commitment to buy government bonds at the current pace so the balance of its holdings rise at 80 trillion yen 705 billion per year
I expect inflation to pick up but this will lag economic growth said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities
The BOJ can afford to stay on hold because it has already pushed out the timing for meeting its inflation target a lot
In a quarterly review of its forecasts the BOJ raised its growth estimates for the fiscal year beginning in April and the following year nodding to brightening prospects for exports
But the central bank left unchanged its already optimistic inflation forecasts for the coming years despite external factors that push up prices such as a rebound in oil prices and rising import bills from a weak yen T9N1F3020
Risks to both economic activity and prices are skewed to the downside the BOJ said in the quarterly forecast report
The momentum for achieving our 2 percent inflation target is maintained but lacks strength it said
With domestic demand still weak many central bankers remain wary on whether price rises driven by external factors could transform into sustained price growth
The BOJ said it expects inflation to hit 2 percent target by around March 2019 unchanged from its forecast in November
NEW CHALLENGES
Japan s growth remained anemic in the first half of last year as consumption slumped But a pick up in global demand has helped exports recover giving rise to market bets the BOJ s next move may be to hike not cut rates
Data released on Tuesday showed factory output rose for a second straight month in December as automakers boosted production L4N1FK3B2
If the economy continues a steady recovery in coming months we expect the BOJ s next step to be a tightening not an easing of policy said Yuichiro Nagai an economist at Barclays LON BARC Securities Japan
But uncertainty over Trump s policies is emerging as a new headache for Japanese policymakers worried about a resurgence of the yen which hurts exports
The dollar slumped against the yen on Monday which benefited from its safe haven status as Trump s tough stance on migration rattled investors and curbed risk appetite
Kuroda could also seek at his post meeting briefing to allay market concerns the BOJ may taper its massive monetary stimulus sooner than expected
Such speculation emerged after the BOJ drove up bond yields last week by abruptly skipping a much anticipated auction to buy short term bonds
Global bond yields have risen on expectations that Trump s pledge of big infrastructure spending could lead to higher U S inflation putting upward pressure on Japanese long term rates
The BOJ was forced to revamp its policy last September into one targeting interest rates rather than the pace of its money printing after more than three years of aggressive bond buying failed to accelerate inflation to its 2 percent target
But the new framework dubbed yield curve control YCC has brought new challenges With markets accustomed to huge bond buying by the BOJ any sign of slowdown in its purchases has prompted market speculation it could withdraw stimulus
1 113 5100 yen |
JPM | U S monthly consumer prices increase moderately in May | By Lucia Mutikani WASHINGTON Reuters U S monthly consumer inflation rose moderately in May as gasoline price increases slowed suggesting the Federal Reserve could continue to gradually raise interest rates this year The Labor Department s inflation report was published ahead of the start of the Fed s two day policy meeting on Tuesday Steadily rising inflation and a tightening labor market are seen encouraging the U S central bank to hike rates for a second time this year on Wednesday Neither too hot nor too cold said Michael Feroli an economist at JPMorgan NYSE JPM in New York As such today s news won t change the terms of the inflation debate and is likely to do little to stir the pot at the Fed meeting The Consumer Price Index increased 0 2 percent last month also as food prices were unchanged That followed a similar gain in the CPI in April In the 12 months through May the CPI accelerated 2 8 percent the biggest advance since February 2012 after rising 2 5 percent in April The surge in the annual CPI is largely the result of last year s weak readings which were driven by big declines in the prices of cell phone service plans and doctor fees falling from the calculation Excluding the volatile food and energy components the CPI rose 0 2 percent supported by a rebound in new motor vehicle prices and a pickup in the cost of healthcare after edging up 0 1 percent in April That lifted the year on year increase in the so called core CPI to 2 2 percent the largest rise since February 2017 from 2 1 percent in April The Fed tracks a different inflation measure which is just below its 2 percent target Economists are divided on whether policymakers will signal one or two more rate hikes in their statement accompanying the rate decision on Wednesday The slow but steady upward pressure on inflation could tilt a majority of policymakers to lift their suggested interest rate forecast possibly penciling in two additional moves in the second half of the year after almost certainly raising rates tomorrow said Sal Guatieri a