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MS | SEC fines Citigroup Morgan Stanley over forex trading program | Reuters Citigroup Inc N C and Morgan Stanley N MS each agreed to pay more than 2 96 million to settle civil charges that they made misleading statements about a foreign exchange trading program they sold to investors the U S Securities and Exchange Commission said on Tuesday
The SEC said neither bank admitted or denied wrongdoing in connection with the marketing of CitiFX Alpha to Morgan Stanley customers in 2010 and 2011 when Citigroup held a 49 percent ownership stake in Morgan Stanley Smith Barney Each payout includes a 2 25 million civil fine the SEC said |
MS | Toronto biotech raises 200 million ahead of ADHD drug decision | TORONTO Reuters Highland Therapeutics Inc has raised 200 million from Morgan Stanley N MS ahead of the U S drug regulator s decision for a new drug that manages attention deficit hyperactivity disorder ADHD the Toronto based biotech startup said on Tuesday The drug HLD200 which underwent two Phase 3 studies last year is under review and awaiting approval by the U S Food and Drug Administration Part of the financing is contingent on the FDA decision which is expected on July 30 HLD200 is designed to be taken once a day at night and uses a delayed and extended release technology to help control ADHD symptoms throughout the day but particularly when the patient wakes up in the morning an especially challenging time of day the company said ADHD is a brain disorder that interferes with functioning and development causing problems such as extreme restlessness or impulsiveness that interfere with school or work according to the National Institute of Mental Health The 200 million private placement was secured through Highland s subsidiary Ironshore Pharmaceuticals Development Inc and is expected to help the company commercialize the drug Drugs to treat the disorder are a multibillion dollar industry Top selling ADHD drugs such as Shire Plc s L SHP Vyvanse can be a big revenue driver for pharmaceutical companies We believe HLD200 has the potential to become the standard of care in the treatment of ADHD Ironshore president Craig Lewis said in a statement |
MS | Fed should keep rate hike engine on idle Morgan Stanley | Investing com As the next Federal Reserve Fed monetary policy decision rears its head at the two day meeting scheduled for January 31 February 1 Morgan Stanley NYSE MS explained on Thursday why the U S central bank is likely to keep its engine revving without taking action for some time to come
Not much has changed in the incoming data though policymakers remain upbeat on the outlook Morgan Stanley said to explain why the broker ruled out a rate hike at the upcoming meeting
The call for the Fed to keep rates untouched is largely in line with consensus and markets only price in a 4 1 chance of a surprise according to Investing com s Fed Rate Monitor Tool
Morgan Stanley indicated that there was little need to change the Federal Open Market Committee s FOMC statement and these experts expect it to continue to describe riske to the outlook as roughly balanced
However these analysts did point to the fact that discussions revealed in the minutes from the previous meeting had identified the risks from potential fiscal policies from President Donald Trump and they also noted that Fed members had been largely upbeat in recent speeches
To the extent an even more upbeat tone emerges in the statement we could see current market derived probabilities for a March hike rise they said
At the moment Fed fund futures price in the odds of a hike at the March meeting with a 25 4 chance
Despite what markets may price we think the probability of a March hike is low and see the FOMC delivering its next hike at the September meeting as it looks to allow inflation pressures to build and fiscal policy to take hold before moving again these experts concluded
Markets are more hawkish with the odds of hike in June at 70 9 |
MS | Merrill Lynch hires former Morgan Stanley adviser Schur | Reuters Bank of America s Merrill Lynch said Adam Schur joined as an adviser after nine years at Morgan Stanley NYSE MS Schur who managed about 850 million in assets last year will work out of Merrill Lynch s White Plains New York office
Merrill Lynch Global Wealth Management had about 2 1 trillion in client balances as of Dec 31 |
JPM | JPMorgan Says Should ve Downgraded Brazil Stocks But Too Late | Bloomberg JPMorgan Chase Co NYSE JPM said it s staying the course on Brazilian stocks even after acknowledging that it would have liked to have downgraded them a month or so ago before the country s currency weakened to its lowest since early 2016 and the Ibovespa benchmark lost 16 percent
It is a relative call and not one in which we are seeing that the country is poised for great things according to a note Friday from strategists led by Emy Shayo Also Brazil is structurally better than in the past they said
The real is currently trading near levels not seen since the crisis that brought down former president Dilma Rousseff when inflation was double digits interest rates were twice today s level and the current account deficit was 2 percent of GDP
The JPMorgan strategists said they expect the central bank to hold steady despite short term inflationary pressures from a truckers strike and calls to raise rates And valuations look relatively cheap they said
Risks remain however including a slowdown in earnings growth as GDP forecasts are being cut and the political scenario the strategists wrote The market is in full election mode and will remain volatile reacting to each poll that comes out before the October vote |
JPM | Alibaba Subsidiary Raises 14 Billion To Fund Blockchain Development | Originally Alipay Ant Financial controls China s biggest online payment network and has a networth of over 150 billion Following the hugely successful series C funding round the new investment has been reportedly earmarked to fund the company s ongoing blockchain AI and IoT development
This is by no means the first time we ve heard of Ant Financial s interest in blockchain technology Vice President and Head of Ant Technologies Lab George Jiang told media reporters at the Alibaba NYSE BABA Computing Conference in hangzhou last October that
Ant Financial is building a smart contract platform which can be applied to industries such as the industrial finance and leasing markets
This includes the company s plans to combine smart contracts with biometric facial recognition software to allow users to rent properties by scanning their faces on arrival and pay by simply locking the door This would greatly reduce inefficiencies in the current system that requires landlords and ladies to chase their tenants for payment each month
In a more recent report Ant technologies also holds the record for the most blockchain patents filed by any other company globally with a total of 49 different blockchain patents more than any US competitor in this field These patents include blockchain applications for mutual insurance quality commodities and public welfare In some of these cases Ant Financial has already implemented these applications utilising a blockchain system to track and record imported products along with data including the product s origin and inspection information which is accessible to consumers when they scan the item
Jiang also expressed that while
Ant Financial has applied for more blockchain patents than other companies he made sure to stress that the company does not ha ve anything to do with ICO
the technical appeal of the blockchain is to build trust while ICO destroys trust
This comes after a recent dictation from CEO of JPMorgan Chase NYSE JPM Jamie Dimon who accepts that blockchain is real but still remains bias against ICOs and digital assets generally |
JPM | These Five Currencies Are Most Exposed to Emerging Market Rout | Bloomberg Derivative traders are hedging their bets on five emerging markets where they see the greatest probability of declines in the next month
The currencies of Turkey Brazil Mexico Russia and South Africa are seeing the world s biggest increases in their implied volatility gauges this quarter amid the worst period for developing nation currencies since China s shock devaluation in the third quarter of 2015
Options traders expectations for swings in emerging market currencies have risen to the highest level since March 2017 sending a volatility gauge by JPMorgan Chase Co NYSE JPM to its worst first half since 2013 Most of the increase has come from currencies in Latin America Emerging Europe the Middle East and Africa
The worst hit is Turkey s lira which saw its measure of one month implied volatility jump 159 percent and trade near the highest level since January 2009
Brazil s volatility gauge climbed 72 percent near a one year high
A gauge of swings in Mexican peso are up 68 percent the steepest since November 2016
Ruble volatility is 49 percent higher this quarter the highest since Russia s emergency rate hike in 2014
South Africa s rand saw a volatility gain of 42 percent the biggest quarterly increase since June 2013 |
JPM | Oil prices fall on rising U S and Russian supplies | By Christopher Johnson LONDON Reuters Oil prices fell on Monday pulled down by rising Russian production and the highest U S drilling activity in more than three years Analysts expect higher U S output to offset supply curbs by the Organization of the Petroleum Exporting Countries OPEC which have been in place for 18 months and have pushed up prices significantly over the past year Benchmark Brent crude LCOc1 was down 65 cents at 75 81 a barrel by 1330 GMT U S light crude CLc1 fell 60 cents to 65 14 The number of new rigs drilling for oil in the United States rose by one last week to 862 its highest since March 2015 data from energy services company Baker Hughes showed RIG U That suggests U S crude output already at a record 10 8 million barrels per day bpd will climb further Russian news agency Interfax said on Saturday that Russia s oil output had risen to 11 1 million bpd in early June up from slightly less than 11 million bpd for most of May and above its target output of under 11 million bpd But markets are worried by falling supply from Venezuela and the potential of lower exports from Iran Venezuelan production is falling because of sanctions economic crisis and mismanagement while Iran faces U S sanctions over its nuclear program that are likely to curb exports in the next few months Sentiment is caught in a tug of war between the drop in supply from Iran and Venezuela and the prospect of rising output from OPEC non OPEC coupled with rampant U S shale production said Stephen Brennock analyst at brokerage PVM Oil Associates OPEC together with some non OPEC producers including Russia started withholding output in 2017 to try to end a global supply glut and support prices Non OPEC supply is expected to rise sharply in 2019 led by U S shale growth along with Russia Brazil Canada and Kazakhstan U S bank JPMorgan NYSE JPM said Oil fundamentals are expected to weaken in 2019 on the back of stronger than expected non OPEC supply but also the potential release of barrels from OPEC as the joint accord between OPEC and non OPEC is unlikely to stay in place JPMorgan said in its quarterly outlook OPEC and its partners are due to meet June 22 23 in Vienna Iraq s oil minister said on Monday that producers should not be influenced by pressure to pump more oil Jabar al Luaibi said that oil prices still require support and stability and producers should not over exaggerate the oil market s need for more supplies
This could be misinterpreted by speculators and consumers leading to a significant fall in oil prices he said |
JPM | Trade Risks Are Evident in Markets If You Look Hard Enough | Bloomberg Opinion Following the disastrous Group of Seven summit this weekend where President Donald Trump upended a carefully crafted effort at unity among the world s top economic powers it s safe to say that most investors were probably expecting equities to stumble Monday Instead the MSCI All Country World Index of global stocks closed at its highest level since March 14
A sign of complacency Perhaps but digging a little deeper beyond the market headlines reveals a good amount of jitters over the potential for a budding trade tiff to devolve in a legitimate trade war That can be seen in the performance of the Standard Poor s SmallCap 600 Index whose constituents are mainly domestic companies with hardly any international operations that would be exposed to tariffs and a higher dollar The gauge closed at a fresh high on Monday extending its gain this year to 11 2 percent By contrast the S P 500 Index which is chock full of companies with international exposure is up only 4 05 percent this year That marks a reversal from 2017 when the S P 500 gained 19 4 percent while the S P SmallCap rose just 11 7 percent Here s another way that investors are putting a greater premium on companies that might be insulated from a trade war At 20 3 times expected earnings small cap stocks are more expensive than bigger peers in the S P which has an average price to future earnings ratio of 17 5 times The gap of 2 84 times has expanded from 2 16 at the end of March
The idea that small caps might provide a trade war hedge or dollar hedge is preposterous but it s one that many investors may have accepted as an excuse to rotate into small cap risk Peter Cecchini the global chief market strategist at Cantor Fitzgerald wrote in a research report at the end of May and repeated on Monday We continue to feel strongly that equity markets broadly will soon respond to building global risks just as Treasuries and volatility markets have
THE EURO IS SAFE FOR NOW
The Great Italian Debt Crisis of 2018 is over Maybe If you blinked you may have missed it The Bloomberg Euro Index was poised to close Monday at its highest level in almost three weeks after Finance Minister Giovanni Tria made assurances that the country would stay committed to the shared currency Tria told the Corriere della Sera newspaper over the weekend that there was no discussion to leave the common currency and that the government would also block any market conditions that would push toward an exit The Bloomberg Euro Index fell to its lowest since July at the end of last month on just such a possibility while Italian stocks and bonds tumbled But Tria s comments show that once again betting on a member of the euro leaving the currency bloc is a fool s errand European Central Bank President Mario Draghi didn t even have to reassure markets that he would do whatever it takes to make sure the euro didn t break up as he did in 2012 when Greece was on the precipice Italy s benchmark FTSE MIB Index of stocks surged 3 42 percent Monday in its biggest gain since April 2017 Italian 10 year bond yields fell 29 basis points to 2 84 percent While that is still far above the 1 71 percent level from where they traded in late April recall that they had reached 3 44 percent at the end of May amid concern about the country s future in the euro area after the Five Star Movement and the League two euro skeptic parties formed a coalition
VOLATILITY RULES EM FXOne of the biggest laments of investors has been the lack of volatility in financial markets globally Maybe they should look at emerging market currencies where the JPMorgan NYSE JPM Emerging Market Volatility Index has just jumped to its highest since March 2017 By contrast the CBOE Options Volatility Index or VIX which measures equities is at about its lowest since January and the Merrill Lynch MOVE Index covering bonds is well below its highs for the year It certainly has been interesting times for emerging markets Last week featured two surprise interest rate hikes a market meltdown in Brazil Argentina s 50 billion International Monetary Fund loan rescue rising fears of a trade war and the realization that the end is nigh for stimulus in Europe according to Bloomberg News The currencies of Turkey Brazil Mexico Russia and South Africa are experiencing the world s biggest increases in their implied volatility gauges this quarter amid the worst period for developing nation currencies since China s shock devaluation in the third quarter of 2015 according to Bloomberg News s Srinivasan Sivabalan The worst hit is Turkey s lira whose measure of one month implied volatility jump 159 percent and is near its highest level since January 2009
OPEC FISSURES
The coming meeting between OEPC and its allies in Vienna on June 22 23 is shaping up to be a can t miss event Crude pushed higher Monday reaching 66 35 a barrel as oil traders shrugged off a report that Russia lifted crude output 140 000 barrels a day above its cap in the first week of June to the highest in 14 months Although the report suggests a potential schism in Russia s alliance with OPEC to curb production it s notable that Saudi Arabia raised production last month to the highest since October Bloomberg News reported citing a person familiar with the kingdom s disclosures to the cartel President Vladimir Putin of Russia said last month that the arrangements were never intended to remain in force forever Russia s key argument would be that the deal has reached its goal the market is balanced and now it s time to think of a supply increase Andrey Polischuk an energy analyst at Raiffeisen Centrobank in Moscow told Bloomberg News Hedge funds cut their net long position in West Texas Intermediate the difference between bets on a price increase and wagers on a drop by 3 3 percent to 313 450 futures and options during the week ended June 5 the least since October 2017 data from the U S Commodity Futures Trading Commission show WTI has closed below its 50 day moving average every day since the start of the month a bearish signal according to Bloomberg News s Jessica Summers
SOUTH KOREAN RISKSMany pundits will certainly opine on whether the historic summit between Trump and North Korean leader Kim Jong Un is a success and which side came out on top For a more impartial view keep an eye on markets specifically the market for credit default swaps tied to South Korea government bonds A rise in the cost of the derivatives could signal that investors think the U S failed to make much headway in getting Kim to give up his nuclear weapons a decline the opposite Regardless of the outcome investors might want to consider betting on a rise in the swaps according to BNP Paribas PA BNPP Asset Management Prices of the swaps are hovering near the lowest in more than a decade suggesting investors see little risk in owning the underlying government debt It s very attractive to buy protection said Jean Charles Sambor the deputy head of emerging market fixed income at BNP Paribas Asset who oversees the equivalent of 671 billion globally told Bloomberg News The risks are asymmetric That s a good way to hedge your portfolio Five year credit default swaps on Korean notes have fallen nine basis points this year to 43 5 basis points amid easing tensions in the Korean peninsula according to Bloomberg News s Lilian Karunungan It s the cheapest among the contracts offered by seven major emerging markets in Asia based on data compiled by CMA
TEA LEAVESIt s a big week for global geopolitical and economic news Besides the Trump Kim summit the Federal Reserve European Central Bank and Bank of Japan will hold policy meetings with big implications But there s no shortage of investors who feel that biggest news of the week will be Tuesday s U S inflation report The report could either fuel or damp concerns that i nflation is accelerating and help determine whether the Fed raises rates three or four times this year The median estimate of economists surveyed by Bloomberg is that the U S will say its consumer price index rose 0 2 percent in May excluding food and energy costs compared with a gain of 1 percent in April That translates into a 2 2 percent increase from a year earlier the most since February 2017 Recall that April s CPI report fell below forecasts spurring a rally in stocks and bonds while causing the dollar to drop Even so a significant share of policy makers opined at the May Federal Open Market Committee meeting that the underlying inflation trend may not have actually changed rather it might merely have been lifted temporarily by transitory factors such as financial services costs Bloomberg Intelligence economists Carl Riccadonna and Niraj Shah wrote in a preview report published Friday
DON T MISS Gaming the Fallout from a Trade War on the Fed s Plans Tim Duy What to Expect From Fed and ECB This Week Mohamed A El Erian Italy Bonds Rejoice in Statement of the Obvious Marcus Ashworth Cash Is King Because It Finally Pays Something Brian Chappatta The Permian Blowout Is Apparently Never Ending Liam Denning |
JPM | Mexico judge signs arrest warrant for local JPMorgan head BVG World | By Christine Murray MEXICO CITY Reuters A judge in Mexico has issued an arrest warrant for the country head of U S investment bank JPMorgan NYSE JPM for alleged fraud in a dispute related to a 2007 loan to a Mexican real estate developer according to the company BVG World Eduardo Cepeda who has been at JPMorgan for almost 30 years and Miguel Angel Barbosa another employee at the bank have been accused by BVG World of fraud linked to a credit line the lender gave it for investments that lost value during the financial crisis BVG World said in a statement JPMorgan said in an emailed statement that its lawyers were working on a response and that Cepeda had the bank s full confidence The accusations have no merit We are working with our lawyers to respond to this demand and for justice to be served JPMorgan said in its statement JPMorgan declined to provide details but said that neither Cepeda nor Barbosa had been arrested Neither Cepeda nor Barbosa replied to requests seeking comment Prosecutors in the state of Guerrero did not immediately reply to a request for comment The fourth district judge of Acapulco in the state of Guerrero signed the detention order last week BVG World said BVG World said in its statement that it received an 87 million loan from the U S bank in May 2007 BVG World later agreed to put properties into a trust controlled by JPMorgan as a guarantee for the loan it said The company said that under an agreement reached in 2012 the bank was meant to sell the properties to recoup what it was owed on the loan and pay the rest of the money to BVG World
The company s lawyers now allege that JPMorgan never intended to sell the properties in the trust and therefore it filed a criminal complaint against the bank |
C | Blockchain and cryptocurrency startup Paxos raises 65 million | By Anna Irrera NEW YORK Reuters Blockchain and cryptocurrency startup Paxos has raised 65 million from investors including venture capital firms RRE Ventures and Liberty City Ventures the New York based company said on Thursday Paxos will use the cash injection to expand its operations which include providing blockchain based services to financial institutions as well as operating cryptocurrency exchange and custodian itBit it said Private equity executive Jay Jordan also participated in the investment Paxos said We will use the capital to help grow the business which is broadly our settlement business on the Paxos side and the crypto asset exchange and custodian on the itBit side Chief Executive Charles Cascarilla said Founded in 2012 as bitcoin exchange itBit the company later rebranded to Paxos and pivoted into a business focused on providing services using blockchain the technology underpinning virtual coins Most recently it has sought to revive the cryptocurrency side of its business in a bid to take advantage of an explosion in crypto trading sparked by a rally in the price of tokens We have been pouring a lot of resources into it for the past nine months Cascarilla said adding that the company was planning to launch more products Paxos holds a trust company charter in the state of New York giving it many of the same privileges as a bank including the ability to take custody of mainstream financial assets That same ability can give it a competitive advantage Cascarilla said In June 2016 Paxos announced a joint venture with Belgium based settlement provider Euroclear to develop a blockchain based system to settle gold The bullion joint venture was dissolved in 2017 but Paxos has continued to develop and test the system with financial institutions Cascarilla said He declined to provide the name of the firms The joint venture with Euroclear had been tested with at least 16 London gold market participants including Citigroup Inc N C Societe Generale PA SOGN Scotiabank and INTL FCStone Inc O INTL |