senior economist at BMO Capital Markets in Toronto The dollar was little changed against a basket of currencies while prices for U S Treasuries fell slightly Stocks on Wall Street were trading higher INFLATION ON THE HORIZON The Fed s preferred inflation measure the personal consumption expenditures price index excluding food and energy rose 1 8 percent on a year on year basis in April matching March s increase Economists expect the core PCE price index will breach its 2 percent target this year Fed officials have indicated they would not be too concerned with inflation overshooting the target A survey by the NFIB on Tuesday showed the share of small businesses reporting raising prices hitting it highest level since 2008 in May Several regional factory surveys have shown manufacturers paying more for raw materials this year Economists expect these higher costs will eventually be passed on to consumers That together with an expected acceleration in wage growth from a tight labor market could boost inflation later this year The unemployment rate is at an 18 year low of 3 8 percent There is inflation out there on the horizon but it is largely a mirage policymakers think will disappear when the economy gets there said Chris Rupkey chief economist at MUFG in New York Last month gasoline prices increased 1 7 percent after surging 3 0 percent in April Food prices were unchanged in May after rising 0 3 percent in the prior month Food consumed at home fell 0 2 percent amid declines in the cost of meat eggs fruits and vegetables Owners equivalent rent of primary residence which is what a homeowner would pay to rent or receive from renting a home rose 0 3 percent in May after a similar gain in April Healthcare costs gained 0 2 percent last month with prices for prescription drugs jumping 1 4 percent and the cost of hospital visits rising 0 5 percent Healthcare costs nudged up 0 1 percent in April Prices for new motor vehicles rose 0 3 percent after sliding 0 5 percent in April
But prices for used cars and trucks fell 0 9 percent after tumbling 1 6 percent in April Airline fares declined 1 9 percent in May after dropping 2 7 percent in the prior month Prices for apparel and recreation were unchanged in May |
JPM | JPMorgan is sued over Mexican property transfer | NEW YORK Reuters A Mexican real estate developer has filed a 1 2 billion lawsuit accusing JPMorgan Chase Co N JPM of fraudulently inducing it to transfer properties based on a false promise it would sell them The complaint by Elias Sacal Cababie and his BVG World SA was filed with the U S District Court in Manhattan on Monday the same day BVG said a Mexican judge had issued an arrest warrant for JPMorgan s country head Eduardo Cepeda for alleged fraud related to a 2007 loan In a emailed statement on Tuesday JPMorgan said the allegations of wrongdoing in the complaint had no merit and added This is all part of a process by Mr Sacal aimed at avoiding fulfillment of financial obligations The bank had on Monday said the accusations related to Cepeda also had no merit and that it was working with its lawyers to respond to this demand for justice to be served A lawyer for Sacal Stephen Meister in an email said it was JPMorgan that was trying to avoid its obligations to his client According to the complaint Sacal and BVG transferred hundreds of millions of dollars of real estate to JPMorgan in September 2012 hoping to use sale proceeds to pay off a 99 million loan and for other business ventures But the plaintiffs said JPMorgan never intended to fulfill its promise and took over the properties to exact revenge including by collecting more fees and interest in the wake of business disputes that they thought had been resolved in 2010 They also said JPMorgan sought to injure Sacal s reputation by badmouthing him to business peers including the alleged use by some executives of anti Semitic slurs when referring to Sacal who is Jewish Monday s complaint accuses JPMorgan of fraud unjust enrichment defamation civil racketeering and other wrongdoing It seeks 400 million of damages on some claims and triple that amount on the racketeering claim
The case is Sacal et al v JPMorgan Chase Bank NA U S District Court Southern District of New York No 18 05249 |
JPM | Fed Dots in Focus as Market Awaits Rate Hike Decision Day Guide | Bloomberg Federal Reserve Chairman Jerome Powell has repeatedly played down the central bank s dot plot as a guide to future interest rates but Wall Street just won t take the hint
While the Federal Open Market Committee is almost certain to raise rates a quarter point at the close of a two day meeting Wednesday investors are focused on whether the panel will signal one or two additional 2018 hikes when it releases updated interest rate forecasts with the policy decision at 2 p m Powell will begin his press conference 30 minutes later
The FOMC was about evenly split in March when it projected three hikes this year so just one participant switching to four hikes could shift the median of the committee Accelerating growth and inflation rising to target might argue for a more aggressive tightening while lackluster wage increases and fragile emerging markets would suggest caution