C | Citigroup denies criminal cartel allegations expected in Australia | SYDNEY Reuters Citigroup N C on Friday denied allegations of criminal cartel conduct expected to be laid by Australian prosecutors over its involvement in a 2 3 billion share issue it underwrote for Australia and New Zealand Banking Group Ltd AX ANZ in 2015 Citi steadfastly denies the allegations made against it and certain employees the bank said in an emailed statement
Citi will vigorously defend these allegations on behalf of itself and its employees |
C | Australia threatens ANZ Deutsche and Citi with criminal charges over share issue | By Paulina Duran and Byron Kaye SYDNEY Reuters Australia is preparing criminal cartel charges against the country s third biggest bank and underwriters Deutsche Bank and Citigroup over a 2 3 billion share issue in an unprecedented move with potential implications for global capital markets The pending charges which can carry hefty fines and 10 year prison terms threaten to change the way institutional capital raisings are handled around the world and do further damage to the reputation of Australian lenders already mired in scandal The Australian Competition and Consumer Commission ACCC said federal prosecutors would charge Australia and New Zealand Banking Group Ltd AX ANZ its Treasurer Rick Moscati the two investment banks and several more unnamed individuals over the 2015 stock placement All three banks denied wrongdoing and vowed to defend the charges with Citigroup saying the regulator was effectively criminalizing practices long seen as the norm in the financial industry The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015 ACCC Chairman Rod Sims said in a statement It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct The third underwriter JP Morgan was not named by the regulator as a target and declined to comment Australia has some of the toughest anti cartel laws in the world however the decision to pursue criminal charges surprised experts given they are harder to prosecute than civil charges The move was almost unique in Australian corporate history and indicated prosecutors had a high level of confidence in their case said Andrew Grant a banking expert at the University of Sydney Business School ANZ shares were 2 percent lower on Friday afternoon while other banks were down less than 1 percent The broader market AXJO was down 0 2 percent It s probably the last thing they need Bell Potter banking analyst TS Lim said Rating agency Moody s said on Friday the charges were credit negative for ANZ THE CAPITAL RAISING In 2015 Australian banks were under pressure to meet new capital requirements prompting ANZ and larger rival Commonwealth Bank of Australia AX CBA to raise a combined A 8 billion in a single week The lead managers did not disclose they kept about 25 5 million shares of the 80 8 million shares issued ANZ said on Friday a fact that is being investigated separately by the corporate regulator As new bank equity flooded the market ANZ shares closed 7 5 percent lower on Aug 7 2015 when the Melbourne based lender announced it had completed the institutional component of the raising according to a Reuters analysis ANZ shares took over a year to recover to their pre raising value of A 32 58 The joint underwriters allegedly reached an understanding on the disposal of shares prompting the cartel criminal charges Citigroup N C said on Friday Underwriting syndicates exist to provide the capacity to assume risk and to underwrite large capital raisings and have operated successfully in Australia in this manner for decades the New York headquartered investment bank said Criminal charges for share underwriters had never been considered by an Australian court and had never been addressed in guidance notes published by regulators it added If the ACCC believes there are matters to address these should be clarified by law or regulation or consultation it said Deutsche Bank DE DBKGn said it was cooperating with investigators and took its responsibilities extremely seriously Caron Beaton Wells a professor of competition law at University of Melbourne said the ACCC and the prosecutor would only bring criminal charges if they were satisfied they would be proven The ACCC has long said that the most potent deterrent for cartel conduct is a potential jail term Beaton Wells said I don t think it s a sudden decision to ramp up just that it s taken a long time to find conduct for proceeding criminally The development compounds a publicity nightmare for Australia s biggest financial firms as they grapple with almost daily allegations of wrongdoing at a public inquiry which is scheduled to run to the end of the year Barristers for the inquiry have raised the prospect of criminal charges against the country s top wealth manager AMP Ltd AX AMP over allegations it misled the corporate regulator No 1 lender Commonwealth Bank is also facing a separate civil lawsuit alleging thousands of breaches of anti money laundering protocols
1 1 3217 Australian dollars |
MPC | Marathon Petroleum beats by 0 07 beats on revenue | Marathon Petroleum NYSE MPC Q4 EPS of 1 05 beats by 0 07 Revenue of 21 2B 22 7 Y Y beats by 210M Shares 2 3 PM Press ReleaseNow read |
MPC | Phillips 66 easily tops Q4 earnings estimates gets 2 7B tax benefit | Phillips 66 NYSE PSX is little changed premarket after easily beating Q4 earnings expectations and announcing a 2 3B capex budget for 2018 planning 500M more in spending than in 2017 Excluding special items including a 2 7B benefit due to the recent tax law changes Q4 adjusted earnings totaled 548M compared with Q3 adjusted earnings of 858M PSX says Midstream s Q4 net income was 139M vs 117M in Q3 Q4 net income in the Chemicals unit totaled 27M vs 121M in Q3 and Refining s Q4 net income came in at 371M vs Q3 s 550M PSX says Q4 realized margins were 8 98 bbl compared with 10 49 bbl in Q3 and 6 47 bbl in the year ago quarter the company s worldwide crude utilization rate was 100 Phillips 66 Partners NYSE PSXP is proceeding with the construction of a new 25K bbl day isomerization unit at the Lake Charles Refinery DCP Midstream s NYSE DCP expansion of the Sand Hills NGL Pipeline capacity to 365K bbl day from 280K bbl day is expected to be complete in Q1 Refining peers Valero and Marathon Petroleum NYSE MPC fell in yesterday s trade despite reporting strong Q4 results Now read |
MPC | U S senator s biofuel overhaul faces resistance | By Jarrett Renshaw SAN ANTONIO Texas Reuters Texas Senator John Cornyn s plan to overhaul U S biofuels policy faces resistance from the oil and ethanol sectors reducing chances of a reboot to the controversial regulations sources familiar with the matter said The plan which the sources said could be released as draft legislation in coming weeks represents nearly two years of negotiations with the rival industries to end their ongoing clash over the future of the Renewable Fuel Standard The decade old law requires refiners to cover the costs of mixing increasing volumes of biofuels like corn based ethanol into the nation s fuel supply by acquiring blending credits called RINs that can be purchased or earned While the regulation has created a lucrative new market for corn growers and fuel blenders the many refiners in Cornyn s home state of Texas complain the system has cost them hundreds of millions of dollars as volumes mandates grow and credit prices trend higher The centerpiece of the Cornyn plan includes the creation of a new type of ethanol RIN credit called a D8 RIN that the Republican lawmaker believes would lower the price of the existing ethanol blending credits the sources said A D8 RIN would be generated when a gallon of gasoline containing more than 10 percent ethanol is produced The existing D6 RIN pool would then cover only gasoline with a percentage of ethanol below 10 percent representing the vast majority of the fuel sold in the country By separating the two types of fuel Cornyn believes generic D6 RIN prices would tumble saving refiners money The higher blend D8 credits would cover a smaller portion of the market but theoretically sell at a premium preserving the incentive for companies to invest in more ethanol blending infrastructure the sources said Refining company Marathon Petroleum Corp NYSE MPC has been an advocate of the idea But segments of the refining industry are opposed to sweeping changes because they profit from the status quo The downstream committee of the American Petroleum Institute API recently decided against voting on whether it supported the D8 RIN proposal the sources said because of opposition to the plan within the group API spokeswoman Sabrina Fang declined to comment on the idea It is not fair or appropriate to comment until there is a legislative package released that we can review and comment on she said But she added the group generally supported Cornyn s efforts to seek a legislative overhaul of the RFS Members of the biofuel industry have their concerns about the D8 credit as well Biofuel and agricultural voices do not support the D8 RIN Brooke Coleman head of the Advanced Biofuels Business Council said Cornyn s proposal would impact the market for niche biofuels by dragging down their prices and reducing the attractiveness of investing in the industry s development Coleman said A Cornyn spokesman Drew Brandewie said the senator is working hard to unify all stakeholders He said the legislation is still being drafted and the major industry trade groups have not seen it He did not comment on the details of the plan SUMMER WAIVER OCTANE REQUIREMENT Cornyn s plan would also lift a ban on sales of higher ethanol blends during the hot summer months something now restricted due to anti smog rules The sources said the proposal was included as a concession to the ethanol industry which has long opposed the ban to support the broader RFS overhaul But plan faces resistance from the corn industry for another reason It would let the renewable fuel program expire in 2022 the sources said effectively replacing its biofuels volume quotas with a mandate for higher octane content in gasoline instead Higher octane can increase fuel efficiency It and can be achieved by blending ethanol or other additives into fuel Bob Dinneen head of the Renewable Fuel Association said that idea endangered the ethanol industry s future
Any effort to reform or repeal the RFS that is founded on the premise of demand destruction is a non starter he said on the sidelines of an industry event this week in San Antonio |
MPC | Cushing s oil market clout wanes amid U S export boom | By Devika Krishna Kumar NEW YORK Reuters The volume of oil sitting in 300 steel tanks in a nine square mile radius in Cushing Oklahoma has long been a key barometer for the health of U S crude supply and the nation s benchmark for daily trading of billions of dollars in the commodity But those tanks could soon drain to levels near effectively empty even as U S oil production soars past a new record of 10 4 million barrels per day Oil supplies have fallen before in Cushing for a variety of seasonal or market driven reasons But this time there is no shortage of crude in the market In fact U S production is straining pipeline and storage capacity The declining volumes stored at Cushing reflects a more permanent shift underscoring the hub s waning influence as the primary measuring stick for the U S oil market and the leading barometer of future supply demand and prices For a graphic of falling oil inventories at Cushing see Companies are now spending millions of dollars building infrastructure to facilitate trading and storage elsewhere such as in Houston and other Gulf Coast ports That could pave the way for a change in the U S benchmark oil price used to value tens of billions of dollars of crude and futures contracts every day The current benchmark called West Texas Intermediate crude or WTI has been derived from the price of physical oil delivered to Cushing for more than three decades Traders and major global crude buyers have advocated replacing WTI with a new benchmark futures contract that would reflect the value of crude delivered to the Gulf Coast The price of oil in Cushing which bills itself as the pipeline crossroads of the world is used to value crude grades produced around the United States and some oil imported from Canada Mexico and South America Prices at the hub also provide the basis for an average of 1 3 million WTI futures contracts worth about 82 billion at current prices that change hands on the CME Group s New York Mercantile Exchange every day making it one of the world s most actively traded commodities But as more pipelines are built to take oil from U S shale fields to Gulf refineries or for export markets much of the crude produced in the giant Permian Basin oilfield in Texas and elsewhere no longer passes through Cushing Instead producers are increasingly shipping directly to seaports such as Houston where vessels carry the oil to dozens of countries worldwide That reflects a major transformation in global crude flows since the United States lifted a four decade ban on oil exports in late 2015 Some traders and buyers argue the benchmark needs to change to reflect this Joshua Wade a crude oil marketer in Oklahoma sees the benchmark delivery point moving south before long That s the direction it s moving he said As opposed to importing now you re exporting through the same infrastructure The oil capital of the nation is in Houston Inventories in Cushing fell to 28 2 million barrels in early March lowest in more than three years Analysts say a level of 20 million barrels is effectively empty That s because tank design necessitates a minimum volume of crude be kept on hand to maintain the physical integrity of the complex and to allow for blending different crude grades to comply with pipeline specifications There has been a major structural shift in crude flows within the U S said John Coleman senior research analyst at consultancy Wood Mackenzie I think Cushing is rapidly losing its relevance A CENTURY OLD WAY STATION Cushing got its distinction in the early 1920s when tanks sprung up to store oil en route from Oklahoma and Texas to major metropolitan areas and refineries in the Midwest In 1983 it became the delivery point for the newly launched WTI futures contract CLc1 Because the U S relied on imports and banned exports Cushing was key for traders to gauge domestic supply trends BP s former head of crude trading Donald Porteous earned the nickname the King of Cushing because of his deep understanding of supply logistics in the Oklahoma town a strategy that often earned him more money than BP LON BP Chief Executive Bob Dudley Porteous now retired declined to comment for this story Now new pipeline projects head straight from west Texas to the Gulf of Mexico a route well south of Cushing Lately Permian Basin prices have declined because pipelines can t be built fast enough to get crude to the Gulf even as pipeline firms have added about 600 000 bpd in capacity since late last year according to data compiled by Reuters We re trying to make sure we re ahead of the pinch points for producers to bring product to refiners or to export Greg Armstrong chief executive of Plains All American said at a recent industry conference Projects in the works could boost outgoing pipeline capacity from the Permian from 2 7 million bpd in March to more than 4 5 million bpd by the end of 2019 according to energy industry information provider Genscape Meanwhile the Dakota Access pipeline started shipping oil last year running out of North Dakota s Bakken shale region to the Gulf bypassing Cushing And Marathon Petroleum NYSE MPC is considering reversing its Capline crude line to bring barrels from Illinois to the Gulf A BENCHMARK SHIFT For now traders watch the price differential between WTI and London based Brent crude to determine where to ferry shipments globally But traders say the price of physical trades in Houston is growing more important as a barometer for shippers Earlier this year even as the WTI crude discount to Brent narrowed Houston s discount to Brent remained steady at about 1 60 a barrel analysts said helping buoy export demand As pipeline capacity to the Gulf has increased and storage has expanded demand to park barrels in Cushing has waned said Carlin Conner chief executive at SemGroup Corp N SEMG which operates about 7 6 million barrels of crude oil storage in Cushing A spokesman for Magellan Midstream Partners which owns about 12 million barrels of Cushing storage said it will remain important because of its connections to the Gulf and Midwest Cushing is also connected via pipeline to the Gulf 500 miles to the south and can offer cheaper storage than what s available on the coast said SemGroup s Conner
I believe Cushing s next chapter he said is that it s going to become an offsite Gulf Coast storage center |
MS | Indonesia s worried about market psychology with JPMorgan report | By Eveline Danubrata and Gayatri Suroyo JAKARTA Reuters Indonesia s reform minded finance minister seemed to invoke memories of the 1997 98 Asian financial crisis this week when explaining why she came down so hard on JPMorgan Chase Co NYSE JPM for downgrading the country s equity market JPMorgan published a research report on Nov 13 that gave Indonesia an underweight assessment just as Southeast Asia s biggest economy was seeing an outflow of funds along with other emerging markets after Donald Trump s victory in the U S election Finance Minister Sri Mulyani Indrawati a former International Monetary Fund director and World Bank managing director thought the downgrade could fuel a stampede out of the country s assets There may be a herd mentality during a situation of panic in financial markets so if someone shouts fire everyone runs and then there s a stampede she told a parliamentary committee this week That is exactly what happened during the 1997 98 Asian Contagion financial crisis when economies from Thailand to South Korea and Indonesia collapsed as foreign investors pulled capital from the region Indonesia was the worst hit a death spiral in the rupiah triggered a banking crisis bankruptcies and rising unemployment and in a matter of months had toppled the country s longtime autocratic president Suharto The U S educated Indrawati shocked the financial community by cutting all business ties with JPMorgan after the November research note including its role as a primary dealer and underwriter for Indonesia s sovereign bonds She also signed new rules on Dec 30 requiring all primary bond dealers to adhere to a principle that is aligned with the government and avoid conflicts of interest She said those conflicts arise when partners receive business from the government but on the other side they do something that is different from the government s own interest Indrawati defended her crackdown on JPMorgan saying that alongside fundamental economic factors investors are influenced by psychology and perception which is sometimes very subjective Achmad Sukarsono an analyst at consultancy Eurasia Group called Indrawati s moves a wake up call for investors that even the most reformist official in Indonesia is taking a political approach to policy and has no qualms about punishing negative opinion Indonesia is particularly vulnerable to a foreign stampede out of its markets foreigners owned 37 55 percent of its government bonds at the end of 2016 In November foreigners sold nearly 32 trillion rupiah 2 4 billion of Indonesian stocks and government bonds according to data from the finance ministry and the stock exchange though the selling has since abated TACTICAL MOVE Before Indonesia s punishment JPMorgan was a primary dealer That meant it was allowed to buy government bonds in auctions and resell them in the secondary market Indonesia had 19 such dealers including Citibank Deutsche Bank DE DBKGn A G and HSBC as of Nov 25 In its Nov 13 report JPMorgan downgraded Indonesian stocks to underweight from overweight citing higher risk premiums in emerging markets after Trump s win Malaysia received an overweight assessment and Brazil a neutral The finance ministry s head of fiscal policy Suahasil Nazara said Indonesia did not deserve a recommendation that was lower than Brazil after the South American country impeached its president and suffered an economic contraction last year JPMorgan executives were caught off guard by Indonesia s reaction to what they saw as a routine report that was not particularly critical of government policies said a person with direct knowledge of the matter Over a series of meetings JPMorgan analysts sought to assure Indonesian officials the change in the bank s assessment on Indonesia was a tactical portfolio rebalancing tied to global factors people familiar with the matter said On Monday JPMorgan upgraded its recommendation on Indonesian stocks to neutral saying that bond volatility should now decay after funds sold a large amount of bonds and equities in emerging markets A JPMorgan spokeswoman said Indonesia s move against the bank had not influenced the upgrade JPMorgan s research is independent and anything published is a result of extensive and objective analysis HISTORY Other emerging market countries have tried to retaliate against unfavourable research including against Morgan Stanley NYSE MS in China and Banco Santander MC SAN in Brazil although the pressure has usually been less explicit than what JPMorgan in Indonesia faced Indonesia s finance ministry came down hard due to its perception of JPMorgan as a repeat offender officials said In 2015 while Indonesia was grappling with its weakest growth in six years and a market sell off Barron s news site picked up a JPMorgan report and ran it with the headline JPMorgan Sell Indonesia Bonds Rupiah NOW Indonesia s then finance minister Bambang Brodjonegoro dropped JPMorgan as an underwriter for its U S dollar denominated bonds a person with direct knowledge of the matter said The government relented after JPMorgan said its report had been misrepresented said the person who declined to be identified
Barron s subsequently corrected its report to say JPMorgan had cut its recommendation on Indonesia s bonds to underweight Barron s did not respond to requests for comment |
MS | Dollar lower stocks flat as caution creeps in ahead of Trump inauguration | By Vikram Subhedar LONDON Reuters The dollar edged lower while stocks were little changed on Friday as investors held back ahead of Donald Trump s inauguration as U S president and a speech that could shed some light on his economic policies Mounting questions about how Trump s administration would carry out an ambitious agenda of lower taxes more government spending and looser regulations have seen a pause in the post election rally in risky assets Concerns over the details of Trump s inauguration speech offset better than expected economic data from China and comments from Federal Reserve Chair Janet Yellen in which she sounded less hawkish than the previous day Tens of thousands of law enforcement officers and miles of barriers were in place in Washington D C as officials braced for hundreds of thousands of people planning to celebrate or protest the inauguration of Trump The dollar lost momentum with the dollar index DXY which tracks the greenback against six major currencies falling 0 1 percent All eyes will be on the content and style of Trump s inauguration speech Morgan Stanley NYSE MS strategists led by Hans Redeker wrote in a note The more Presidential this speech comes across the better the outcome for markets the strategists wrote European stocks STOXX opened weaker before recouping some losses to trade flat Trading was choppy with mining shares the biggest beneficiaries of the reflation rally spurred by Trump s election win the biggest drag on the indexes Europe s benchmark index was poised for its worst week since before Trump s election win last November Caution prevailed across asset classes with borrowing costs in the euro area pulling further away from one month highs on Friday while appetite for safe haven debt underpinned Bunds Ten year bond yields in Germany the euro zone s biggest economy and its benchmark issuer fell 1 basis point to 0 29 percent He s Trump likely to talk about job creation and unifying the U S and we may have to wait a bit longer for details on economic measures said Natixis fixed income strategist Cyril Regnat Fund flows in the run up to Friday s inauguration indicate investors moving into less risky assets and locking in some profits in banking stocks and high yield debt Precious metals funds saw their first inflows in 10 weeks according to data from fund tracker EPFR and Bank of America Merrill Lynch while money was pulled from funds focused on financials stocks and high yield bonds Gold prices held steady and were headed for a fourth straight week of gains U S gold futures rose 0 1 percent to 1 202 7 per ounce Also in commodity markets oil prices rose supported by expectations of tighter supply and on reports of record Chinese demand O R China s economy grew a faster than expected 6 8 percent in the fourth quarter boosted by higher government spending and record bank lending giving it a tailwind heading into what is expected to be a turbulent year