The market will be focused on 2018 dots said Michael Feroli chief U S economist at JPMorgan Chase Co NYSE JPM It is a close call I m leaning toward four but without much conviction The FOMC is really focused on the language but I think that will be overshadowed by the dots
Powell advised investors in his March press conference not to focus too much on the dots Asked about its projections for 2020 he said policy makers don t have the ability to see that far into the future That echoed his 2016 view when he pointed to shortcomings in the dot plot
Economists surveyed by Bloomberg predict the FOMC will stick with its March prediction of three hikes this year in the updated quarterly forecasts
Even so there is a risk that the dots go up a tad not down said Steven Ricchiuto chief U S economist at Mizuho Securities All you need is for one to change There has been enough strength in the economy to tilt to more tightening
The Summary of Economic Projections could see other changes that reflect mostly upbeat economic data since March Forecasts could show higher 2018 growth lower unemployment rates and possibly slightly higher inflation said Stephen Stanley chief economist at Amherst Pierpont Securities LLC
The committee will also debate the language in its policy statement Minutes to the last two FOMC meetings showed officials have begun to discuss changes reflecting that policy is moving closer to neutral rather than still being characterized as accommodative
I d expect this part of the statement to be softened to something like somewhat accommodative or perhaps even dropped said Jonathan Wright an economics professor at Johns Hopkins University in Baltimore and a former Fed economist
In the press conference journalists are likely to ask Powell about softening global growth and emerging markets struggling with higher U S rates Currencies of such nations have been hammered in a spreading selloff amid worries that their economies won t cope with higher U S borrowing costs
The tone of the press conference will be important and Powell will likely strike a balance not eager to raise faster or slower said Roberto Perli a partner at Cornerstone Macro LLC in Washington |
JPM | Gasoline leads broad increase in U S producer inflation | By Lucia Mutikani WASHINGTON Reuters U S producer prices increased more than expected in May leading to the biggest annual gain in nearly 6 1 2 years the latest sign of a gradual building up of inflation pressures The Federal Reserve raised interest rates for a second time this year on Wednesday and forecast two more rate hikes The U S central bank noted that overall and underlying inflation measures had moved closer to its 2 percent goal The Fed is on the right course with its gradual pace of rate hikes because the inflation heat may yet lead to fire and the risk that monetary policy has to move faster and put the long economic recovery in jeopardy said Chris Rupkey chief economist at MUFG in New York The producer price index for final demand rose 0 5 percent last month boosted by a surge in gasoline prices and continued gains in the cost of services the Labor Department said The PPI edged up 0 1 percent in April In the 12 months through May the PPI increased 3 1 percent the largest advance since January 2012 Producer prices rose 2 6 percent year on year in April Economists had forecast the PPI gaining 0 3 percent from the prior month and rising 2 8 percent from a year ago A key gauge of underlying producer price pressures that excludes food energy and trade services nudged up 0 1 percent last month The so called core PPI rose by the same margin in April In the 12 months through May the core PPI rose 2 6 percent after advancing 2 5 percent in April The renewed upward trend in producer prices strengthens expectations that inflation will pick up this year The Fed s preferred inflation measure the personal consumption expenditures PCE price index excluding food and energy increased 1 8 percent year on year in April after a similar gain in March New projections from Fed officials on Wednesday indicated that the core PCE price index would slightly run above the 2 percent target The dollar reversed losses against a basket of currencies following the Fed s rate decision while prices for U S Treasuries fell Stocks on Wall Street fell marginally STEEL PRODUCTS PRICES SURGE Regional factory surveys have shown an acceleration in raw material prices this year So far manufacturers have not passed on these higher costs to consumers A worsening worker shortage is expected to push up wages This together with expensive raw materials will likely squeeze profit margins and probably force businesses to raise prices A report on Tuesday showed monthly consumer prices rising moderately in May In May prices for goods surged 1 0 percent accounting for 60 percent of the rise in the PPI Goods prices were unchanged in April In May they were boosted by a 9 8 percent jump in the price of gasoline Wholesale gasoline prices slipped 0 4 percent in April Prices for steel mill products surged 4 3 percent in May the largest rise since February 2011 likely reflecting steel and aluminum import tariffs imposed in March by the Trump administration The cost of these products could rise