Brent crude LCOc1 the international benchmark rose 29 cents to 54 45 U S West Texas Intermediate WTI crude oil futures CLc1 were trading up 31 cents at 51 68 per barrel |
MS | Morgan Stanley CEO James Gorman s 2016 pay up 7 pct to 22 5 million | By Olivia Oran Reuters Morgan Stanley N MS Chief Executive James Gorman s overall pay rose 7 percent in 2016 as the Wall Street bank s stock soared and it edged closer to hitting a key profitability target Gorman will receive 22 5 million in total compensation up from 21 million in 2015 spokesman Mark Lake said in an email Gorman received a 5 million stock bonus for his performance in 2016 an 8 percent increase from 2015 according to a filing with the U S Securities and Exchange Commission The 117 293 shares were in addition to 1 5 million in salary cash deferred cash and long term incentives The filing did not provide greater detail on Gorman s total 2016 compensation Gorman who became CEO in 2010 has been focused on building Morgan Stanley s wealth management business a more stable revenue source than trading Morgan Stanley posted an 8 percent return on equity in 2016 moving closer to the 9 to 11 percent range which Gorman aims to achieve by the end of 2017 Morgan Stanley shares soared 33 percent in 2016 the biggest gainer among the largest U S banks stocks Gains were particularly strong after the Nov 8 U S election as investors bet that the Trump administration would usher in an era of less regulation and more economic growth Net income in 2016 fell 2 percent to 6 billion weighed down by a challenging start to the year when the bank cut 25 percent of jobs in its fixed income trading division after a prolonged slump in the business The fixed income unit rebounded after the first quarter exceeding Gorman s target of 1 billion in revenue per quarter Gorman s pay was below that of JPMorgan Chase Co N JPM CEO Jamie Dimon s 28 million up 3 7 percent in 2016 |
MS | France enters green bond market with 22 year maturity AFT | PARIS Reuters France is entering the fast growing market for green bonds with longest maturity ever issued the Agence France Tresor said on Monday as it launched the sale
As host of the 2015 Paris Agreement to combat global warming the government wants to put France at the center of the green bond market which has so far been dominated mostly by corporate issuers and international development banks
AFT said the new bond would have a 22 year maturity coming due in June 2039 and would be tapped in the future to meet investor demand The coupon rate has yet to be announced
The joint lead managers for the issue are Barclays LON BARC BNP Paribas PA BNPP Credit Agricole PA CAGR Morgan Stanley NYSE MS Natixis and Societe Generale PA SOGN |
MS | Citi to make decision on Brexit plans in first half Europe chief | DUBLIN Reuters U S bank Citigroup NYSE C will make a decision on its Brexit contingency plans in the first half of the year and choose from a number of potential EU counties to relocate some investment banking business the bank s European chief said on Tuesday We will be making a decision in the first half of this year it s a decision that every bank has to make in the first six months of this year James Cowles Citi s Chief Executive Officer for Europe the Middle East Africa EMEA told the European Financial Forum conference in Dublin Along with fellow U S bank Morgan Stanley NYSE MS Citi has identified many of the roles that will need to be moved from Britain following its exit from the European Union sources involved in the processes told Reuters last week Cowles said the bank was looking at where to establish a new broker dealer by either creating a new EU entity or through building up one of its existing entities Our issue is with our broker dealer which is located in the U K and it will lose presumably passporting rights Cowles said We ve reached out we ve talked to regulators and people at government across many countries in Europe including Ireland Italy Spain France Germany and the Netherlands and we re in the process of evaluating each one of them Citi which has almost 60 percent of its European headcount based outside Britain will need to shift 100 positions in its sales and trading business sources with knowledge of the matter said last week
It already has a large banking unit in Dublin which is regulated by the European Central Bank and employs around 2 500 people in Dublin Cowles said Citi would continue to have good steady employment growth in Ireland |
JPM | Cryptos Continue to Rise Dimon Says to Beware of Bitcoin | Investing com Cryptocurrencies were mostly higher on Thursday as investors continued to be bullish about bitcoin and other digital currencies
Bitcoin was trading at 7 711 90 rising 0 58 the Bitfinex exchange as of 8 44 AM ET 12 44 GMT not far from a session high of 7 748 90
Other digital coins were mixed on Wednesday with Ethereum the world s second largest cryptocurrency by market cap falling 0 43 to 608 70 on the Bitfinex exchange Ripple the third largest virtual currency increased 0 93 to 0 68136 while Litecoin was at 121 61 down 0 89
JP Morgan Chase NYSE JPM CEO Jamie Dimon said Thursday investors should be wary of popular digital coins
I don t want to be a bitcoin spokesman Dimon said in interview on CNBC Just beware
In September Dimon called bitcoin a fraud then regretted the comment in January While some on Wall Street have embraced the alternative currencies Dimon and Berkshire Hathaway NYSE BRKa Chairman and CEO Warren Buffet have been among its harshest critics
Buffet who was in a joint interview with Dimon said I set a high standard I don t know whether Jamie can top me or not Buffet told shareholders in May that bitcoin is probably rat poison squared
In other news U S investment giant Fidelity is looking to enter the cryptocurrency space and could set up its own exchange The firm is hiring a number of peronall for crypto digital asset and blockchain projects including a DevOps System Engineer to help create a new crypto exchange according to media reports
If the firm does move into the digital exchange space that could be good news for cryptos as it would help legitimise the digital coins and give many Americans access to investing in the sector |
JPM | U S services data suggests downward revision to first quarter GDP | WASHINGTON Reuters U S economic growth for the first quarter is likely to be revised lower after the Census Bureau s Quarterly Services Survey QSS report on Thursday showed a bit less spending on services than previously estimated JPMorgan NYSE JPM expects that first quarter gross domestic product could be pared to a 2 0 percent annualized rate when the government publishes its third growth estimate later this month The Commerce Department reported last month that the economy grew at a 2 2 percent pace in the January March period We think that consumption related to nonprofit hospitals will be the main culprit behind our expected downward revision said Daniel Silver an economist at JPMorgan in New York The latest GDP report showed that nominal gross output of nonprofit hospitals increased at a 3 3 percent seasonally adjusted annual rate in the first quarter but related data on revenue from the QSS point to a modest decline in consumption during the quarter
Nonprofit hospital spending accounts for nearly 4 percent of GDP As result growth in consumer spending could be revised lower Consumer spending which accounts for more than two thirds of the U S economy was reported to have expanded at a 1 0 percent rate the first quarter the slowest in almost five years |
JPM | Elliott s Singer agrees with Buffett Dimon on profit guidance | Reuters Hedge fund Elliott Management Corp Chief Executive Paul Singer said on Thursday he agreed with billionaire investor Warren Buffett and JPMorgan Chase Co N JPM CEO Jamie Dimon that companies should move away from providing quarterly earnings guidance The main point was that they thought that quarterly guidance should be reduced or eliminated in an effort to make a net subtraction of short termism in the corporate governance landscape I happen to agree with that my team agrees with that Singer told The Deal s annual corporate governance conference in New York Buffett who is chairman of Berkshire Hathaway Inc N BRKa and Dimon wrote in a Wall Street Journal column on Thursday that the pressure to meet short term estimates has contributed to a fall in the number of U S public companies Companies often hold back spending on technology hiring and research and development to meet quarterly earnings guidance that may be affected by factors outside the company s control they wrote
Elliott often acquires stakes in companies as an activist shareholder criticizing their financial performance and asking them to commit to changes |
JPM | Brazil banks gain after JPMorgan keeps overweight on Brazil stocks | Banco Santander MC SAN Brasil BSBR 3 5 Itau Unibanco ITUB 1 5 and Banco Bradesco BBD 1 4 rise in morning trading possibly buoyed by a JPMorgan NYSE JPM note saying it s too late to downgrade Brazilian stocks now Widely watched Brazil ETF NYSEARCA EWZ 1 2 Brazil real rose against the U S dollar BRL USD to 0 2625 2 56 The note from strategists led by Emy Shayo says it would have been better to downgrade Brazilian stocks a month ago but now isn t the time Bloomberg reports The country is in a better position than it has been historically and inflation is lower than the last time the Brazil real approached 4 US furthermore monetary policy will probably be accommodative until H2 2019 the note says JPMorgan also keeps Argentina at overweight and Mexico at underweight ETFs EWZ BRZU BZF BRAQ UBR DBBR FBZNow read |
C | Payments processor EVO Payments stock jumps in Nasdaq debut | Reuters Shares of EVO Payments Inc O EVOP rose as much as 26 percent in their debut on Wednesday giving the company a market valuation of 1 54 billion EVO s shares opened at 20 05 above their initial public offering price of 16 The offering of 14 million Class A shares by EVO Payments and selling stockholders raised 224 million after being priced at the upper end of its projected range The Atlanta Georgia based company facilitates payments by linking stores to customers bank accounts and has operations in 50 markets worldwide including the United States Canada Mexico and Europe EVO said in its IPO filing that it competes with independent merchant acquirers and payment processors including First Data Global Payments Vantiv and TSYS The company intends to use proceeds from the IPO for buying a 19 8 percent economic interest in parent company EVO Investco LLC through which the firm will operate and control all of the business and affairs of the parent EVO Payments which collects fees primarily from the number and value of transactions processed said revenue for full year 2017 rose 20 4 percent to 504 7 million from a year earlier The company recorded a loss of 32 3 million compared with a profit of 57 5 million in 2016 J P Morgan BofA Merrill Lynch Citigroup NYSE C Deutsche Bank DE DBKGn Securities and SunTrust Robinson Humphrey are lead underwriters to the offering |
C | Colombia heads for divisive runoff with peace deal at stake | By Helen Murphy and Daniel Flynn BOGOTA Reuters Colombia headed for its most divisive presidential race in decades after right winger Ivan Duque won Sunday s first round vote triggering a runoff with leftist Gustavo Petro that could upset a historic peace deal or see a reversal in business friendly policies It is the first time in Colombia s modern history that an openly leftist candidate has reached the second round of a presidential vote a prospect that has unnerved some investors in Latin America s fourth largest economy Duque a 41 year old former official of the Washington based InterAmerican Development Bank was the convincing winner of Sunday s ballot with 39 percent of votes ahead of Petro an outspoken ex mayor of Bogota with 25 percent broadly in line with polls However Duque s pledge to overhaul the 2016 peace deal with the Revolutionary Armed Forces of Colombia FARC by scrapping immunity for those convicted of crimes has alarmed many Colombians weary after five decades of conflict that killed more than 200 000 people and left 7 million others displaced Though outgoing President Juan Manuel Santos won the Nobel Peace Prize for forging the accord it has deeply divided the nation of around 50 million people The deal was narrowly rejected in a referendum before Congress finally approved a modified version Petro himself a former member of the now defunct M 19 rebel group has backed the peace agreement along with the three other losing candidates meaning Duque may need to moderate his position to attract wavering voters in the June 17 second round We don t want to shatter the agreement We want to make it clear that a Colombia of peace is a Colombia where peace meets justice Duque said in a victory speech on Sunday to cheering supporters in which he complimented third place finisher Sergio Fajardo and said their social agendas had much in common Fajardo a center left mathematician who won 24 percent of the vote has declined to endorse either candidate for the second round saying his supporters would make up their own minds It would be disrespectful to say I am the owner of the votes Fajardo told Blu Radio on Monday adding that he would meet with his team to discuss options All recent polls have predicted that Duque would beat Petro in a second round and that Fajardo was the only candidate who could have posed a risk to the conservative frontrunner if he had made it through However some political analysts in Colombia said that the votes of the center left could be enough for Petro to at least mount a serious challenge to Duque provided he can dodge his rival s accusations of radicalism Petro was quite clearly behind Duque in the vote so that will reassure the markets said Camilo Perez head of economic studies at Banco de Bogota But the fact that Fajardo was so close to Petro may generate nervousness as his approach is probably closer to Petro s and that could send votes Petro s way However Petro s more hardline rhetoric could also put off center left voters said Citigroup NYSE C analyst Munir Jalil Colombia s COLCAP stock index was down 0 65 percent with many investors assuming the election was Duque s to lose The yield on the local Treasury bond maturing July 2024 slipped to 6 044 from 6 071 on Friday while trade in the peso currency was closed for the U S Memorial Day holiday ENRICHING THE POOR The winner of the second round will face an intimidating array of challenges from stubbornly low economic growth to threats to Colombia s prized investment grade credit rating as well as difficulties in implementing the peace accord Some areas abandoned by the FARC have suffered an increase in fighting between criminal gangs and a remaining guerrilla group the National Liberation Army ELN over valuable illegal mining and drug trafficking territories Polls suggest the end of the FARC conflict has shifted voters priorities to inequality and corruption from security issues opening the door to the left for the first time However a growing crisis in neighboring socialist run Venezuela which has driven hundreds of thousands of desperate people across the border is a thorn in Petro s side Duque s camp allege he would plunge Colombia into a similar crisis While Duque has pledged to cut taxes and support private enterprise Petro has promised to take power away from the political and social elites he accuses of stymieing development At his election night party in the capital Petro struck a moderate tone though as both he and Duque seek to attract centrist voters When we talk about defeating poverty we re not talking about impoverishing the rich but about enriching the poor said the bespectacled Petro surrounded by family members In a country where oil and coal are the top export earners Petro s pledges to end extractive industries have dismayed business leaders and centrists Our country has never lived such a polarized moment as this and Petro represents a huge danger Mariana Ria o a 21 year old student said at Duque s celebration party at a conference center in Bogota But we are going to beat him Graphic on Latin American elections |
C | Retirees Should Know These 3 Facts About Required Minimum Distributions January 09 2020 | Neglecting to withdraw a required minimum distribution RMD from an IRA by the due date brings about a painful tax code penalty 50 Yes you read that right If you are supposed to withdraw at least 4 000 and uh oh did not do as such you have to write the IRS a check for 2 000 Keep in mind that on January 1 2020 the RMD rules were modified
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 that s just half of retirement planning The second part the distribution phase sometimes gets overlooked even though it can be more fun to think about That s because the distribution phase is where you determine how to spend your hard earned assets
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
Along with those choices you need to be mindful of the RMD because it applies to the majority of retirement accounts This IRS rule requires you to withdraw a specific minimum amount from any qualified accounts you have when you reach a certain age previously it was 70 1 2 but beginning in 2020 it is 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
The Most Important Things to Know About RMDs
Which types of retirement accounts have RMDs Qualified retirement accounts like 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 do I have to start taking distributions For most accounts you must take your first distribution by April 1 of the year following the calendar year in which you reach age 72 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 following 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 happens if don t take my RMD The penalty for not taking a required minimum distribution or if the distribution is not large enough is a 50 tax on the amount 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
Example Ann is 71 and must take her first RMD in the year that 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 of the RMD that Ann must withdraw for the calendar year in which she turns 72
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 | Market Bubbles It s Not The Price It s The Mentality | Actually one of the dangers is that people could be throwing risk to the wind and this market could be a runaway We sometimes call that a melt up and produces prices too high and then if there s a shock you come down to Earth and that could impact sentiment I think this market is fully valued and not undervalued but I don t think it s overvalued Jeremy Siegel
Here is the interesting thing
Market bubbles have NOTHING to do with valuations or fundamentals
Hold on don t start screaming heretic and building gallows just yet
Let me explain
I can t entirely agree with Siegel on the market being fairly valued As shown in the chart below the S P 500 is currently trading nearly 90 above its long term median which is expensive from a historical perspective
However since stock market bubbles are a reflection of speculation greed and emotional biases valuations and fundamentals in the present are a reflection of those emotions
In other words bubbles can exist even at times when valuations and fundamentals might argue otherwise Let me show you a very basic example of what I mean The chart below is the long term valuation of the S P 500 going back to 1871
Notice that with the exception of only 1929 2000 and 2007 every other major market crash occurred with valuations at levels LOWER than they are currently
Secondly all market crashes have been the result of things unrelated to valuation levels such as liquidity issues government actions monetary policy mistakes recessions or inflationary spikes Those events were the catalyst or trigger that started the reversion in sentiment by investors
For Every BuyerYou will commonly hear that for every buyer there must be a seller
This is absolutely true The issue becomes at what price What moves prices up and down in a normal market environment is the price level at which a buyer and seller complete a transaction
Market crashes are an emotionally driven imbalance in supply and demand
In a market crash the number of people wanting to sell vastly overwhelms the number of people willing to buy It is at these moments that prices drop precipitously as sellers drop the levels at which they are willing to dump their shares in a desperate attempt to find a buyer This has nothing to do with fundamentals It is strictly an emotional panic which is ultimately reflected by a sharp devaluation in market fundamentals
Bob Bronson once penned
It can be most reasonably assumed that market are sufficient enough that every bubble is significantly different than the previous one and even all earlier bubbles In fact it s to be expected that a new bubble will always be different than the previous one s since investors will only bid up prices to extreme overvaluation levels if they are sure it is not repeating what led to the last or previous bubbles Comparing the current extreme overvaluation to the dotcom is intellectually silly
I would argue that when comparisons to previous bubbles become most popular like now it s a reliable timing marker of the top in a current bubble As an analogy no matter how thoroughly a fatal car crash is studied there will still be other fatal car crashes in the future even if the previous accident causing mistakes are avoided
Comparing the current market to any previous previous period in the market is rather pointless The current market is not like 1995 1999 or 2007 Valuations economics drivers etc are all different from cycle to the next Most importantly however the financial markets adapt to the cause of the previous fatal crashes but that adaptation won t prevent the next one
It s All RelativeLast week in our MacroView I touched on George Soros theory on bubbles which is worth expanding a bit on in the context of this article
Financial markets far from accurately reflecting all the available knowledge always provide a distorted view of reality The degree of distortion may vary from time to time Sometimes it s quite insignificant at other times it is quite pronounced When there is a significant divergence between market prices and the underlying reality the markets are far from equilibrium conditions
Every bubble has two components
An underlying trend that prevails in reality and
A misconception relating to that trend
When a positive feedback develops between the trend and the misconception a boom bust process is set in motion The process is liable to be tested by negative feedback along the way and if it is strong enough to survive these tests both the trend and the misconception will be reinforced Eventually market expectations become so far removed from reality that people are forced to recognize that a misconception is involved A twilight period ensues during which doubts grow and more people lose faith but the prevailing trend is sustained by inertia
As Chuck Prince former head of Citigroup NYSE C said As long as the music is playing you ve got to get up and dance We are still dancing Eventually a tipping point is reached when the trend is reversed it then becomes self reinforcing in the opposite direction
Typically bubbles have an asymmetric shape The boom is long and slow to start It accelerates gradually until it flattens out again during the twilight period The bust is short and steep because it involves the forced liquidation of unsound positions
The chart below is an example of asymmetric bubbles
The pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view Prices reflect the psychology of the market which can create a feedback loop between the markets and fundamentals
This pattern of bubbles can be clearly seen at every bull market peak in history The chart below utilizes Dr Robert Shiller s stock market data going back to 1900 on an inflation adjusted basis with an overlay of the asymmetrical bubble shape
As Soro s went on to state
Financial markets do not play a purely passive role they can also affect the so called fundamentals they are supposed to reflect These two functions that financial markets perform work in opposite directions
In the passive or cognitive function the fundamentals are supposed to determine market prices
In the active or manipulative function market prices find ways of influencing the fundamentals