further after the government this month widened the duties to imports from the European Union Canada and Mexico The inflation impact of the steel and aluminum tariffs though likely moderate will be more visible in the second half of this year said Ryan Sweet a senior economist at Moody s Analytics in West Chester Pennsylvania Wholesale food prices edged up 0 1 percent last month after declining 1 1 percent in April Excluding food and energy goods prices increased 0 3 percent rising by the same margin for a third straight month The cost of services increased 0 3 percent after nudging up 0 1 percent in April Services were driven by a 0 9 percent rise in margins for trade services The cost of healthcare services ticked up 0 1 percent after falling 0 2 percent in April Those costs feed into the core PCE price index Economists said factoring in the PPI and CPI data they expected the monthly core PCE price index rose 0 2 percent in May which would push the annual increase to 1 9 percent Medical care pricing looked weak in May but we see firmness in other inputs related to used vehicle prices airfares and prices for various financial services said Daniel Silver an economist at JPMorgan NYSE JPM in New York
The Commerce Department will publish May PCE inflation data on June 29 |
C | Euroscepticism crops up in Hungarian village transformed by EU funds | By Krisztina Than POROSZLO Hungary Reuters More than a million tourists have flocked to the village of Poroszlo in eastern Hungary since 2012 when Europe s largest freshwater aquarium opened with 6 5 million euros of financing from the European Union While Poroszlo s residents recognise the benefits of EU membership some of them see Brussels as an external force that imposes all kinds of demands on them such as how money coming from the bloc should be spent and whether Hungary should accept Muslim immigrants Such ambivalent attitudes have been central to the electoral success of nationalist eurosceptic Prime Minister Viktor Orban Hungarians broadly welcome EU membership and its funding but like Orban they still believe Brussels has no right to foist its rules and values on them This ecocentre is splendid it attracts many tourists and the village can feel this said Zsuzsanna Godo 60 as she left Poroszlo s supermarket The Lake Tisza Ecocentre and its aquarium was largely funded by the EU with the government and the village itself also contributing Godo said it had created jobs and the turnover of local shops had increased But when asked if EU membership was good for Hungary she said No I don t see any point as they put limitations on us in many areas They set conditions how the money should be spent or there are the migrants the EU try to tell us what to do After more than a million refugees and migrants came to Europe in 2015 fleeing war and poverty the EU sought to disperse many of the arrivals around the bloc including to Hungary Orban pursued a strident anti immigration campaign ahead of April elections where he was reelected by a landslide with many voters in rural Hungary feeling Orban stood up for national interests when he rejected the EU s migration policies According to a 2018 survey by global think tank Globsec EU membership has overwhelming support across Central Europe with 75 percent of Hungarians saying they would vote to stay in the bloc But it has declined from 79 percent in 2017 while the leave camp increased to 18 percent from 14 percent Csaba Toth director of liberal think tank Republikon Istitute says while Orban s campaign was not intended to undermine Hungarians pro EU attitude it has had side effects If voters are constantly hearing for years in a well funded campaign that Brussels wants to settle many migrants here they will believe it especially as there was no positive campaign to counter it he said Hungary has been allocated over 25 billion euros worth of EU funds in the 2014 2020 budget period according to EU data making it the third biggest recipient in former communist eastern Europe behind Poland and Romania Graphic on EU Structural and Investment Funds spending in 2014 2020 The funds from the EU which the country joined in 2004 have contributed to investment and boosted Hungary s economy which is expected to grow by 4 percent this year However growth is forecast to slow in coming years partly as EU funds ebb Citigroup NYSE C said in a May 25 note We believe the government s latest over 4 percent GDP growth forecasts for 2018 2022 seem too optimistic as we expect growth to slow as labour supply and EU funds will be largely utilized it said Citigroup projects 4 percent growth for 2018 and then only 3 1 percent for 2019 As talks about the EU s next budget start Brussels proposed on Tuesday to spend more of the bloc s money on Italy and other southern states hit by the economic and migration crises while giving less to eastern Europe Hungary has said it would oppose any reduction in EU funds including agricultural subsidies that could hit its sizeable farm sector BACKWATER The Lake Tisza Ecocentre has ambitious plans to expand its huge aquariums and leisure park with more EU money to show an even greater array of Hungary s wildlife and in 2016 it applied for a further 800 million forints 2 9 million of EU funding This is also an EU tender if we win then we will build a new 900 square meter extension to the building director Janos Kiss said proudly The centre which lies on the shore of the tranquil Tisza lake famous for its abundant bird population has attracted more than 1 2 million visitors since 2012 mostly Hungarians The lake is a large artificial reservoir located on the former flood plains of the Tisza river with zigzagging channels backwaters and a myriad of small reedy islands Janos Bornemisza has been mayor of Poroszlo since 1994 He fought for the aquarium for years and says it helped to lengthen the high tourist season benefiting his village We think in a small village like this we are not directly impacted by Brussels but indirectly of course we are as we are interested to know how much EU funds we will receive and this makes us feel we are part of the EU and we want to remain so he said Some in the village share this view but with reservations We can be grateful to the EU for many things but it also has disadvantages for example we have become a dumping ground of the EU as far as foodstuffs are concerned said Vince Kocsis a grey haired man wiping off sweat as he gets off his bike in the heat He blames multinational companies for bringing lower quality products to Hungary To some extent we need the EU as we should belong somewhere for the country to get wealthier I think We used to belong to the Soviet Union they moved out and now we have something else added Kati a 63 year old pensioner who declined to give her full name She says Brussels should not meddle into Hungary s affairs though We get money but we also give them something no We must comply with their conditions Her words echo comments by Orban made in a March 6 speech to businessmen in Budapest when he said that EU funds were not a precondition for the success of the Hungarian economy We must understand that by giving us money they are financing themselves This is a wise system Orban said My guiding principle is that it s not money that we need from Europe It s not the Europeans money that we need it s their markets This is why we must stay in the European Union |
C | Australia s CBA seeks redemption with record settlement | By Paulina Duran and Jonathan Barrett SYDNEY Reuters Commonwealth Bank of Australia CBA AX CBA agreed to pay a record penalty of A 700 million 529 3 million to settle explosive money laundering charges brought by Australia s financial intelligence agency The biggest financial penalty in Australian corporate history was almost double the amount CBA had set aside signaling the tougher regulatory framework Australian banks face following revelations of widespread misconduct Even so CBA shares were up 1 5 percent in afternoon trade as investors breathed a sigh of relief that authorities had not pursued much larger fines in a case that shocked the country and triggered an executive shake up at the bank It is the second major case new CEO Matt Comyn who replaced Ian Narev in the wake of the scandal has settled with regulators in a month after admitting to rate manipulation allegations Australia s biggest bank admitted it had breached money laundering and terror financing laws on 53 750 occasions according to an statement of facts tendered in court by both parties Suspicious transactions were repeatedly not reported and monitoring processes failed it said The money laundered through the CBA accounts included the proceeds of drug and firearms importation and distribution syndicates predominantly involving methamphetamine the court document said CBA also failed to adequately notify the regulator of transactions linked to several customers who posed a potential risk of terrorism or terrorism financing CBA shares were up 2 percent in a slightly positive market even though the fine was by far the biggest in Australian corporate history and almost double the A 375 million CBA had set aside to deal with the case Many of the breaches carried maximum penalties of up to A 21 million each exposing CBA to fines running into the billions of dollars While we had not factored in a fine above 375 million given a wide variety of potential outcomes we note that many in the market had expected a fine as large as 1 billion UBS said in a note to clients The breaches were first revealed in August last year CBA blamed them on a computer error but the case triggered a share selldown and a board shake up with Narev announcing his retirement two weeks later amid a public outcry While not deliberate we fully appreciate the seriousness of the mistakes we made new CEO Comyn said in a statement Our agreement today is a clear acknowledgement of our failures and is an important step towards moving the bank forward Australian Treasurer Scott Morrison told reporters it was now time for CBA to get on with the job of restoring trust CLEANER SLATE As part of the settlement which must be approved by the Federal Court the bank acknowledged it did not take all the necessary steps to identify mitigate and manage money laundering and terrorism financing risks The bank said it would book a A 700 million provision in its fiscal 2018 results to be released in August Last month CBA was ordered to carry an additional 1 billion in reserve capital until it satisfies regulators that it has improved oversight to avoid similar breaches in the future The bank is still facing two separate class actions by shareholders linked to losses suffered from the money laundering breaches The Australian government has pledged to boost oversight of the financial sector and increase penalties for corporate crimes in light of widespread misconduct revealed by an ongoing inquiry into the country s banks and wealth managers One of CBA s main rivals Australia and New Zealand Banking Group Ltd AX ANZ is facing criminal cartel charges along with underwriters Deutsche Bank DE DBKGn and Citigroup NYSE C over a 2 3 billion share issue |