When both functions operate at the same time they interfere with each other The supposedly independent variable of one function is the dependent variable of the other so that neither function has a truly independent variable As a result neither market prices nor the underlying reality is fully determined Both suffer from an element of uncertainty that cannot be quantified
Currently there is a strong belief the financial markets are not in a bubble and the arguments supporting that belief are based on comparisons to past market bubbles
It is likely that in a world where there is virtually no fear of a market correction an overwhelming sense of urgency to be invested and a continual drone of bullish chatter the markets are poised for the unexpected unanticipated and inevitable event
ReflectionsWhen thinking about excess it is easy to see the reflections of excess in various places Not just in asset prices but also in stuff All financial assets are just claims on real wealth not actual wealth itself A pile of money has use and utility because you can buy stuff with it But real wealth is the stuff food clothes land oil and so forth If you couldn t buy anything with your money stocks bonds their worth would revert to the value of the paper they re printed on if you re lucky enough to hold an actual certificate
But trouble begins when the system gets seriously out of whack
GDP is a measure of the number of goods and services available and financial asset prices represent the claims it s not a very accurate measure of real wealth but it s the best one we ve got Notice the divergence of asset prices from GDP as excesses develop chart
What we see in the above chart is that the claims on the economy should quite intuitively track the economy itself Excesses occur whenever the claims on the economy the so called financial assets stocks bonds and derivatives get too far ahead of the economy itself
This is a very important point
The claims on the economy are just that claims They are not the economy itself
Take a step back from the media and Wall Street commentary for a moment and make an honest assessment of the financial markets today
The increase in speculative risks combined with excess leverage leave the markets vulnerable to a sizable correction at some point in the future The only missing ingredient for such a correction is the catalyst to bring fear into an overly complacent marketplace
It is all reminiscent of the market peak of 1929 when Dr Irving Fisher uttered his now famous words Stocks have now reached a permanently high plateau
This time IS different
However this time is only different from the standpoint the variables are not exactly the same as they have been previously The variables never are but the outcome is always the same |
MPC | U S Midwest oil refiners boost output cut region s dependence on Gulf Coast | By Jarrett Renshaw NEW YORK Reuters U S refineries from Ohio to Minnesota are capitalizing on access to cheap crude from Western Canada and North Dakota oilfields helping their region break a historic dependence on fuel from the Gulf Coast while redrawing oil trade maps Since the early 2000s crude and fuel flows from the Gulf Coast into the U S heartland have been cut in half as crude coming from Canada and North Dakota has pushed U S Midwest refining activity to record levels In 2016 Midwest refining capacity rose to 3 9 million barrels per day bpd of crude the highest annual volume on record Midwest refiners such as Marathon Petroleum Corp NYSE MPC Phillips 66 NYSE PSX BP LON BP PLC and Husky Energy have invested billions of dollars on new units capable of turning sludgy crude from Canada into gasoline and diesel Investments in the Dakota Access Pipeline and other avenues have helped bring in shale oil from North Dakota Ten years ago we were 1 million barrels per day short on products with the Gulf Coast supplying the product Today the midcontinent is flush with products Marathon Petroleum Chief Executive Gary Heminger said in a recent Reuters interview at the company s Findlay Ohio headquarters Yet analysts warned that weakening U S gasoline demand will make it challenging for Midwest refiners to sell their growing output The Midwest is land locked making it hard to get products to new markets especially as rival refiners defend their turf Philadelphia area refiners are currently fighting efforts to reverse a pipeline so Midwest companies can move fuel to western Pennsylvania Graphic Midwest Breaks Free of Gulf Looks North Instead CHANGING FLOWS For years Gulf refiners with access to cheaper crudes could underprice their Midwest rivals in Chicago Indianapolis and other cities in the region Traders made easy money sending gasoline north in the summer Now Midwest plants can compete more effectively thanks to booming production in western Canada and North Dakota of crude that routinely sells at a discount against the U S benchmark price The Midwest is well positioned to supply its region and parts of southern Canada and will even have excess supplies to send to the East Coast It s in a good spot said Mark Routt chief economist at KBC Advanced Technologies At the turn of the century the Midwest received 3 4 million bpd of crude and refined products from the Gulf In 2016 that figure was halved Chicago gasoline peaked at a premium of 14 cents a gallon versus the future contract this summer much less than the summer premiums of nearly 40 cents in 2014 and 2015 The trade was as slow as I ve ever seen it said one scheduler who sends barrels along the line Hurricane Harvey knocked out half of the Gulf s capacity while Midwest refiners processed a record 4 06 million barrels per day bpd of crude oil in late August and early September 12 percent more than the 2016 average The Rockies which includes Bakken oil fields sent 550 000 bpd to the Midwest last year That is triple the volumes seen in 2010 before Dakota Access opened Phillips 66 and Marathon Petroleum are minority partners in the line which opened in 2017 and can pump as much as 525 000 bpd Canada has sent an average of 2 1 million bpd of crude through June of this year more than triple the rate from two decades ago according to EIA data SPENDING ON UPGRADES Midwest refiners invested billions of dollars to handle the heavier Canadian crude For instance Marathon and BP spent over 6 billion to install new coking units to handle the heaviest parts of the Canadian oil Marathon s 144 000 bpd Detroit refinery nearly tripled its usage of Canadian crude last year hitting a record high of 137 400 bpd EIA data showed BP s 430 000 bpd Whiting Indiana refinery can now process up to 85 percent heavy crude up from 20 percent before the upgrades But analysts predict that ebbing U S gasoline demand will eventually force Midwestern refiners to find other markets including exports To facilitate this some pipelines that used to carry product to the Midwest have already been reversed But Philadelphia area refiners are pressuring state regulators to reject reversal of a pipeline that would bring Midwest fuel to the Pittsburgh area The owners of the 1 2 million bpd Capline Pipeline the nation s largest crude pipeline by volume will soon gauge shipper interest in reversing that line which currently runs from Louisiana to Illinois The line is owned by Marathon BP and Plains All American and the group said reversal would not come until 2022 Shippers abandoned the line in recent years due to the waning financial incentive to move barrels north But BP which has an ownership interest in the pipeline has slowed the reversal over concerns that it could erode the discount on Canadian oil enjoyed by its Whiting refinery BP did not respond to questions about that pipeline Analysts expect regional market share battles to intensify The Midwest will go from being short roughly 500 000 bpd of gasoline this year to a surplus of roughly 200 000 bpd by 2030 according to Wood Mackenzie refinery analyst Andrew Shepard A gasoline supply glut would pressure prices and weaken profit margins for refiners Shepard said Eventually Midwest refiners will have to close plants if they cannot access new markets
The Midwest must gain increased access to the East Coast market Shepard said |
MPC | Midwest refiners showing strength as dependence on Gulf Coast subsides | Midwest refiners such as Marathon Petroleum MPC 0 6 and Phillips 66 PSX 0 1 are capitalizing on access to cheap crude from western Canada and North Dakota oilfields helping the region break its historic dependence on fuel from the Gulf Coast
Ten years ago we were 1M bbl day short on products with the Gulf Coast supplying the product Today the mid continent is flush with products MPC CEO Gary Heminger tells Reuters
Midwest refiners processed a record 4 06M bbl day of crude oil in late August and early September 12 more than the 2016 average while Hurricane Harvey knocked out half of the Gulf s capacity
But analysts warn that weakening U S gasoline demand will make it challenging for Midwest refiners to sell their growing production the Midwest is land locked making it hard to get products to new markets and Philadelphia area refiners are fighting efforts to reverse a pipeline so Midwest companies can move fuel to western Pennsylvania
Regional market share battles are expected to intensify as the Midwest is forecast to go from being short 500K bbl day of gasoline this year to a 200K bbl day surplus by 2030 according to Wood Mackenzie
Now read |
MPC | Marathon Petroleum beats by 0 28 beats on revenue | Marathon Petroleum NYSE MPC Q3 EPS of 1 77 beats by 0 28 Revenue of 19 4B 17 9 Y Y beats by 470M Press ReleaseNow read |
JPM | JPMorgan s Dimon sees more innings left in economic recovery | JPMorgan JPM 1 4 CEO Jamie Dimon thinks this economic recovery has more oomph left in it Bloomberg reports It s taken nine years for the U S economy to grow 20 compared with some previous cycles when the economy increased 40 in less time We re probably in the sixth inning Dimon said Friday at an investor conference in New York It s very possible you re going to see stronger growth in the U S Dimon says the current round of economic growth has been hampered by bad policy Some policy mistakes on taxes and regulations are being fixed now he added I ve heard people say well it s looking like 2007 Completely untrue he said There s much less leverage in the system The banks are much better capitalized Previously Banks gain as strong economic reports lift treasury yields June 1 Now read |
JPM | Investors Dump Local Currency EM Bond Funds This Week ETF Watch | Bloomberg Two exchange traded funds tracking local currency bonds in emerging markets absorbed massive block sales this week as global fears of trade disputes and rising U S Treasury yields sent developing nation debt into a tailspin
Investors moved more than 73 million of the SPDR Bloomberg Barclays LON BARC Emerging Markets Local Bond ETF or EBND on Thursday That was the most since November 2012 and more than 14 times the daily average volume in the past year A larger fund the VanEck Vectors J P Morgan EM Local Currency Bond ETF or EMLC posted turnover of 253 million Thursday more than five times its daily average in the past year
It s no surprise that investors are heading for the exits as local currency emerging market credit is taking a beating In May local sovereign bonds posted a negative 0 75 percent total return and the MSCI Emerging Markets Currency Index fell nearly 1 4 percent
But despite investor caution some see the rout as a chance to enter the market For example Didier Lambert a portfolio manager at JPMorgan Chase Co NYSE JPM is finding value in countries with low inflation that boosts real yields He s betting on nations like Indonesia Brazil and South Africa And he s not alone in his convictions
The EM local market is looking more valuable as some investors have exited said Michael Roche a New York based strategist at Seaport Global Holdings Those remaining are more strategic in outlook and less prone to abruptly leave the sector |
JPM | Brazil May inflation muted set to pick up on trucker protest | By Bruno Federowski BRASILIA Reuters Brazilian inflation likely held below the official target range in May a Reuters poll of economists showed before shifting up a gear in June due to the effects of a nationwide truckers strike Consumer prices tracked by the benchmark IPCA index probably rose 2 73 percent in the 12 months through May according to the median estimate of 22 forecasters That would be slightly above a 2 70 percent reading in mid May but still below the 2 76 percent rate at the end of April as a weak economy continues to hamper the central bank s efforts to lift inflation back to its target range The bank targets a 4 5 percent year end inflation rate with a tolerance margin of 1 5 percentage points up or down It undershot its goal for the first time ever last year and has since cut interest rates to an all time low Double digit unemployment rates and widespread idle capacity have kept a lid on price hikes as Latin America s largest economy slowly recovers from its deepest recession in decades Yet inflation is likely to get an unexpected boost in June after protesting truckers nearly paralyzed several industries in the final weeks of May As this major strike is primarily a negative supply shock gasoline and food prices have jumped economists at JPMorgan NYSE JPM told clients in a note We think fuel prices will normalize relatively fast as the fuel trapped on the roads and at companies is delivered However the strike appears to have generated permanent losses in the food sector as perishable products had to be discarded and other inputs such as livestock feed were not delivered leading to losses of livestock and at breeders JPMorgan revised up their forecast for June inflation to a 0 94 percent monthly increase from 0 62 percent previously This would help inflation end the year at 3 9 percent up from a previous forecast of 3 6 percent the note said That would be a sharp upswing from a median estimate of a 0 30 percent increase in consumer prices in May in the Reuters poll The release is scheduled for Friday at 9 a m local time 1200 GMT
Several economists have also downgraded their 2018 gross domestic product GDP forecasts in the wake of the trucker strike Highway blockages also contributed to a smaller than expected trade surplus in May |
JPM | Exports government spending seen boosting Australia s first quarter economic growth | By Swati Pandey SYDNEY Reuters A bumper run of resource exports and higher government spending provided a much needed fillip to Australia s economy last quarter supporting views the economy is likely to extend its 26 year run without recession Figures from the Australian Bureau of Statistics ABS on Tuesday showed government spending climbed 1 6 percent in the first quarter to an inflation adjusted A 84 6 billion 64 7 billion lifting potential for growth Separate data showed stronger exports and a relatively smaller rise in imports combined to add 0 3 percentage points to gross domestic product GDP last quarter Analysts had predicted a 0 5 percentage point addition The jump in goods exports helped narrow the country s current account deficit to the smallest since early 2017 at A 10 5 billion The GDP report is due on Wednesday and had been forecast to show growth of 0 8 percent in the first quarter from a tepid 0 4 percent in December ECONAU Annual growth likely accelerated to a healthy 2 7 percent from 2 4 percent the previous quarter The Reserve Bank of Australia RBA has recently sounded upbeat about economic activity thanks in part to unexpected strength in the domestic labor market and a synchronized upturn in global growth However consumer spending which accounts for around 57 percent of GDP has cast a shadow over the RBA s optimism That is one reason the central bank is considered certain to leave interest rates at an all time low 1 50 percent for the 22nd straight meeting later in the day AU INT Interest rates have been on hold since August 2016 marking the longest period of unchanged policy since the cash rate was introduced in 1990 The futures market 0 YIB is not fully pricing in a hike until September next year Net exports contribution came in below consensus but is still quite strong compared with the negative drag on GDP we saw in the December quarter said JPMorgan NYSE JPM economist Henry St John The government finance numbers were stronger than we had expected Consumption growth continues to weaken in a fairly orderly manner So we have to rely on trade numbers for GDP growth While strength in retail and car sales in the first quarter suggest consumption made a reasonable contribution to overall activity data out on Tuesday showed that momentum has faded New vehicle sales slipped in May for the second straight month as demand for light commercial vehicles and passenger cars declined
Retail sales growth in April was a tepid 0 4 percent after a flat March |
JPM | South American Economies Dive South as Growth Outlook Dims | Bloomberg Pro business leaders in South America s largest economies are struggling to spark growth as their policies run head on into domestic crises and emerging market turbulence
Brazil and Argentina have seen their 2018 growth estimates cut from around 3 percent earlier this year to 2 2 percent and 1 3 percent respectively according to economists surveyed by their central banks More downside revisions are on tap with JPMorgan Chase Co NYSE JPM recently lowering its Brazil call to a mere 1 2 percent this year Some analysts say Argentina may even fall into a brief recession
Brazil and Argentina were expected to regain momentum this year after emerging from recession in 2017 under the market friendly policies of presidents Michel Temer and Mauricio Macri But their fortunes were reversed when global market volatility exacerbated their domestic problems An unsustainable budget deficit forced Argentina to seek help from the IMF while political uncertainty is on the rise in Brazil ahead of its election in October
On top of that a severe drought made things worse for Argentina while a massive trucker strike paralyzed the Brazilian economy The Argentine peso has slid more than 20 percent so far this year even after the central bank raised rates to 40 percent while the Brazilian real has accumulated losses of more than 10 percent
We expect the Argentine economy to continue to decelerate markedly in the coming months Itau economists Juan Carlos Barboza and Diego Ciongo wrote in a note to clients citing the impact of the drought tighter macro policies and lower real wages The international environment including Brazil s growth and financial conditions is also less supportive
Other South American economies are faring better so far Chile grew at its fastest pace in more than five years in April buoyed by the return of market friendly President Sebastian Pinera The Colombian economy is also seen accelerating toward a 3 percent growth rate in 2019
Still that may not be enough to overcome the drag from the region s largest economies
The impact on the region is significant as Brazil and Argentina account for more than half of South America s economy said Pedro Tuesta senior economist with 4Cast Ltd consultancy in Washington
Updates with analyst quote in final paragraph |
JPM | Credit Suisse to pay 47 million to settle hiring corruption probe | ZURICH Reuters Credit Suisse S CSGN will pay a penalty of about 47 million to resolve a U S Department of Justice corruption probe into its hiring practices in the Asia Pacific region between 2007 and 2013 the Swiss bank said in a statement on Wednesday The bank said no criminal charges were brought that it had set aside money in previous periods to cover the penalty and that it did not expect an impact on second quarter results The U S investigation looked into whether Credit Suisse hired referrals from government agencies in Asia in exchange for business Chief Executive Tidjane Thiam has been seeking to turn around the bank s fortunes following big losses as well as exit an era when ethical lapses cost it billions in penalties or settlements Since 2013 Credit Suisse has implemented numerous enhancements to its compliance and controls function and it remains committed to upholding the highest standards of integrity and fair business practices in every jurisdiction in which it operates the Zurich based bank said in a statement Other banks have made payments to resolve similar U S Foreign Corrupt Practices Act investigations including JPMorgan Chase Co N JPM in 2016 when it agreed to pay U S authorities 264 million to resolve allegations it hired the relatives of Chinese officials or powerful executives so called princelings to win banking deals
HSBC L HSBA has also said it has been investigated by the U S Securities and Exchange Commission in relation to hiring practices of candidates with ties to Asian government officials |
JPM | Buffett Dimon say quarterly profit forecasts harming economy WSJ | Reuters Billionaire investor Warren Buffett and JPMorgan Chase N JPM Chief Executive Jamie Dimon voiced concerns that the financial markets focus on short term goals is hurting the economy and urged companies to move away from providing quarterly earnings guidance according to the Wall Street Journal The pressure to meet short term estimates has contributed to a fall in the number of U S public companies wrote Buffett chairman of Berkshire Hathaway Inc N BRKa and Dimon who is also the chairman of top executives lobbying group Business Roundtable in an article on Wednesday Short term oriented capital markets have discouraged companies with a longer term view from going public at all depriving the economy of innovation and opportunity the said In our experience quarterly earnings guidance often leads to an unhealthy focus on short term profits at the expense of long term strategy growth and sustainability they wrote Companies often hold back spending on technology hiring and research and development to meet quarterly earnings guidance that may be affected by factors outside the company s control the business leaders wrote More than 100 million Americans invest in public companies directly or through mutual funds and millions more participate in corporate public and union pension plans Public companies owe it to all of them to get this right they said Buffett and Dimon said they are not opposed to the current practice of quarterly and annual reporting that ensures transparency
Though publicly owned companies account for only about 4 300 of America s 28 million businesses they are responsible for a third of all private sector employment and half of all business capital spending America s public companies drive job creation opportunity and economic growth they wrote |
C | Saudi banks plan U S dollar bonds despite ample liquidity sources | By Davide Barbuscia and Tom Arnold DUBAI Reuters At least three commercial banks in Saudi Arabia are preparing U S dollar debt issues banking sources said in what would be the first hard currency debt sales by Saudi banks in several years The banks want to diversify their sources of finance and boost capital levels but are in no rush for the cash as they are still flush with liquidity due to sluggish credit growth and looser public spending The kingdom s increasing reliance on international bond issues has also freed up liquidity for local banks Riyad Bank SE 1010 the kingdom s fourth largest bank by assets has mandated banks for a U S dollar bond sale four bankers said The bank had announced its intention this year to establish a program to issue bonds in local currency and U S dollars to diversify sources of finance and boost the bank s capital base The largest lender National Commercial Bank SE 1180 NCB is preparing documents before a potential issue two sources said Samba Financial Group SE 1090 the third largest is working with Citigroup N C on a potential U S dollar debt sale four sources said The three Saudi banks did not respond to requests for comment Citigroup declined to comment Saudi banks are often better capitalized than their international peers but experts said they may want an extra buffer to prepare for new international rules on capital levels known as Basel III and to meet an expected rise in credit demand Saudi banks had been expected to issue U S dollar bonds after the Saudi government started borrowing on international markets two years part of its effort to boost its finances that had been hit by a slump in oil prices We expected banks to issue after the Saudi sovereign bond as that s a typical trajectory in the development of debt markets sovereign banks and then corporates said Usman Ahmed head of investments at Emirates NBD Asset Management The kingdom has issued 50 billion in international bonds with 9 billion of the total via Islamic bonds This has established a sovereign yield curve providing a benchmark for bank and corporate bond issues But bankers said the slowdown in credit demand as sliding oil prices hurt the economy meant Saudi banks were under no pressure to raise more funds However rising crude prices now at their highest since 2014 are lifting economic prospects Moody s estimates excess liquidity in the banking system was 5 1 percent of assets in March against 6 2 percent in December suggesting that this year s slide in government deposits held by commercial banks had dented available funds but not by much However the ratings agency said it expected credit growth in Saudi Arabia to rebound materially in the second half of 2018 and banks funding needs could increase amid rising domestic sovereign and quasi sovereign debt sales |