C | Australia charges investment banks with alleged cartel activity | By Alun John HONG KONG Reuters Australia s anti cartel laws have come to global attention with the country s competition watchdog lodging criminal charges for alleged cartel behavior against two global investment banks in a move one expert called almost unique Deutsche Bank AG DE DBKGn and Citigroup Inc NYSE C denied wrongdoing with the latter saying the regulator was effectively criminalizing practices long seen as the norm in the financial industry Banking expert Andrew Grant at the University of Sydney Business School said the move was almost unique in Australian corporate history and indicated prosecutors had a high level of confidence in their case The charges which can carry hefty fines and 10 year prison terms could lead to changes in the way institutional capital raisings are handled and do further damage to the reputation of Australian lenders already mired in scandal WHAT HAPPENED The Australian Competition and Consumer Commission ACCC on Friday said federal prosecutors would charge Australia and New Zealand Banking Group Ltd ANZ Deutsche and Citi Criminal charges were also laid against several current and former senior executives at the three banks The Commission said the charges involve alleged cartel arrangements related to trading ANZ stock after an ANZ institutional share placement underwritten by Deutsche and Citi in August 2015 ANZ Deutsche and Citi said they expect to be charged and denied wrongdoing JPMorgan Chase Co NYSE JPM which also acted as underwriter has not been charged and declined to comment WAS THE ANNOUNCEMENT A SURPRISE The ACCC has been working toward a significant criminal prosecution over cartel behavior for a number of years In February Chairman Rod Sims in a speech said the Commission had five referrals with Australian prosecutors and a portfolio of investigations that were at an advanced stage The surprise was the ACCC had been looking at investment banks Most other Commission investigations into cartels have looked at trade in goods The first cartel prosecution in modern Australian history was in 2017 involving collusion among Japanese vehicle shippers from 2009 through 2012 Prior to that the only other cartel criminal prosecution in Australia took place in 1908 and involved coal miners ARE AUSTRALIA S CARTEL LAWS SO DIFFERENT FROM ELSEWHERE No not really said Stephen Corones emeritus professor of law at Queensland University of Technology I don t think it is true to say that Australia s cartel laws are stricter than those of the U S and the EU All three jurisdictions impose criminal sanctions and jail terms of up to 10 years for cartel offences Corones said However the power to push for charges is newer in Australia as cartel conduct was only criminalized in 2009 Since then the Commission has built a team of investigators with the intention of taking tougher action In addition recommendations from a Competition Policy Review panel were passed into law in 2017 which Sims said position the ACCC better to protect competition and consumer interests in a time of unprecedented technological change HAS THE COMMISSION INCREASED POLICING OF CARTELS Yes it has said Christopher Hewitt consultant counsel at Moulis Legal While there is no major difference between Australian rules around cartels and those in other jurisdictions the ACCC has shown in the last few years that it is much more willing to use the powers it has and push for higher fines and criminal charges Hewitt said In April for example the Federal Court of Australia raised a fine imposed on airline booking agency Flight Centre Travel Group Ltd by 14 percent to A 12 5 million 9 54 million after the Commission appealed against the initial fine which it said was inadequate to achieve a strong deterrence I don t see any let up in this said Hewitt And with the ongoing Royal Commission into financial sector misconduct the pressure to take action against banks is even greater |