C | CLO risk retention now just a memory as final appeal deadline passes | By Kristen Haunss NEW YORK LPC After three and a half years of litigation US Collateralized Loan Obligation CLO managers are now completely free of Dodd Frank skin in the game rules The deadline for regulators to ask the Supreme Court to consider their case in a 2014 lawsuit by the US loan trade association passed Thursday removing the final risk retention hurdle hanging over the market We are very pleased that this three and half year journey is over and that the risk retention rule will no longer apply to CLO managers said Elliot Ganz general counsel at the Loan Syndications and Trading Association LSTA the trade group that filed the suit While the judicial process was bumpy we are delighted that it ultimately worked and our members can get back to focusing on what they do so well providing capital to American companies The LSTA sued the Federal Reserve Fed and Securities and Exchange Commission SEC arguing that risk retention rules that require CLO managers to hold 5 of their deal were arbitrary capricious and an abuse of discretion and could limit funding to the neediest borrowers CLOs are the largest buyers of leveraged loans which companies including retailer Party City and American Airlines rely on for financing In February the US Court of Appeals for the District of Columbia Circuit ruled in favor of the trade association finding that CLOs no longer need to comply with the rule that is designed to align manager and investor interests After an initial 45 day window passed without regulators asking for a review back to the Appeals Court on April 5 the District Court for the District of Columbia vacated an earlier ruling in favor of regulators and managers were allowed to start issuing CLOs without holding retention Spokespeople for the Fed and SEC declined to comment But the threat of a Supreme Court review remained Regulators had 90 days from the Appeals Court s February 9 ruling to ask for the review which they chose not to do The market has been operating on the assumption that this was going to be the state of play but this has freed people up to make decisions based on what makes sense for marketing and a deal structure perspective and not be locked into the risk retention mandate they were before said Paul St Lawrence a partner at law firm Cleary Gottlieb Steen Hamilton
Even with risk retention US CLO volume is up almost 43 this year through May 8 compared to the same period in 2017 with more than US 43bn of deals raised according to Thomson Reuters LPC Collateral data Citigroup NYSE C is forecasting a record US 140bn of US CLO issuance this year |
C | Unauthorized transfers siphon funds from Mexican banks central bank | By Michael O Boyle
MEXICO CITY Reuters An as yet unknown amount of funds were sucked out of at least five Mexican financial groups through unauthorized transfers in recent days a top central bank official said on Friday while stopping short of calling it a cyber attack
Lorenza Martinez head of Banxico s payment system told Reuters that it was still unclear how much money had been fraudulently transferred and she refrained from naming the affected institutions which could include banks and brokers
These unauthorized transfers were originated in the system that connects the institutions to the payment system Martinez said in a telephone interview noting that banks had to migrate to an alternate slower technology to process payments
Slow interbank transfers since the end of April and terse statements by authorities have fed concerns in social media that Latin America s second biggest economy could be the latest victim of cyber attacks that have hit central banks and financial groups around the world
Martinez said that the central bank s SPEI interbank transfer system was not compromised but that the problem had to do with software developed by institutions or third party providers to connect to the payment system
Mexico s SPEI system is a domestic network similar to the SWIFT global messaging system that moves trillions of dollars each day
Hackers have used SWIFT connections to target banks around the world but the Brussels based company has not disclosed the number of attacks
Martinez refrained from calling the incidents in Mexico a cyber attack At this time we cannot reject any hypothesis she said It was something done on purpose but how it was done we are in the process of finding out
Martinez said that no clients had been affected since the transfers hit accounts of financial institutions in the central bank
The funds had been wired to accounts that appeared to be false she said
Local banks were carrying out their own investigations with security experts and were in the process of filing charges with authorities after the incident that also involved cash withdrawals from the bogus accounts she said
In late April Mexican bank Banorte reported an incident that slowed transactions and Mexico s central bank said it was investigating the problems that hit at least three local financial institutions
On Friday Citibanamex the local unit of Citigroup Inc NYSE C said on Friday that some of its clients had experienced delays in interbank transfers but that it did not have any problems in its payment systems |
JPM | 4 Trade Ideas For JP Morgan | Here is your Bonus Idea with links to the full Top Ten
JPMorgan Chase Co NYSE JPM started higher out of consolidation after the election like all financials And like all financials it stalled in mid December After a month of tight daily ranges holding over the 20 day SMA and under that resistance it fell two weeks ago That took the price outside of its Bollinger Bands and it moved sideways for a week until it got back inside and touched the 50 day SMA Last week it started back higher and finished at the prior resistance
As it enters the week momentum is strong The RSI is rising and bullish and the MACD is about to cross up its own bullish signal A push above the resistance would give a target on a Measured Move to 93 There is resistance at 87 and then free air above Support lower comes at 85 70 and 83 Short interest is low under 1 and the company is expected to report earnings next on April 13th
Weekly options expiring February 3rd show a large open interest on the call side above at the 91 and 91 5 strikes This could draw the price higher this week But for February monthly options the biggest open interest is at 85 below with some size at 87 5 and 90 on the call side The April options expiring after earnings show the call side open interest growing from the 85 Strike to a peak at the 92 50 strike with the 85 and 77 5 strikes large on the put side
JP Morgan Ticker JPM
Trade Idea 1 Buy the stock on a move over 87 with a stop at 85
Trade Idea 2 Buy the stock on a move over 87 and add a February 86 5 85 Put Spread 53 cents for protection while selling a March 10 Expiry 91 Covered Call 53 cent credit
Trade Idea 3 Buy the March 82 5 87 5 Bullish Risk Reversal 1 20
Trade Idea 4 Buy the February 87 5 90 Call Spread 79 cents and sell the February 85 Puts 64 cent credit
After reviewing over 1 000 charts I have found some good setups for the week These were selected and should be viewed in the context of the broad picture reviewed Friday which heading into February saw the Equity markets continuing to look strong especially on the intermediate charts
Elsewhere look for Gold to continue lower while Crude Oil churns over support The US Dollar Index continues lower but may be bottoming while US Treasuries are biased lower The Shanghai Composite is resuming its drift higher but will be closed until Friday while Emerging Markets work higher
Volatility looks to remain at abnormally low levels keeping the bias higher for the equity index ETF s SPDR S P 500 NYSE SPY iShares Russell 2000 NYSE IWM and PowerShares QQQ Trust Series 1 NASDAQ QQQ Their charts show real strength continuing in the intermediate term Shorter term the QQQ has been the leader but is getting a bit overheated while the SPY and IWM may be ready to start higher out of consolidation Use this information as you prepare for the coming week and trad em well
DISCLAIMER 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 | Are High Yield ETFs Becoming Too Hot To Handle | Love is in the air this Valentines week and many income investors are smitten with the returns of their high yield investments The steady march higher in assets like junk bonds preferred stocks emerging market debt and even leveraged closed end funds has remunerated shareholders for their faith
The poster child of this strength may well be the iShares iBoxx High Yield Corporate Bond NYSE HYG This well known fund which invests in a passive index of high yield U S corporate debt has gained more than 22 over the last year That jump includes both price gains and income distribution over a 52 week period It also bests every corner of the U S fixed income sector map by a wide margin
This low volatility environment has been good to shareholders of credit sensitive bonds that have participated in the rally However I am always careful to remind investors that the strength of this trend comes at a meaningful cost as well The inverse relationship between bond prices and yields precipitates the compression of future dividends In the case of HYG it is only sporting a 30 day SEC yield of 5 22 now and that statistic could soon start with a 4 handle
Owners of high yield debt are now getting paid far less for the uncertainty of holding risky credit than they have since 2014 One look at a 5 year chart of the BofA Merrill Lynch US High Yield Option Adjusted Spread Index should be a sobering experience
This chart effectively measures the difference between a high yield bond index and a similar spot on the Treasury curve It s now trading at a spread of 386 basis points which is down near levels not seen since 2014 That prior low in high yield bond spreads ultimately led to a period of volatility and above average risk for shareholders
This same compression in yields is happening across other areas of the credit spectrum as well The iShares US Preferred Stock NYSE PFF yields just 5 5 at today s prices The iShares JPMorgan NYSE JPM USD Emerging Markets Bond NYSE EMB yields 4 92 Even a lower duration junk bond fund such as the PIMCO 0 5 Year High Yield Corporate Bond NYSE HYS is yielding just 4 13 We have seen these funds trade with an additional 200 basis points or more in yield during the trough of a correction
I also noted the overall complacent stance of the high yield closed end fund CEF market in Many of the top leveraged funds in this space are trading with some of the widest premiums or tightest discounts in years It s downright frothy at the index level
It s worth noting that CEFs are often a great sentiment indicator for credit conditions because their share price floats in relation to net asset value This provides them with the capability to draw in late cycle buyers or attract emotionally driven sellers on both sides of the market If price is an indicator there certainly is no fear to be had at the moment
There is no telling how long the rally in credit will last and I m certainly not going to call a top in absolute terms Any long term market participant that has ridden through these credit cycles in the past knows trends can extend much farther than anyone thought possible However there is growing reason to be cautious with new money committed at these levels I would much rather be a buyer on a meaningful pullback than fantasizing that the current trend will extend indefinitely into the future
For those who continue to hold high yield investments it s a and consider what changes may be appropriate in light of your risk tolerance Making incremental changes when markets are calm is far easier than after volatility rears its ugly head That s when emotions take over your typically level headed strategy Simply moderately reducing large position sizes and adding to cash will allow you to have some dry powder on hand for the next opportunity that comes along
Bond investors tend to believe they can always be bailed out through the accumulation of income if they simply hold an investment long enough Nevertheless just like in the stock market there are appropriate times to be an enthusiastic buyer and appropriate times to be more careful and thoughtful |
MPC | Harvey throws a wrench into U S energy engine | By Ernest Scheyder and Erwin Seba HOUSTON Reuters A hurricane in the heart of the U S energy industry is set to curtail near record U S oil production for several weeks with the impact expected to reverberate throughout the country and across international energy markets Harvey hit the Texas shore as a fierce Category 4 hurricane causing massive flooding that has knocked out 11 percent of U S refining capacity a quarter of oil production from the U S Gulf of Mexico and closed ports all along the Texas coast Gasoline futures jumped as much as 7 percent to their highest level in more than two years in early Monday trading in Asia as traders took stock of the storm s impact The outages will limit the availability of U S crude gasoline and other refined products for global consumers and further push up prices analysts said Damage assessments could take days to weeks to complete and the storm continues to drop unprecedented levels of rain as it lingers west of Houston home to oil gas pipeline and chemical plants And restarts are dangerous periods as fires and explosions can occur So far the federal government has not announced if it will release barrels of oil or refined products from the nation s Strategic Petroleum Reserve SPR which holds nearly 680 million barrels of oil The SPR was established in the 1970s to prevent supply shocks in the wake of an embargo imposed by several members of the Organization of the Petroleum Exporting Countries OPEC This is not like anything we have ever seen before said Bruce Jefferis chief executive of Aon Energy a risk consulting practice It is too soon to gauge the full extent of Harvey s damage to the region s energy infrastructure he said More than 30 inches 76 cm fell in the Houston area in 48 hours and a lot more rain is forecast according to the National Weather Service The storm was felt from coastal ports to inland oil and gas wells Oil producers in the Eagle Ford shale region of south Texas have halted some operations At least four marine terminals in the Corpus Christi area an export hub for energy deliveries to Latin America and Asia remained closed due to the storm We just simply don t know yet the damage all this rain will have on Houston s energy infrastructure said Andrew Lipow president of energy consultancy Lipow Oil Associates LLC Texas refineries could be offline for up to a month if their storm drainage pumps become submerged he said As the storm churned towards Texas on Friday U S gasoline futures RBc1 rose to their highest level in three years for this time of year Those gains came even before several large Houston area refiners including Exxon Mobil Corp N XOM halted some operations Exxon closed the second largest U S refinery its 560 500 barrel per day bpd refinery in Baytown Texas complex because of flooding Royal Dutch Shell Plc L RDSa also halted operations at its 325 700 bpd Deer Park Texas refinery The refinery may be shut for the week it said Flooding on highways between Houston and Texas City nearer to the coast led Marathon Petroleum Corp N MPC to cut back gasoline production at the company s 459 000 bpd Galveston Bay Refinery in Texas City said sources familiar with plant operations Marathon Petroleum N MPC employees were unable to drive to work and conditions at the plant forced the company to reduce gasoline output said industry sources Marathon spokesman Jamal Kheiry declined to discuss plant operations Not every plant in the region was hit Operations were stable at the largest U S crude refinery Motiva Enterprises MOTIV UL 603 000 bpd Port Arthur plant the company said Motiva double staffed the refinery s crew ahead of the storm as did Total SA PA TOTF at the company s 225 500 bpd Port Arthur refinery said sources familiar with plant operations Coastal refineries in Texas account for one quarter of the U S crude oil refining capacity All of those refineries have been impacted by Harvey since Thursday when refineries in Corpus Christi Texas shut in production ahead of the storm s landfall on Friday Colonial Pipeline the largest mover of gasoline diesel and other refined products in the United States said its operations had not been affected by Harvey Any disruptions to the conduit would send prices across the U S Southeast and Northeast soaring Traders have been keeping a close eye on whether there will be an outage at the pipeline
Citgo Petroleum Corp PDVSAC UL and Flint Hills Resources FHR UL two of the refiners that closed last week as the storm approached did not provide updates about the status of their Corpus Christi refineries on Sunday |
MPC | Harvey threatens more U S Gulf refineries supply constraints emerge | By Erwin Seba HOUSTON Reuters Record rains and flooding from Tropical Storm Harvey triggered more oil refining outages in Texas on Tuesday bringing the total offline to more than 16 percent of overall U S capacity as the storm took aim at plants along the Louisiana coast As the storm moved up the Gulf Coast supply shortages emerged as major pipelines carrying gasoline diesel and jet fuel started to adjust deliveries or close lines outright due to lack of supply About 3 million bpd of U S refining capacity had already been shut with more shutdowns expected Restarting plants even under the best conditions can take a week or more The U S Gulf Coast is home to nearly half of domestic refining capacity with some 5 6 million barrels per day bpd of capacity in Texas and 3 3 million bpd in Louisiana More refinery closures were expected as parts of Texas have received more than four feet of rain Fuel prices were expected to keep rising as refining capacity remains down and pipelines run short Explorer Pipeline which runs from Texas to Chicago will shut two lines early Wednesday These closures are already impacting markets with crude prices lower on a perceived drop in demand and gasoline prices spiking in response to lower supply said Sandy Fielden director of oil and products research at Morningstar Colonial Pipeline the key artery sending gasoline up the East Coast was still shipping barrels there but has faced flooding at origination points in Texas The Northeast was already dealing with reduced supply Philadelphia Energy Solutions the region s largest refiner said it has sold all its available regular gasoline barrels due to increased demand while Monroe Energy s refinery has increased runs U S gasoline futures RBc1 on Tuesday rose 2 6 percent to 1 756 per gallon and have jumped about 8 5 percent since last Wednesday when refiners started shuttering capacity ahead of the storm making landfall Heating oil futures a proxy for diesel and other distillates rose 1 1 percent Harvey will raise product prices nationwide denting demand especially in September said Barclays LON BARC analysts in a note Tuesday U S crude futures CLc1 were down 0 8 percent on Tuesday a day after falling more than 2 percent In cash trading the spread between Gulf Coast gasoline prices and benchmark futures rallied further a day after hitting a five year high in anticipation of constrained supply That price was lately 24 cents above benchmark futures RBc1 traders said Retail gasoline prices have started to rise with the average gallon of gasoline rising 1 cent overnight to 2 38 nationally The average price in Texas rose 2 cents to 2 19 per gallon Marathon Petroleum Corp N MPC was shutting two refineries in the Houston area on Tuesday because of flooding according to sources familiar with plant operations The 459 000 bpd Galveston Bay Refinery in Texas City Texas 45 miles 72 km south of Houston has flooding in its tank farm and on nearby streets the sources said Exxon NYSE XOM has shut its 362 300 bpd Beaumont refinery in east Texas due to high water in the plant said sources familiar with the plant The company earlier shut production at its Baytown Texas refinery the nation s second largest Motiva Enterprises MOTIV UL planned to decide on Tuesday on whether to shut its Port Arthur Texas plant the largest U S crude refinery two sources familiar with plant operations said
Total cut production to the minimum at its 225 500 bpd Port Arthur refinery as of Tuesday afternoon according to sources |
MS | Morgan Stanley Q4 EPS estimated at 0 65 on revenues of 8 28 bn | Investing com NYSE Morgan Stanley Q4 EPS estimated at 0 65 on revenues of 8 28 bn The U S bank is due to report earnings on Tuesday before the market opens It reported Q4 2015 diluted EPS of 0 39 on net revenues of 7 74 bn Trading income growth seen positive on increased U S election related volatility Net interest income also expected to increase despite low interest rates on loan growth Focus also on progress in bank s Project Streamline cost cutting initiative |
MS | Tech vendor Misys launches P2P lending software for banks | By Anna Irrera NEW YORK Reuters Financial technology vendor Misys is launching software to enable banks to provide peer to peer lending to their customers as competition from young companies in the sector heats up The technology would enable retail and corporate banks to connect their customers looking for loans with individual or institutional investors digitally the private London based software company said on Tuesday P2P lenders which allow consumers and small businesses to borrow from investors online emerged in response to a contraction in bank lending following the financial crisis of 2008 By automating much of the lending process companies like LendingClub Corp OnDeck Capital and Prosper were able to service borrowers that had become too risky or too expensive for banks to lend to from their more constrained balance sheets They make money by charging fees for facilitating the transaction Misys said the software would allow banks to maintain a relationship with clients that they would otherwise have to turn away without have to originate loans from their balance sheet Banks are losing market share to P2P platform providers By embedding crowdlending into the overall credit lifecycle a bank can maintain and expand its client base recapture business from alternative finance marketplaces and boost lending growth Jean Cedric Jollant senior product officer at Misys told Reuters The launch comes as the nascent peer to peer lending sector expands despite facing some growing pains Research by Morgan Stanley NYSE MS estimates that P2P lending companies also known as marketplace lenders could originate up to 490 billion in loans globally by 2020 Banks have been reacting to the trend by either partnering with younger companies or launching their own online lending operations Spanish banking group Banco Santander MC SAN in 2016 partnered with U S small business lender Kabbage to provide loans while JP Morgan Chase NYSE JPM Co previously partnered with OnDeck Jollant said Misys was launching the product because it was already an established provider of financial lending software to many large global lenders He added that the company was in discussions with a number of interested banks in the U S Europe and India |
MS | Morgan Stanley shares rise in pre market trade after Q4 earnings beat | Investing com Wall Street investment bank Morgan Stanley NYSE MS reported stronger than expected fourth quarter earnings ahead of Tuesday s opening bell sending its shares higher in pre market trade
Morgan Stanley said adjusted earnings per share came in at 81 cents in the final three months of last year beating expectations for earnings of 65 cents per share and up from 39 cents in the same period a year earlier
For the current quarter net income applicable to Morgan Stanley was 1 7 billion compared with income of 908 million for the same period a year ago
The bank s fourth quarter adjusted revenue totaled 9 02 billion above forecasts for revenue of 8 47 billion and compared to revenue of 7 7 billion in the year ago period
Compensation expense of 4 1 billion increased from 3 7 billion a year ago primarily driven by higher revenues Non compensation expenses of 2 7 billion compared with 2 6 billion a year ago