C | Australia charges former local heads of Citi Deutsche ANZ in cartel case | By Paulina Duran and Byron Kaye SYDNEY Reuters Australian authorities have charged the former local bosses of Citigroup Inc NYSE C and Deutsche Bank AG DE DBKGn with criminal cartel offences over a 2 3 billion stock issue one of the country s biggest cases of alleged white collar crime The tally of names disclosed on Tuesday showed the ambition of newly empowered antitrust regulator the Australian Competition and Consumer Commission ACCC which revealed on Friday it planned to seek charges against the investment banks over a 2015 share raising for Australia and New Zealand Banking Group Ltd ANZ plus ANZ itself The regulator said charges over the share placement have been laid against Citi s former Australia head Stephen Roberts its current local head of capital markets John McLean and its London based head of foreign exchange trading Itay Tuchman along with Deutsche s former local chief Michael Ormaechea and former local capital markets head Michael Richardson It said charges were also laid against ANZ its treasurer Rick Moscati as well as the two investment banks These serious charges are the result of an ACCC investigation that has been running for more than two years ACCC Chairman Rod Sims said in a statement He declined to comment further since the matter was before the court ANZ Citi and Deutsche have previously said they would defend the charges After the names of the people being charged were released Deutsche said it continued to believe it and its staff had acted responsibly in the interests of clients and legally Both Michael Ormaechea and Michael Richardson are highly regarded and have our full support a spokeswoman said in an email Citi which has said the regulator appeared to have criminalized standard practices in capital raisings without warning and ANZ were not immediately available for comment The charges come at difficult time for Australia s financial sector which is facing a year long public misconduct inquiry that has brought embarrassing headlines on an almost daily basis Earlier this week the country s biggest lender Commonwealth Bank of Australia CBA paid a record A 700 million 535 million to settle a civil lawsuit in which it was accused of more than 50 000 breaches of anti money laundering protocols The charges against ANZ and its investment banks which can carry hefty fines and 10 year prison terms could lead to changes in the way institutional capital raisings are handled and do further damage to the reputation of Australian lenders The placement was made when Australian banks were under pressure to meet new capital requirements which prompted ANZ and CBA to raise a combined A 8 billion in a single week The regulators disclosed the names of the people charged after the close of share trading on Tuesday ANZ shares closed down 0 3 percent in line with the broader market but are down 7 percent since the inquiry started in February The ACCC has been building a team of investigators since cartel conduct was criminalized in 2009 and was further empowered last year with new laws governing competition The Commonwealth Director of Public Prosecutions which brought the charges on behalf of the ACCC said further details would not be made public until after the first court appearance in Sydney on July 3 |
C | Automation could thin Citigroup s investment banking unit jobs FT | Reuters Citigroup Inc s N C investment banking business could shed as much as half of its 20 000 technology and operations staff in the next five years due to automation the Financial Times reported on Monday Operational positions were the most fertile for machine processing the FT reported citing Jamie Forese chief executive officer of the bank s institutional clients group We ve got 20 000 operational roles Over the next five years could you make it 10 000 Forese was quoted as saying in the FT article
Under tremendous pressure from investors to boost profits but unable to grow revenue much banks have increasingly turned to technology to reduce costs |
C | Market Brief Sentiment Perks Up Ahead Of Sino U S Trade Deal | FX Brief
Risk sentiment was given a gentle boost with traders anticipating that U S and China will sign the much touted phase one trade deal on Wednesday The British pound was weaker following further hints from BOE that they may ease AUD and NZD are the strongest majors GBP and JPY are the weakest Volatility remained low overall due to a lack of economic data Price Action
DXY s advance has stalled at the 200 day eMA with the index closing the week with a 2 bar reversal pattern below this key level A bearish pinbar has formed on USD CHF and bullish engulfing candle on EUR USD underscores the potential for the dollar to mean revertUSD JPY traders are keeping a close eye on 109 73 resistance to see if it can finally break Whilst Friday s bearish pinbar shows a hesitancy to push high today s price action is testing its highs on the back of the weaker yen and positive trade deal sentiment We re keeping a close eye on GBP USD to see how it reacts around 1 30 Price action is drifting lower to this key support level and if it breaks opens up a run for the lows around 1 2900 NZD crosses are perking up reinforcing the analysis that perhaps we ve seen a trough on NZD CHF NZD JPY NZD USD and a peak on EUR ZD
Equities Brief
Most Asian stock markets are trading in the green ahead of the official sign off of the U S China Phase One trade deal that is scheduled to take place in Washington on 15 Jan Meanwhile Japan s Nikkei 225 is closed today for a public holidayInterestingly the USD CNH offshore Yuan has continued to inch lower and in today s Asian session it has managed to breach below 6 90 for the first time since Jul 2019 that has added impetus to maintain the on going positive sentiment seen in Asian equities in general Australian s ASX 200 has dipped slightly by 0 37 but the Index is still holding at its previous range resistance all time high area of 6890 880 Today s lackluster performance has been dragged down by healthcare related stocks where the Healthcare sector is downed by 1 23 Other than U S China diplomatic trade relations the other significant focus will be the start of U S Q4 2019 earnings session Overall the consensus is set for another second consecutive drop in earnings for Q4 at 1 6 y y The major banks will kickstart the reporting session where Q4 earnings report cards for Wells Fargo NYSE WFC Citigroup NYSE C and JP Morgan will be out on Tues 14 Jan |
MPC | Premarket Losers as of 9 05 am 4 30 2018 | S 11 after announcing merger deal with T Mobile ARNC 9 on Q1 earnings MPC 6 on buying Andeavor for 23B Now read |
MPC | Benefit of Trump tax cuts overshadowed by technology and misplaced policies Milken conference speakers | By Liana B Baker and Anna Irrera LOS ANGELES Reuters The windfall gains from the tax cuts passed by the U S Congress in December have brought back animal spirits that encourage risk taking throughout corporate America according to some of the participants at the annual Milken Institute Global Conference in California on Monday Tax reform in the United States has led to frankly a number of companies flush with cash and looking for their opportunity to use their balance sheets to affect significant change in their market places as exhibited by two of the big mergers in telecom and energy announced in the last 24 hours Robert Smith founder and CEO of private equity firm Vista Equity Partners said at a panel discussion Late Sunday T Mobile US Inc and Sprint Corp said they had agreed to a 26 billion all stock merger and believed they could win over skeptical U S regulators because the merger would create thousands of jobs and help the United States beat China in creating the 5G next generation mobile phone network Also on Monday Marathon Petroleum Corp NYSE MPC agreed to buy rival Andeavor for more than 23 billion in the largest ever tie up between U S oil refiners giving the combined company a nationwide presence and increased access to growing export markets Michael Corbat the chief executive officer of Citigroup Inc NYSE C was also positive about the economic outlook and said the Trump tax cuts have yet to filter through to many businesses The benefits of tax reform aren t yet fully into our economy Not yet fully appreciated in terms of the intermediate impact they can have he said U S Representative Kevin McCarthy the leader of the Republican majority in the House said the tax cut bill has been a huge boost for Americans We ve watched the growth of America expand People are talking about 3 0 percent growth we haven t seen that in quite some time McCarthy said adding that Americans have received pay raises and bonuses However rapidly changing technology is providing challenges for many U S businesses and may be driving populist political policies which are undermining the business confidence generated by the U S tax cuts conference speakers said Jim McCaughan chief executive officer at Principal Global Investors said technological advances are resulting in poor job prospects for some of the world s population but politicians are in denial about this and are mistakenly blaming immigration and free trade As result the onus is on business leaders to re train workers he said People feel angry in part because the reason for their displacement and the lack of good job prospects isn t the foreigner the trade the immigrant it s actually technology And that is why re skilling is so important he said One example of the uncertainty created for U S business by misplaced policies is President Trump s tariffs on imported steel and aluminum The exemptions from the tariffs for some countries expire on Tuesday but it was still not clear on Monday which U S allies would get their exemptions renewed The uncertainty resulting from technological changes is also making it hard for chief executives to plan ahead Vista s Smith added It s pretty reasonable to project a strategy for the next 12 months but frankly when you start talking about three to five years it gets really murky really fast he said CEOs are expected to not only understand technologies that didn t exist one or two years ago but to make strategic decisions as to which investments to make and the pace of these changes have staggering consequences if you get it wrong he said The CEOs I talk to have never been more excited and never been more paranoid at the same time Smith said Another concern for businesses is rising U S interest rates Scott Minerd global chief investment officer at Guggenheim Partners warned that Trump s tax cuts could trigger more interest rate hikes by the Federal Reserve We are coming in the United States to a point where the stimulus and fiscal policy put in place in Washington is colliding with monetary policy
Minerd said Volatility is going to pick up |
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