Institutional Securities net revenues were 4 6 billion reflecting strong results across our Sales and Trading franchise and continued strength in M A advisory
Wealth Management net revenues were 4 0 billion and pre tax margin was 22 Fee based asset flows for the quarter were 17 1 billion
Investment Management reported net revenues of 500 million with assets under management or supervision of 417 billion
James P Gorman Chairman and Chief Executive Officer said Our quarterly results reflect consistent strong performance while our annual results show meaningful earnings growth over 2015
Immediately after the earnings announcement Morgan Stanley shares rose 48 cents or 1 1 in trading prior to the opening bell to 44 28 from a closing price of 43 81 on Friday |
MS | Morgan Stanley sails past Q4 estimates with EPS of 0 81 | Investing com NYSE Morgan Stanley Q4 earnings easily beat estimatesThe U S bank Tuesday said Q4 diluted EPS came in at 0 81 vs estimate of 0 65 and 0 39 a year earlier Revenues jumped to 9 0 bn from 7 7 bn a year earlier and compared with estimate of 8 28 bn Full year EPS was 2 92 on revenues of 34 6 bn Morgan Stanley shares were up 1 48 at 44 45 in pre market trade |
MS | At Davos retreat of globalization stokes fears for poor nations | By Sujata Rao DAVOS Switzerland Reuters In 2014 Arnold Kamler CEO of New Jersey based Kent International took a big step he resumed making bicycles in the United States 23 years after uprooting production to China This year he hopes to sell half a million U S made bikes For business and political leaders gathered in the Swiss Alps town of Davos for this year s World Economic Forum Kamler s experience part of a process Morgan Stanley NYSE MS once dubbed the re industrialization of America is a cause for some anxiety If a mix of accelerating automation and trade protectionism is the defining economic climate of the moment globalization may well be in decline and developing nations that failed to capitalize on the past two decades of economic integration notably those in Africa may have missed the boat altogether It is an issue with profound consequences for emerging economies that have built their fortunes on exports and for richer nations that hope a reshoring of industrial production will appease disgruntled blue collar workers at home and re ignite stagnant wage growth Global trade likely grew last year at just 1 7 percent lagging world economic growth for the first time in 15 years and for only the second time since 1982 according to the World Trade Organization which expects a further slowdown in 2017 While there are complex reasons behind the slowdown it s hard to ignore the rising popularity of trade protectionism and anti globalization U S President elect Donald Trump s campaign pledges and plans for a very large border tax on firms producing overseas fall into this category But perhaps even more influential is businesses push toward automation digitization robotics and innovations such as 3 D printing that undermine low wage countries biggest comparative advantage That contributed to the return of 250 000 manufacturing jobs to the United States between 2010 and 2015 according to data from Reshoring Initiative a group that advises U S businesses Kamler s state of the art plant for instance will soon be able to produce bicycles with just 12 employees per shift Most of those people will be sitting looking at computer screens The same operation in China would need 60 people he said Automation tends to see jobs return to the countries which develop the technology carmaker Ford s decision to expand a Michigan plant rather than start one in Mexico is seen as partly motivated by a focus on high tech electric vehicles LAGGARDS Reshoring is bad news for emerging economies transformed by the manufacturing for export boom and now suffering from its reversal But for countries only now getting in on the manufacturing act things are worse says Hung Tran managing director of the Washington DC based Institute for International Finance IIF The conclusion to reach is that the business and growth model which worked for many countries especially in Asia won t provide the same growth opportunities as before Tran said That s the big challenge for emerging economies that are only just trying to take off it s much harder to do than 20 years ago when all you needed to do was attract investment produce and export Tran said Laggards include swathes of Africa and also India the world s fastest growing economy With a 1 2 billion population it accounts for just 2 percent of global trade but needs desperately to create jobs for the 10 million youth entering the workplace each year The fear is that as low level factory jobs for unskilled workers become scarcer workers in these countries unlike in early birds such as China or Malaysia will be ill prepared for the higher tech manufacturing of the future Against that backdrop India may struggle to meet its goal of raising manufacturing s share of the economy to 25 percent That share is currently 16 percent half of China s level Others are even worse off manufacturing comprises 10 percent of Nigeria s economy and 6 percent in Tanzania according to the World Bank The picture is mirrored across Africa where the population could double by 2050 to 2 5 billion There is a missed boat aspect for industrial output especially for Africa said Marion Amiot at Oxford Economics whose report on the impact of digitization concluded that upfront costs of technology and training would pose significant entry barriers for poorer economies Not everyone is pessimistic India for instance may be able to capture the burgeoning trade in services It and peers such as Indonesia are moving to reform their economies unlocking faster growth and making exports less important LOSERS EVERYWHERE It could eventually prove a game in which everyone loses Take Trump s tirades against Mexico U S firms have invested more than 200 billion in Mexico employing over a million people but are now under pressure to shutter factories producing for U S markets Yet reshoring may not deliver the kind of benefits Trump and U S unions hope for The new high tech plants will likely create far fewer jobs than expected Second the loss of manufacturing jobs and failure to create them in countries with huge populations may trigger more migration to rich countries exacerbating the tensions that are fuelling the lurch toward right wing parties Migration patterns already suggest people s movement is increasingly dictated by push from poorer areas of the world rather than by pull from richer countries UBS said in a note
As former Mexican president Felipe Calderon warned Trump in a tweet The more jobs you destroy in M xico the more immigrants the American people will have |
MS | Wall St lower as market digests Trump May comments | Investing com U S stocks were lower early Tuesday after comments by Trump and Theresa May The DJI was off 0 25 at 10 15 ET after Monday s holiday The S P 500 lost 0 36 The tech heavy Nasdaq composite shed 0 58 The dollar index was off 1 12 as Trump warned of risks of the greenback s strength Investors were also digesting UK PM Theresa May s speech confirming Britain to exit the single market NYSE Morgan Stanley shares were down 2 17 at 42 86 despite easily beating Q4 esimates |
JPM | JPMorgan CEO Dimon sees U S economic expansion continuing | NEW YORK Reuters JPMorgan Chase Co N JPM Chief Executive Jamie Dimon said on Friday that the U S economic expansion may be only two thirds of the way through its course It could easily continue Dimon said at an investor conference in New York Because economic growth has been slow year by year over an unusually long expansion there is still slack in the system he said The current trade disputes between governments however are a negative for the economy he said
JPMorgan is the biggest U S bank by assets |
C | Cautious Saudi bankers give reality check on country s economic health | By Tom Arnold RIYADH Reuters Saudi Arabia s banks are preparing for muted lending growth this year providing a reality check on the state of the country s economy and government efforts to stimulate growth Saudi Arabia unveiled its Vision 2030 plan in 2016 to transform the country s economy which is still suffering the after effects of the slump in oil prices recession and austerity measures to cut the state deficit Vision 2030 is in the future but we re dealing with the reality of now said one senior Saudi banker We re having to be more careful and client demand is weak anyway The International Monetary Fund is expecting the Saudi economy to grow 1 8 percent this year but some local bankers worry their assets are shrinking as loans get repaid but new borrowing opportunities dry up The banks also complain that they have seen little benefit so far from the government s 72 billion riyals 19 20 billion stimulus plan announced last year to kick start the economy The expectation is that the rebound in credit growth will be delayed until the end of 2018 said Olivier Panis senior credit officer of EMEA financial institutions at Moody s There s still a lack of confidence from investors about when economic growth will start again and when some of the big projects will be implemented Three of the four local banks to report first quarter earnings so far this quarter including the two largest National Commercial Bank and Al Rajhi Bank have revealed shrinking loan growth setting a gloomy tone to the earnings season The Saudi banks subdued outlook contrasts with the enthusiasm of international banks which are keen to muscle into the Arab world s largest economy as it prepares to transform industries ranging from energy to entertainment More than a dozen foreign banks have already licenses to operate branches in the country Citi N C is considering seeking a full license and Credit Suisse S CSGN is seeking one CREDIT DEMAND Credit expansion in the country contracted by 1 percent last year as the economy slipped into recession the first since 2009 Credit growth for the first quarter was 0 5 percent In retail banking cuts in government energy subsidies have hit consumer spending Also the weak economy led to hundreds of thousands of expatriate workers leaving the country over the past year also denting demand for consumer credit and loans Among the banks corporate customers appetite for credit also remains weak Contractors and other companies serving the government are often still waiting to be paid although the government has taken steps to speed up the process One banker said because of this situation his bank had raised its collateral requirement on loans to contractors to up to twice the size of the loan from 1 5 times previously Fallout from the government s anti corruption drive on the country s business and political elite has increased caution among the local banks bankers say The after effects of the corruption purge have also delayed lending to some companies such as Kingdom Holdings Another dampener has been new rules on bad debts From the start of this year banks had to comply with IFRS 9 accounting rules which set out stricter provisions on what banks have to set aside for problem loans The banks are also having to meet tighter Saudi central bank corporate lending rules which limit a bank s exposure to a single customer This means no bank can have exposure to any one client of more than 15 percent of their Tier 1 capital several bankers said The previous limit was 25 percent With big government linked companies dominating the Saudi economy banks are in some cases now much more restricted in who they lend to A number of banks are already at the cap for lending to the largest conglomerates so that s a challenge they will have to manage said Panis at Moody s
1 3 7502 riyals |
C | Xi s Top Economic Adviser to Visit U S on Trade Mission | Bloomberg Chinese President Xi Jinping s top economic adviser plans to visit Washington for follow up trade talks after Trump administration officials traveled to Beijing last week according to the White House
President Donald Trump was briefed this morning by members of the U S delegation led by Treasury Secretary Steven Mnuchin who returned to Washington on the weekend from a two day visit to China White House spokeswoman Sarah Huckabee Sanders told reporters on Monday Sanders didn t elaborate on the status of the discussions
Liu He will travel to Washington next week she said Liu was recently promoted to vice premier and is Xi s top deputy on economic matters
China s Ministry of Foreign Affairs Ministry of Commerce and State Council Information Office didn t immediately respond to faxed requests for confirmation
The president has a great relationship with President Xi and we are working on something we think will be great for everybody Sanders said in Washington China s top economic adviser the vice premier will be coming here next week to continue the discussions with the president s economic team We will keep you posted as the discussions are ongoing
Mnuchin s delegation wrapped up two days of talks with Chinese economic officials on Friday with only an agreement to keep talking Trump has threatened to impose tariffs on as much as 150 billion in Chinese goods duties that can be imposed after a public comment period ends May 22
Mnuchin will be part of a U S delegation to Jerusalem on May 14 to open the new American embassy to Israel but will return in time to meet with Liu a Treasury spokesman said
The two sides appear to be at loggerheads with both making long lists of demands the other won t meet analysts say Trump wants China to cut its annual trade surplus with the U S by at least 200 billion by the end of 2020 and refrain from retaliation against proposed U S tariffs China wants the U S to stop an investigation into the country s acquisition of sensitive American technologies
The U S has demanded too much The upcoming visit is unlikely to yield a deal but may make some progress said Wang Yong a professor at the School of International Studies at Peking University Both sides have pressure as the implementation date of tariffs related to the 301 investigation draws near
Liu told American business leaders while visiting Washington earlier this year that he d take steps to reform China s economy according to a person familiar with the situation Liu said at the time that he had three requests for the Trump administration Establish a new economic dialogue name a point person on China issues and hand over a specific list of demands the person said
Last Thursday Friday s talk was too demanding and China probably won t accept all the lists as given but there are a lot of places where both countries can talk more for example in terms of market access IP protection trade practices and more importantly Made in China 2025 Liu Li gang chief China economist at Citigroup Inc NYSE C said in a Bloomberg Television interview from Hong Kong In all these areas there s wiggle room for both sides to have some constructive talks
Updates with ministries in fourth paragraph |
C | Xi and Trump Talked Trade Korea Ahead of Chinese Aide s Visit | Bloomberg President Donald Trump and Chinese President Xi Jinping discussed trade and North Korea in a phone call Tuesday as Xi s top economic adviser plans additional talks in Washington following last week s trip by U S officials to Beijing
The two men discussed Xi s meeting with North Korean leader Kim Jong Un and agreed on the importance of continuing sanctions on North Korea until it permanently dismantles its nuclear and missile programs according to a statement from White House Press Secretary Sarah Huckabee Sanders
Trump also affirmed his commitment to ensuring that the U S and China have a balanced investment and trade relationship the statement said
The call followed Xi s meeting with the North Korean leader in the port city of Dalian over the past two days the second meeting between top officials of the two Communist allies in less than two months Kim told Xi that North Korea does not need nuclear weapons as long as security threats and hostility against the nation are eliminated the official Xinhua News Agency reported Kim had a summit with President Moon Jae in of South Korea late last month and is expected to meet with Trump possibly next month
On Monday in Washington Trump was briefed by members of the U S delegation led by Treasury Secretary Steven Mnuchin who returned to Washington on the weekend from a two day visit to China
Liu He will travel to Washington next week Sanders said on Monday Liu was recently promoted to vice premier and is Xi s top deputy on economic matters
China s Ministry of Foreign Affairs Ministry of Commerce and State Council Information Office didn t immediately respond to faxed requests for confirmation
The president has a great relationship with President Xi and we are working on something we think will be great for everybody Sanders said in Washington China s top economic adviser the vice premier will be coming here next week to continue the discussions with the president s economic team We will keep you posted as the discussions are ongoing
Mnuchin s delegation wrapped up two days of talks with Chinese economic officials on Friday with only an agreement to keep talking Trump has threatened to impose tariffs on as much as 150 billion in Chinese goods duties that can be imposed after a public comment period ends May 22
Mnuchin will be part of a U S delegation to Jerusalem on May 14 to open the new American embassy to Israel but will return in time to meet with Liu a Treasury spokesman said
The two sides appear to be at loggerheads with both making long lists of demands the other won t meet analysts say Trump wants China to cut its annual trade surplus with the U S by at least 200 billion by the end of 2020 and refrain from retaliation against proposed U S tariffs China wants the U S to stop an investigation into the country s acquisition of sensitive American technologies
The U S has demanded too much The upcoming visit is unlikely to yield a deal but may make some progress said Wang Yong a professor at the School of International Studies at Peking University Both sides have pressure as the implementation date of tariffs related to the 301 investigation draws near
Liu told American business leaders while visiting Washington earlier this year that he d take steps to reform China s economy according to a person familiar with the situation Liu said at the time that he had three requests for the Trump administration Establish a new economic dialogue name a point person on China issues and hand over a specific list of demands the person said
Last Thursday Friday s talk was too demanding and China probably won t accept all the lists as given but there are a lot of places where both countries can talk more for example in terms of market access IP protection trade practices and more importantly Made in China 2025 Liu Li gang chief China economist at Citigroup Inc NYSE C said in a Bloomberg Television interview from Hong Kong In all these areas there s wiggle room for both sides to have some constructive talks
Updates with White House statement starting in second paragraph |
C | Bond yields risk trend break but confirming bear market will take time | By Karen Brettell NEW YORK Reuters Benchmark 10 year U S Treasury yields are threatening to break above a declining trendline that has contained the bonds for more than 30 years That may mark the beginning of a long term bear market though confirming such a trend could take years Expectations that the Federal Reserve will raise interest rates at least two more times this year and surging Treasury issuance as the U S government finances worsening trade and budget deficits has roiled bonds and sent 10 year yields to their highest levels in more than four years Those yields broke back above 3 percent on Wednesday and are likely to increase further to at least the 3 50 percent level If the Fed adopts a more aggressive view of the economy yields would rise even further It s a fairly consensus view now that yields are heading higher said Jason Hunter chief technical strategist at JPMorgan NYSE JPM in New York Whether the move is the beginning of a structural bear market is less certain There is no official mark that would define when a bear market has begun and whether we are headed into one may depend on the next economic downturn and how the Fed responds to it We won t know until the full extent of the next Fed easing cycle Hunter said It s not going to be clear cut that we don t come back and revisit the low yields that we saw with this particular cycle There are signs however that bode badly for bonds Five and 10 year note yields both ended last month with a bullish outside month denoting when the month s range is first lower and then higher than the prior month and subsequently closes the month above the prior month s highs That signals that further yield increases are likely It is a very strong signal that we re going to continue to see these yields push higher in the months ahead said Tom Fitzpatrick chief technical strategist at Citigroup NYSE C in New York Fitzpatrick notes the bull market in bonds endured for 35 years from 1981 when 10 year yields were over 15 percent to the low of 1 31 percent in 2016 That is consistent with the time of the previous bear market from 1946 to 1981 when yields increased from less than 2 percent to over 15 percent in the same time frame suggesting bonds move in the same long term cycle Ten year yields also appear to have made a double bottom dropping to 1 38 percent in 2012 and 1 31 percent in 2016 and have ceased forming the lower highs and lower lows that marked the declining yield trend Everything suggests a loss in momentum in the downtrend Fitzpatrick said While I think that s a work in progress I think there is more than enough dynamic here to at least suggest that it could be a more structural bear market in fixed income developing Moves in the yield curve will be watched for indications on when the U S economy is likely heading for a recession and a new cycle of Fed easing JPMorgan s Hunter sees a possibility that the two year 10 year yield curve will invert by early next year That typically precedes an equity downturn by around nine months to 1 1 2 years which then leads to an economic downturn and Fed easing Only at that point can you really get an understanding that yields are now starting to make higher yield highs higher yield lows on a longer term basis and starting a new secular trend Hunter said Citi s Fitzpatrick meanwhile expects the housing and stock markets which are typically the cause of major economic downturns to continue to do well for several more years with the yield curve flattening further at least in the near term If 10 year yields rise over 4 percent which is the top of the trading range since the 2008 lows then you re beginning to think this is something much more important Fitzpatrick said The best indicator for a major downturn would be the inversion of the two year and five year yield curve which has preceded each major downturn in recent history Fitzpatrick said
These have included the savings and loan housing crisis of the 1980s the stock market implosion in 2000 and the financial crisis of 2007 2009 when in each instance the two year five year yield curve inverted by approximately 20 basis points |
C | Why Palladium ETF Has Soared In 2019 | Palladium has gained investor attention on its continued rally in 2019 The auto catalyst metal just touched an all time high of 2000 per ounce The recent shutdown of palladium mines due to the world s second largest palladium supplier has been pushing prices higher Interestingly the has increased three times in 2019 the highest ever annual gain Notably palladium prices have risen around 60 since In fact Aberdeen Standard Physical Palladium Shares ETF has gained 54 3 year to date outperforming the 10 8 gain of the Invesco DB Commodity Index Tracking Fund WA DBC Analysts at Citigroup Inc NYSE C continue to remain bullish on the metal and expect the prices to cross the 2500 milestone Let s take a look at the factors that are driving the palladium rally read Factors Behind the UpsidePalladium has been seeing strong demand in the manufacturing of industrial products The for catalytic converters in gasoline powered cars including hydrocarbons carbon monoxide and nitrogen dioxide to more benign nitrogen carbon dioxide and water vapor The demand for the metal is expected to keep rising as emission standards are getting more rigid in countries like India Europe China and Japan In fact even before the implementation of the China is seeing a surge in demand for palladium read Moreover as the United States and China have apparently agreed on a phase one trade deal the analysts expect improvement along with increasing strength in the global automobile industry This in turn is expected to drive demand Meanwhile the markets have been long grappling with a supply crunch of palladium In fact market demand for the metal remains unmet Moreover analysts expect the palladium market to continue In fact the world s largest producer of the auto catalyst metal Russia based is uncertain about its ability to resolve the supply issue It is being largely speculated that Moscow is close to completely exhausting while some are withholding supplies as they are waiting for prices to soar In fact the global palladium market witnessed in 2018 The deficit is estimated to as palladium consumption touches 11 2 million ounces while mining production stays at a deficit and residual Russian stockpiles diminish Palladium ETF in FocusPALL reflects the performance of the price of palladium less Trust s expenses The shares are designed for investors who want a cost effective and convenient way to invest in physical palladium PALL charges 60 basis points in fee per year and has AUM of 309 9 million see Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
C | 3 Investing Facts About Required Minimum Distributions You Need To Know December 19 2019 | If you do not make a required minimum distribution RMD from your own or an inherited IRA by the specified deadline the IRS could hit you with a big penalty 50 For example if you were required to withdraw a minimum of 4 000 and you did not you would be obliged to pay 2 000
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
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 required minimum distribution 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 70 1 2
Why does the IRS requires 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
Key Facts 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 do I need to begin withdrawals For most accounts you should take your first distribution by April 1 of the year following the calendar year in which you arrive at age 70 1 2
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 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 70 and must take her first RMD in the year she reaches age 70 1 2 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 of the RMD that Ann must withdraw for the calendar year in which she turns 70 1 2
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 |
MPC | Marathon Petroleum 2 on surprise Q1 profit as refining margins rise | Marathon Petroleum MPC 2 moves higher after reporting a surprise Q1 profit as refining margins jump 18 despite challenging market conditions While refining operating losses narrowed to 70M in the quarter from 86M a year ago refining and marketing margins rose 18 to 11 65 bbl well above a Barclays LON BARC estimate of 10 30 bbl MPC says Q1 refinery direct operating costs rose 16 5 to 9 45 bbl but still came in well below a Jefferies estimate of 10 18 bbl Q1 total throughput fell 3 7 to 1 71M bbl day but the result edged Barclays forecast for 1 68M bbl day and the company expects to process 1 975M bbl day in the current quarter 4 6 higher than a year ago MPC also says a special committee expects to complete the ongoing review of Speedway s divestiture by mid 2017 Now read Marathon Petroleum Corp 2017 Q1 Results Earnings Call Slides |
MPC | Marathon Petroleum approves additional 3B share buyback | Marathon Petroleum NYSE MPC 1 8 AH after announcing a 3B share repurchase authorization in addition to its previous authorization with 2 14B remaining as of March 31 MPC says it expects cash proceeds from dropdowns of midstream assets to its MLP and limited partner distributions to fund substantial ongoing return of capital to shareholders and limited partner distributions to fund substantial ongoing return of capital to shareholders Now read |
MPC | Marathon Petroleum says decision coming soon on Speedway spinoff | Marathon Petroleum MPC 0 8 indicates a decision is coming soon on whether to spin off its Speedway gasoline and convenience store chain into a publicly traded entity At a J P Morgan investor conference last week MPC Chairman and CEO Gary Heminger showed a presentation saying the Speedway evaluation would be completed during Q3 MPC says Speedway s Q1 revenue totaled 135M lower than the 167M reported in the year ago quarter partly due to lower margins on gasoline and merchandise at its locations but it says market conditions later in the quarter raise hopes for a stronger financial performance in the driving season Now read |
MPC | Why record U S oil exports are poised for even more growth | By Devika Krishna Kumar and Marianna Parraga NEW YORK HOUSTON Reuters U S refineries are producing more fuel than ever as they seek to meet rising demand from overseas rather than the drivers on nearby roadways Last year the U S became the world s top net exporter of fuel an outgrowth of booming domestic production since the shale oil revolution started in 2010 That s a fundamental shift from the traditional U S role in global markets as a top importer and consumer Net exports are on track to hit another record in 2017 making foreign fuel markets increasingly important for the future growth prospects and profit margins of U S refiners Shale oil producers have provided refiners with abundant and cheap domestic crude supplies giving them the raw material they need to produce internationally competitive fuel The nation set a record in 2016 by sending a net 2 5 million barrels per day bpd of petroleum products to foreign markets That compares to net fuel imports of 2 3 million just a decade ago according to U S government data Booming exports have bolstered margins at the biggest U S refiners including Marathon Petroleum NYSE MPC and Valero and compensated for lack of strong growth this year in U S fuel demand Now the government of U S President Donald Trump is seeking to deregulate oil and gas production to further leverage rising U S exports for international political gain a policy Trump calls energy dominance Surging U S crude production has already complicated the ongoing effort by the Organization of the Petroleum Exporting Countries OPEC to tame a global glut that has halved oil prices since 2014 The United States remains a massive importer of crude oil regularly trading the top spot with China but American refineries now re export much of that oil as jet fuel diesel and gasoline The U S has a growing role in satisfying demand for motor fuel in countries such as Mexico and Brazil where the thirst for U S fuel is likely to accelerate amid refinery outages and high production costs Refined U S exports are also going further afield to Asia and diesel exports to Europe increased in June to levels not seen in nearly two years traders have said See graphic Traditionally oil traders refiners and investors have considered U S fuel demand as one of the leading metrics for predicting international crude oil supply and price trends Now they are increasingly looking to foreign demand for U S fuel for guidance Globally you re going to have increased demand for all of our products and so our focus will go beyond the U S borders said Texas based Valero s Chief Executive Joe Gorder In contrast he predicted a slight decline in U S gasoline demand over the next decade U S gasoline demand hit a record in 2016 as low pump prices encouraged consumption but has leveled off this year Rising fuel efficiency in cars is expected to limit future domestic demand growth LATIN AMERICAN BUYERS U S refined products are filling shortages in countries such as Mexico and Venezuela where refineries have been running below capacity U S exports have also made inroads into Brazil s market by undercutting the price of locally produced fuel Latin America s imports of U S fuels reached almost 2 5 million bpd in the first quarter compared with 2 32 million bpd in 2016 The growth was fueled by Mexico Brazil Peru Venezuela and Central America according to the U S Energy Information Administration EIA Mexico already the biggest export market for U S gasoline and diesel is seeking higher than usual volumes in July and August to fill a void left by a fire at its biggest refinery last month In recession scarred Venezuela the country s largest refining complex has lowered operating rates this month to less than half of its 955 000 barrel per day capacity a level that has required state run oil company PDVSA to import more fuel to meet domestic demand Between them Mexico and Venezuela have recently said they want to buy extra volumes of almost 19 million barrels in the second half of the year mostly from the United States an amount suggesting that U S exports will grow again this year over last year s record levels Net U S exports of transport fuels could rise 8 8 percent this year according to PIRA Energy an analytics and forecasting unit of S P Global Platts In Brazil fuel distributors have begun buying more U S imports because they are cheaper than fuel sold by state run oil firm Petrobras Petrobras had failed to align its wholesale prices with international markets opening a window for importers to bring fuel into Brazil Petrobras last month said it would peg its fuels more closely to international prices as it tried to slow the expansion of U S imports Analysts said supply from U S refiners was unlikely to slow much BEYOND THE AMERICAS U S refiners have also boosted exports to Europe and Asia In Europe U S shipments of diesel rose to nearly 500 000 bpd in June according to traders well above flows that have rarely exceeded 370 000 bpd since July 2015 U S global distillate exports including diesel hit a record that month said researcher ClipperData which tracks global oil flows Exports of refined products to several Asian countries including India Japan and South Korea rose to record levels in 2016 and China took a record 303 000 bpd of U S produced fuels in February U S refiners are likely to play in important role in meeting rising demand from Asia said Nicole Leonard senior project consultant at Platts Analytics Oil Gas Consulting Analysts and traders expect U S refined products exports to continue to grow even with increased competition from large exporters in the Middle East Europe and India Demand for U S fuels is underpinned by refinery challenges in neighboring countries said Sandy Fielden director of oil and products research for Morningstar Commodities Research in Austin Texas It doesn t seem that these Latin American countries are going to cure their refining problems overnight he said |
MS | Exclusive Morgan Stanley cuts bankers bonuses as deals IPOs stall sources | By Liana B Baker and Olivia Oran Reuters Morgan Stanley N MS laid off a number of senior investment bankers last week and cut bonuses by roughly 15 percent because of a decline in revenue from dealmaking and capital raising across Wall Street people with knowledge of the matter told Reuters Individual bankers were awarded different amounts depending on performance and geographic region though many received a smaller paycheck for 2016 said the sources on Thursday who were not authorized to discuss compensation publicly Morgan Stanley which ranked fourth for investment banking fees last year cut more than 20 managing directors from its investment banking division globally representing about 5 percent of the total the sources said While the bank typically lets go of the bottom 5 percent of its workforce at year end to get rid of underperformers the cuts to senior bankers were deeper than in years past according to the sources Morgan Stanley also announced the promotion of managing directors on Thursday A Morgan Stanley spokeswoman declined to comment The bank will offer more details about staffing and compensation next Tuesday when it reports earnings Wall Street banks have been cutting staff and curbing compensation for years to cut costs They have also lost top talent to boutique firms which are not subject to the same regulatory pressure felt by big banks and can pay a greater portion of compensation in cash Global investment banking fees across Wall Street declined 7 percent in 2016 to a three year low according to Thomson Reuters data Those figures include advising companies on mergers and acquisitions as well as raising debt and equity Equity capital market fees which declined 23 percent showed the biggest drop of all banking activities as a result of a dearth of initial public offerings IPOs occurred at the lowest levels since 2009 Merger activity also slowed from record levels in 2015 with global deal volume falling 17 percent Morgan Stanley s global investment banking fees dropped 13 3 percent to 4 5 billion |
MS | Morgan Stanley to pay 13 million for overbilling clients SEC | By Sarah N Lynch WASHINGTON Reuters Morgan Stanley NYSE MS will pay 13 million to settle civil charges after it overbilled some of its wealth management clients because of coding and other billing system errors U S regulators said Friday The Securities and Exchange Commission said the bank was also charged with violating custody rules designed to safeguard investor assets The bank agreed to settle the case without admitting or denying the charges A spokeswoman for Morgan Stanley s wealth management unit said the company was pleased to have the matter resolved All affected clients have been reimbursed and the firm has enhanced its policies and procedures including discontinuing the use of certain legacy systems company spokeswoman Christine Jockle said in a statement The SEC said that the billing errors at Morgan Stanley affected more than 149 000 clients Between 2002 and 2016 the bank received more than 16 million in excess fees as a result of the errors In addition the SEC said that Morgan Stanley did not comply with custody rules in which an independent accountant conducts an annual surprise exam to ensure asset managers are keeping their clients money safe For two consecutive years the SEC said Morgan Stanley did not provide the accountant with a complete or accurate list of client funds and it failed to preserve client contracts This was the second time in less than a month that Morgan Stanley has faced SEC fines
On Dec 20 another unit of the bank paid 7 5 million to settle charges that it violated customer protection rules when it used trades involving customer cash to lower its borrowing costs |
MS | Japan core machinery orders fall as Trump demand uncertainty sets in | By Stanley White
TOKYO Reuters Core orders for Japanese machinery fell in November at their fastest in seven months a sign companies may be deferring capital expenditure as uncertainty over the incoming Trump Administration s trade policies and global demand worries take hold
Core orders a highly volatile data series regarded as a leading indicator of capital expenditure fell 5 1 percent in November from the previous month Cabinet office data showed on Monday more than the median estimate for a 1 7 percent decline
Many economists originally forecast that capital expenditure would gradually increase this year but growing concerns that U S President elect Donald Trump may adopt protectionist trade policies could cause companies to scale back investment
Trump vowed to withdraw from the Trans Pacific Partnership free trade pact a blow for Japan because it was counting on the TPP to boost exports and drive structural reform in its farm sector
There is some uncertainty about the new U S government but this has not been fully factored in yet said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities
Depending on what happens Japanese companies could be forced to rethink their capex plans There are also worries that domestic consumer spending may not accelerate
Core machinery orders which exclude ships and heavy electrical equipment fell in November due to a decline in orders from chemicals makers oil refiners and the transport sector the data showed
Orders from the wholesale and retail industries also fell in November
Orders from the services sector fell 9 4 percent in November after a 4 6 percent increase in the previous month
Orders from manufacturers rose 9 8 percent following a 1 4 percent decline in the previous month
Trump who takes office on Jan 20 has rattled Japanese automakers by threatening a large border tax on the cars they manufacture in Mexico and export to the United States
Some economists worry that once Trump takes office his criticism could shift to the goods Japan manufacturers within its own borders for export the United States which could discourage Japanese capital expenditure
There are also concerns that trade friction with the United States could hurt Japanese consumer sentiment which would then weigh on household spending |
JPM | JPMorgan sees flat second quarter markets revenue verses year earlier | NEW YORK Reuters JPMorgan Chase Co N JPM corporate and investment bank chief Daniel Pinto said that second quarter markets revenue looks like it will be flat compared with a year earlier Speaking on Tuesday at an investor conference Pinto said that the drag of several one off items is reducing the benefit of mid single digit percentage improvements in core trading business such as in rates credit and equities The odd items include tax law consequences on a spread business and the effect of some accounting rules on some investments Pinto said Pinto spoke at the start of a work week that is loaded with presentations by Wall Street executives |
JPM | U S consumer confidence rebounds house prices increase | By Lucia Mutikani WASHINGTON Reuters Consumer confidence rebounded in May but households were a bit pessimistic about their short term income prospects even as they expected strong job growth to persist which could restrain consumer spending The Conference Board said on Tuesday its consumer confidence index rose 2 4 points to a reading of 128 0 this month from a downwardly revised 125 6 in April The index was previously reported at 128 7 in April If consumers don t step up their spending then the growth outlook this year may disappoint on the weak side said Chris Rupkey chief economist at MUFG in New York U S financial markets were little moved by the data amid a deepening political crisis in Italy The dollar rose to a 10 month high against the euro while U S Treasury yields fell Stocks on Wall Street dropped with the S P 500 and Dow Jones Industrial Average touching near three week lows The Conference Board s so called labor market differential derived from data on respondents views on whether jobs are plentiful or hard to get increased to 26 6 in May the best reading since May 2001 from 22 7 in April That measure which closely correlates to the unemployment rate in the Labor Department s employment report suggests that labor market slack continues to shrink But consumers were less upbeat about their short term income prospects The share of consumers expecting an improvement in their income fell to 21 3 percent this month from 21 8 percent in April The proportion expecting a decrease rose to 8 2 percent in May from 7 9 percent in the prior month BUYING PLANS DROP The weak income readings are despite massive tax cuts which the Trump administration claimed would boost paychecks for American workers The 1 5 trillion tax cut package came into effect in January Consumers also showed a reluctance to commit to purchases of big ticket items this month with intentions to buy automobiles houses and appliances declining Consumer spending braked sharply in the first quarter and there are signs that it picked up early in the April June period A separate report on Tuesday showed the S P CoreLogic Case Shiller composite index of home prices in 20 metropolitan areas increased 0 5 percent in March after rising 0 8 percent in February House prices gained 6 8 percent in the 12 months to March after rising by the same margin in February The solid gains are at odds with recent data which had suggested a cooling in house prices The Federal Housing Finance Agency reported last week that house prices edged up 0 1 percent in March from February The regulator s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae or Freddie Mac While the weakness in the FHFA house price data raised some concerns that the trend in house price appreciation had started to shift lower so far the Case Shiller data do not support that view said Daniel Silver an economist at JPMorgan NYSE JPM in New York
The house price inflation is being fueled by an acute shortage of homes available for sale which is hurting the housing market |
JPM | Kuroda Leaves Magical Thinking Behind as BOJ Slogs Ahead | Bloomberg The thing is boys can t fly No matter how much they believe
Bank of Japan Governor Haruhiko Kuroda may not say that on Wednesday when he speaks at an annual BOJ conference in Tokyo But he s been forced to acknowledge it at least implicitly since famously invoking Peter Pan in a speech at the same event three years ago
I trust that many of you are familiar with the story of Peter Pan in which it says The moment you doubt whether you can fly you cease forever to be able to do it Kuroda told the gathering on June 4 2015 Yes what we need is a positive attitude and conviction
Kuroda will host this year s conference whose theme is central banking in a changing world Raghuram Rajan former governor of the Reserve Bank of India will deliver the keynote speech
It would be so out of place if Kuroda made the Peter Pan speech today said Masamichi Adachi a senior economist at JPMorgan Chase Co NYSE JPM and a former BOJ official The BOJ has learned that trying to influence expectations doesn t really work In Japan it seems it doesn t work unless everyone believes in inflation
Long Road
Federal Reserve Bank of St Louis President James Bullard speaking in Tokyo on Tuesday said the BOJ s frustrating battle with inflation has been instructive for the rest of the world showing how tough things can get if inflation expectations get rooted at a low level
And the going got tough for Kuroda s vision About a year after his Peter Pan speech Kuroda described raising inflationary expectations as an unprecedentedly difficult challenge Within months the BOJ had shifted its policy framework to yield curve control a move meant to achieve sustainability for the long road ahead to 2 percent inflation
Now with nearly another two years gone the road still stretches into the horizon Lately Kuroda is less about magical thinking more about chagrined determination
To be sure Kuroda has made a believer of some at least to a degree He oversaw Japan s longest economic expansion in nearly three decades and wages are rising albeit modestly by the most in years With a weaker yen as fuel the Nikkei earlier this year hit the highest level since the early 1990s
BOJ s Kuroda Starts New Term With Fresh Commitment to Easing
Yet as Kuroda enters a sixth year at the helm of the BOJ inflation isn t even halfway to its target Japan s core inflation which excludes fresh food registered 0 7 percent in April after a second straight monthly decline Few private economists forecast sustained 2 percent core inflation to be reached in coming years
Kuroda may not be living the dream anymore but expect him to stay on his new message Lately this has been about patience and the need to stay the course In a statement after last month s policy meeting for the first time under Kuroda the BOJ removed any mention of when it expected to achieve 2 percent inflation |
JPM | Stocks battered as Italian crisis deepens | By Tomo Uetake TOKYO Reuters Asian stocks extended a global sell off on Wednesday as Italy s political crisis rippled across financial markets toppling the euro to a 10 month low pushing up borrowing costs for Rome and sending investors into safer assets such as U S Treasuries MSCI s broadest index of Asia Pacific shares outside Japan tumbled 1 4 percent while Japan s Nikkei average sold off 1 5 percent to a six week low Chinese shares also headed south with the Shanghai Composite index down 1 4 percent South Korea s KOSPI and Australia s S P ASX 200 slipped 2 0 percent and 0 5 percent respectively Financial spread betters expected a mixed opening in Europe with London s FTSE to open 5 points lower at 7 627 Frankfurt s DAX to open 5 points higher at 12 671 and Paris CAC to open down 3 points at 5 435 The sharp downturn in Asia followed from an equally harsh session on Wall Street on Tuesday where the Dow Jones Industrial Average fell 1 6 percent the S P 500 lost 1 2 percent and the Nasdaq Composite dropped 0 5 percent The financial sector took the hardest hit Investors fear that repeat elections in the euro zone s third largest economy which could come as soon as July may become a de facto referendum on Italian membership of the currency bloc and its role in the European Union The way Italy s short term debt yields are spiking makes you think default risk is on radar in the market It tells how grave the situation is said Makoto Noji senior strategist at SMBC Nikko Securities What the markets are starting to factor in is not a default per se but an early election leading to a victory of eurosceptics and an exit from the euro Short dated Italian bond yields a sensitive gauge of political risk soared 1 5 percentage points from Monday to their highest since 2013 in their biggest move in nearly 26 years Safe haven U S Treasury bonds and German bunds rallied as did the Japanese yen the U S dollar and gold The euro fell against the Swiss franc Japanese yen and U S dollar nearing 1 15 and touching its lowest point since July U S 10 year Treasuries were yielding 2 817 percent in the Asian afternoon edging up from the U S close of 2 768 percent while S P futures rose 0 2 percent Earlier this week there was talk that a new vote in Italy would not be held until late this year or early 2019 prolonging the uncertainty Kerry Craig a global market analyst at JPMorgan NYSE JPM Asset Management noted that Italy s economy is in better shape that it was in 2011 when the euro zone was mired in a debt crisis But he added Completely dismissing the risk that Italy poses would be an unwise move especially given how the next election may play out and the prospect of a stronger eurosceptic position In Asia traders also fretted over the on again off again U S North Korean summit and the U S China trade relationship The United States said on Tuesday that it would continue pursuing actions on trade with China prompting Chinese state media to slam the U S announcement Emerging market stocks lost 1 2 percent marking a new low point for the year under continued pressure from a rising U S dollar for countries that often borrow in that currency Indonesia s central bank is holding an out of cycle policy meeting on Wednesday and is expected to raise its benchmark interest rate for the second time in two weeks according to a Reuters poll Oil struggled under pressure from expectations that Saudi Arabia and Russia would pump more oil to counter potential supply shortfalls from Venezuela and Iran even as U S output has surged in recent years
U S crude futures retreated 0 2 percent to 66 58 per barrel extending losses into a sixth consecutive sessions |
C | Citi chairman says all options on table to find his replacement | CHICAGO Reuters Citigroup Inc N C Chairman Mike O Neill said all options were being considered to find a successor to replace him when he steps down in the next 12 months after reaching the retirement age of 72 The options include having Citigroup Chief Executive Officer Mike Corbat taking on the additional role of chairman O Neill said at the Wall Street bank s annual shareholder meeting on Tuesday O Neill added he was a bit agnostic about keeping the roles of chairman and CEO separate Citi s board of directors preferred to have different people in the two roles O Neill had said at last year s shareholder meeting Corbat 57 has spent at least 20 years at Citigroup and was installed as CEO with O Neill s backing in October 2012 when the board fired Vikram Pandit O Neill was named chairman in April that year after becoming a board member in 2009 Wall Street welcomed the O Neill Corbat pairing in part because of O Neill s record boosting shareholder returns a decade earlier when he overhauled Bank of Hawaii Corp which had businesses sprawling across the Pacific Ocean STEINER PROPOSAL FAILS At Tuesday s annual shareholder meeting a proposal to lower the stock ownership threshold required to call a special meeting of shareholders failed narrowly with 49 8 percent of votes cast in favor a preliminary count showed Citigroup investor Kenneth Steiner had submitted a proposal to lower the threshold to allow shareholders owning 15 percent of Citi s outstanding common stock to call special meetings The current threshold in Citi s by laws stands at 25 percent Special meetings can be held between annual shareholder meetings and can be called by investors to vote on important matters such as electing new directors Our board continues to believe that a 25 percent threshold strikes an appropriate balance Citi said in its proxy statement and recommended shareholders vote against Steiner s proposal Influential proxy advisory firm Institutional Shareholder Services Inc had recommended that Citi lower the threshold More than 94 percent of votes cast at the meeting backed the 2017 executive pay awards Citi said The compensation included a 48 percent raise for Corbat in 2017 a year in which Citi made more money but fell short of earlier targets
The bank said all director candidates were elected with at least 97 9 percent of votes cast |
C | Citigroup declares 0 32 dividend | Citigroup NYSE C declares 0 32 share quarterly dividend in line with previous Forward yield 1 85 Payable May 25 for shareholders of record May 7 ex div May 4 Now read |
C | Citigroup Says Buy 3 10 Year Treasuries Target Rally to 2 65 | Bloomberg Who wants to buy U S Treasuries at these levels Citigroup Inc NYSE C for one
With the longest selloff in a year stalling Citigroup strategists Jabaz Mathai and Jason Williams say go long duration by purchasing 10 year notes at about 3 percent They re targeting a rally that pushes the yield down to 2 65 percent according to a note released Thursday They d add to their position on a selloff up to 3 1 percent but would stop out at a close over 3 15 percent
Investors in the world s biggest bond market are weighing how much further yields can rise after they touched the highest levels in four years this week The median estimate among 57 analysts surveyed by Bloomberg is for the 10 year rate to climb gradually for the rest of 2018 to 3 14 percent by year end It fell three basis points to just below 3 percent on Thursday
While an onslaught of debt issuance has weighed on the Treasury market the upcoming increase in supply for the next quarter is already priced in Mathai and Williams wrote
Meanwhile losses in Treasuries will likely be contained by equity markets that are still skittish about what higher rates will mean they said In February a sharp rise in U S yields helped spark a brief stock market rout
Equity markets are reacting negatively to increases in Treasury yields the strategists wrote A further sell off in rates will be held in check by the feedback loop from equity markets
The main risk they say is that crude prices continue to climb pushing breakeven inflation rates higher and Treasury yields as well
Citi isn t alone in questioning how much higher yields will rise BMO Capital Markets strategists on Thursday pondered a formation known as a double top for the 10 year yield at around 3 033 percent the approximate intraday high over the past two sessions They re less aggressive in their snapback seeing 2 851 percent as a potential destination
Just a day ago it seemed no one wanted to step in front of climbing yields Now that the market has proved it won t decline every session it seems some are mustering the courage |
C | Prince Alwaleed s firm sells Movenpick Hotels to AccorHotels | DUBAI Reuters Prince Alwaleed bin Talal s Kingdom Holding SE 4280 and its partners have agreed to sell Movenpick Hotels and Resorts to its associate firm AccorHotels PA ACCP The deal is expected to close in the second half of 2018 Kingdom Holding said in a statement Kingdom has a 5 7 percent stake in Accor SA AccorHotels said earlier it had agreed to buy rival Movenpick Hotels Resorts for 560 million Swiss francs 567 million in a deal which Accor said would boost its earnings and marks the latest example of the French group s ambitious takeover strategy Founded in 1973 in Switzerland Movenpick Hotels Resorts operates in 27 countries with 84 hotels and has a strong presence in Europe and the Middle East Earlier this year Kingdom sold its stake in the Four Seasons Hotel in Beirut for around 100 115 million including debt sources had told Reuters Prince Alwaleed the kingdom s most recognized business figure was freed on Jan 27 after being held at Riyadh s Ritz Carlton hotel for three months on the orders of his cousin Crown Prince Mohammed bin Salman as part of an anti corruption crackdown Alwaleed a nephew of Saudi King Salman is closely watched in international markets because of investments in companies such as Citigroup Inc N C and Twitter N TWTR |
C | Cyberwarfare populism top black swan events at Milken conference | By Anna Irrera BEVERLY HILLS Calif Reuters Cyberwarfare and populism are some of the top risks that could threaten global stability and financial markets in the years ahead investors and policymakers warned at the annual Milken Institute Global Conference this week as they characterized them as black swan events Thomas Barrack founder and executive chairman of Colony Northstar said cybersecurity was his greatest concern because if the system itself is hacked or breaks or causes trauma I am not sure what happens Representative Ed Royce chairman of the U S House of Representatives Foreign Affairs Committee echoed the sentiment saying that Russian weaponization of information has been one of his main concerns The impact that is having in terms of the effect on the democratic process there in Eastern Europe is very concerning Royce said Indeed worldwide Russian efforts in this regard need to be effectively countered and it s been many years since we ve done anything effective Royce who also expressed concerns about the proliferation of nuclear weapons called for more aggressive action We need on social media and with respects to our sanctions push back and make them Russia feel the price for doing this Royce said American intelligence agencies have said that Russia interfered in the 2016 U S presidential race to try to help Donald Trump win the presidency Trump has repeatedly denied receiving help from Moscow for his election campaign and Russian has denied meddling in the election While government and business leaders worldwide have become more aware of cybersecurity risks the threat may still be underappreciated some speakers said The cyberwarfare in this world is completely unknown uncontemplated and has to be grasped as we think about where we are going Mary Callahan Erdoes chief executive officer of JPMorgan NYSE JPM Asset Management said on Monday Others cited rising populism in the West as one of the biggest risks for the global economy and market stability My black swan is politics politics in the West which is getting bust said Peter Mandelson a former European trade commissioner and British first secretary of state And bust politics has two effects It generates populist nationalist pressures on government and regulators draws them more into the economy onto the backs of businesses and makes decision making by investors and businesses much more difficult Although speakers did share what might keep them up at night in the coming months the outlook was generally upbeat at the event with Citigroup Inc N C CEO Michael Corbat describing the current state of affairs as being OK Ironically the mood was so positive that some speakers worried about excessive optimism I am really concerned regarding the overwhelming optimism which we observed over the past two days said Hiro Mizuno chief investment officer for Japan s Government Pension Investment Fund People say nothing matters to the capital markets so that is scary
Chris Stadler managing partner at CVC Capital added When you sit here and you talk about all these things hitting on all cylinders and you don t know what could change it you re coming close to an event |
C | Citi s senior banker says rate environment supportive of corporates raising funds | RIYADH Reuters The global interest rate environment is supportive of companies wanting to raise money said James Forese president of Citigroup N C and chief executive of the bank s institutional clients group
Forese said there had been a normalization of interest rate policies but the global market was still accommodative to companies seeking to raise funds
Speaking at a business conference in Riyadh he added that Citigroup was considering expanding its activities in Saudi Arabia into a full banking license |
C | Citigroup C Stock Moves 0 76 What You Should Know | Citigroup C closed the most recent trading day at 74 55 moving 0 76 from the previous trading session This change was narrower than the S P 500 s daily loss of 0 86 At the same time the Dow lost 0 96 and the tech heavy Nasdaq lost 1 13
Heading into today shares of the U S bank had gained 4 54 over the past month outpacing the Finance sector s gain of 1 94 and the S P 500 s gain of 3 66 in that time
Wall Street will be looking for positivity from C as it approaches its next earnings report date On that day C is projected to report earnings of 1 84 per share which would represent year over year growth of 14 29 Meanwhile our latest consensus estimate is calling for revenue of 17 77 billion up 3 77 from the prior year quarter
C s full year Zacks Consensus Estimates are calling for earnings of 7 74 per share and revenue of 73 85 billion These results would represent year over year changes of 16 39 and 1 37 respectively
It is also important to note the recent changes to analyst estimates for C Recent revisions tend to reflect the latest near term business trends With this in mind we can consider positive estimate revisions a sign of optimism about the company s business outlook
Our research shows that these estimate changes are directly correlated with near term stock prices Investors can capitalize on this by using the Zacks Rank This model considers these estimate changes and provides a simple actionable rating system
Ranging from 1 Strong Buy to 5 Strong Sell the Zacks Rank system has a proven outside audited track record of outperformance with 1 stocks returning an average of 25 annually since 1988 Over the past month the Zacks Consensus EPS estimate has moved 0 12 higher C is holding a Zacks Rank of 3 Hold right now
Digging into valuation C currently has a Forward P E ratio of 9 7 For comparison its industry has an average Forward P E of 12 35 which means C is trading at a discount to the group
It is also worth noting that C currently has a PEG ratio of 0 84 The PEG ratio is similar to the widely used P E ratio but this metric also takes the company s expected earnings growth rate into account C s industry had an average PEG ratio of 1 53 as of yesterday s close
The Banks Major Regional industry is part of the Finance sector This group has a Zacks Industry Rank of 105 putting it in the top 42 of all 250 industries
The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
To follow C in the coming trading sessions be sure to utilize Zacks com |
JPM | Where Are Silver Prices Headed In 2017 | How low and how high will the price of silver range on the PAPER markets during 2017 Knowing the influence central bankers politicians HFT algos bullion banks and JPMorgan NYSE JPM exercise over increasingly managed markets it is impossible to answer the question and it is probably the wrong question to ask
Instead what do we know with a high degree of certainty
The U S national debt will substantially increase as it has almost every year since 1913 We can trust politicians and central bankers to act in their best interests to spend in excess of their revenues and increase total debt See chart below
Politicians and central bankers are unlikely to change a century of their spend borrow tax and inflate behaviors
The price of silver on the paper markets will be volatile but over the long term will exponentially increase as it has since 1913
Silver prices relative to their own history and to the S P 500 Index are low and far more likely to rise than to fall further See charts below
CONCLUSIONS
Silver prices will like the national debt consumer prices and currency in circulation increase The inevitable long term direction of silver prices is upward
Silver prices are currently low by many measures so the probable move higher should be substantial Risk of lower prices is small
What analysis supports these conclusions
National Debt
Plot the official national debt on a log scale every four years presidential election years The exponential increase about 9 per year every year is unmistakable Doubling debt approximately every eight years is not a winning strategy for the U S economy Take cover
Population Adjusted National Debt
Yes the official national debt even adjusted for population growth has increased exponentially for 100 years Expect it to rise further and probably more rapidly as baby boomers retire uncontrolled Medicare costs skyrocket and politicians aggressively spend with borrowed currency
Silver Prices The Long Term
Silver prices have risen exponentially for 100 years along with debt consumer prices and currency in circulation Note the log scale
Silver to S P 500 Ratio
Plot monthly prices for the ratio of silver to the S P 500 Index In the long term both increase exponentially however the current price of silver is low compared to the price of the S P 500 Note that silver prices are off two thirds from their 2011 high while the S P is at an all time high Expect silver prices to move much higher regardless of a potential correction in the S P
Silver Prices on a Log Scale
Silver prices bottomed in 2001 and have risen erratically since then The log scale trend channel has expanded which indicates wide volatility because silver prices rise too rapidly and then crash Prices are currently at the low end of the expanding channel Expect silver prices to rise substantially from here
How High
The center line of the expanding channel reaches approximately 50 by the end of 2017 The high end of the channel is about three times higher This guarantees nothing but it indicates based on the last 17 years of price history that a paper silver price of 50 should NOT be surprising Of course it will be a shock according to official pronouncements from experts on Wall Street who believe that all savings should be invested trapped in their digital accounts but consider the source
From
there is only one thing more frightening than not knowing what is coming next and that is living in a world run by experts who think they know exactly what is going to happen next These are the same experts who didn t see the 2005 housing bubble the 2008 financial collapse the EU implosion Brexit or the Trump presidency
RISK and DEBT
Our financial world sits upon a precarious peak of debt monetary ignorance rising interest rates risky derivatives and flawed economic models while politicians and central bankers aggressively pursue failed policies to the detriment of all but the financial and political elite 2017 will probably be the year of the implosion and that suggests silver prices should easily exceed 30 I certainly will not be surprised if the paper silver price reaches and exceeds 50 in 2017 2018 Based on spending debt warfare welfare currency devaluations monetary stupidity cyber wars loss or dollar reserve currency status declining silver ore concentrations central bank interventions currency wars Italian banking problems and so much more we should consider prices of 50 100 as not only possible in 2017 but a near certainty by 2019 2022
Silver Cycles
Cycles are slippery but consider the following chart which shows that silver reached lows in 1994 5 2001 2008 and 2017 about every seven years The vertical lines on the chart below are spaced every 84 months Note that silver bottomed in December 2015 and the next bottom is not due until about 2022 23
WHAT ELSE
Our central bankers and commercial bankers thanks to fractional reserve banking excessive debt creation shadow banking QE bailouts and more have created a great many digital dollars The price of gold similar for silver versus the monetary base shows how low the price of gold silver is compared to the zillions of digital currency units created by banks Consider the following chart macrotrends net
WHAT ELSE
From an
The facts surrounding silver have never been more bullish
In only a few years JPMorgan has accumulated the largest hoard of silver in the history of the world physical silver not the paper stuff
A price rise is inevitable
Imagine silver as a poker game The stakes are in the billions JPMorgan is holding an ace king high royal flush It s a lock so they can t lose Everybody else at the table has four of a kind or a full house JPMorgan is in no hurry to win the pot
CONCLUSIONS Continued
Politicians and central bankers will promote failed policies while devaluing fiat currencies which will push silver prices much higher Expect 30 in 2017 and 50 if one or more implosions occur Physical prices may be far higher than paper prices
Long term silver cycles indicate the market bottomed in late 2015 and should rise for another three to five years
Assuming Ted Butler is correct JPMorgan will stimulate the coming substantial rise in silver prices NOT for our benefit but for the benefit of JPMorgan and their management bonuses
50 silver may not happen in 2017 but it certainly is NOT unlikely
100 silver seems inevitable in a few years unless U S politicians reduce spending by at least one third slowly repay the national debt abolish the Federal Reserve reduce military expenses and face the voters during a massive depression Nope political change and a return to monetary sanity are not likely but 100 silver before the next cycle low in 2022 23 is quite likely Hyperinflation of the U S dollar should bankers and politicians choose that road will accelerate price increases and push prices to unimaginable levels |
JPM | Guess Stock Value Rated Positive | Guess Inc NYSE GES Is Under The Watchful Eye Of Analysts And Is In Great Potential Of Surging
Analyst Reviews
The apparel company shares rose on last week s session on lesser trade bulk than the customary Guess Inc stock was at 13 04 and traded at 0 62 points In other values it traded 4 75 from 50 day moving average of 13 04 For the 10 day moving average the stock valued at 12 22 and 200 day moving average was at 15 11
Guess Inc stocks recorded a number of 23 72 off of the high and 4 63 was eliminated from the recent low over the previous 50 day periods
While PEG ratio is at 6 21 Guess Inc stock marked a close of 12 42 in the recent trading session resulting to a market cap of 1 05B a firm advantage to a fresh impulse of 12 42
Guess Inc shares commenced at 12 30 in the last trading session between 12 30 and 12 50 following to an increase of 0 13 over the recent closing price It last traded at 12 42
Stake Matters
JPMorgan Chase Co acquired shares in Guess Inc resulting to an increase on stakes as owned by the finance company According to its latest 13F issuance with the SEC the company acquired 13 8 in stakes from Guess Inc during its third quarter review this year The established holder owned 260 431 portions of the company s stock after obtaining an extra 31 659 shares throughout the session
Virginia Retirement Systems ET AL also purchased fresh stakes in Guess Inc In the second quarter VRS acquired stakes valued at about 406 000
Aside from JPMorgan NYSE JPM and Virginia Retirement Systems ET AL stakes from Guess has been raised into BlackRock Fund Advisors With a number of hedge funds BlackRock Fund Advisors improved its point in the business as it heightened it stakes by 5 7 in the second quarter A number of 6 540 717 shares is now owned by BlackRock and is overall prized at 98 438 000 after obtaining an extra 355 028 stakes in the recent quarter
In the second quarter BlackRock Investment Management LLC advanced its stake in stocks of Guess Inc by 5 0 percent In latter results after purchasing an additional 572 shares in the most recent quarter BlackRock now maintains 29 062 stakes of the establishment s stock priced at 437 000
With the apparel company s stock owned by hedge funds and other holders these fundamental factors now encompassed the 74 73 stock of the Guess Inc
Guess Inc is an internationally renowned apparel company that caters the demographics from children to adults and markets manufactures and designs lifestyle clothing and accessories frequently used as casualwear It has a widespread of businesses from e commerce to physical stores that supplies retail and wholesale merchandises across the globe |
MPC | Strong dollar sends oil prices down on Tuesday | Investing com The price of oil declined on Tuesday with crude settling at 2 29 lower than yesterday and Brent also declining by 2 02 Prices were at a two week low mostly on the momentum of the strong dollar
The dollar was up against the euro the pound and the yen on intraday trading on Tuesday
Crude settled at 52 48 a decrease of 2 29 or 1 24 per barrel
Brent oil settled at 55 67 down 2 02 or 1 15 per barrel
The price of natural gas settled at 3 312 per unit down 11 06
Output cuts from Oman Kuwait and Venezuela impacted oil prices during intraday trading
Other factors influencing the market include the following according to analysts
Marathon Petroleum NYSE NYSE MPC disclosed plans to hasten its asset sales this year with 1 4 billion of EBITDA to be put into a Master Limited Partnership MPLX NYSE MPLX
SM Energy NYSE SM is selling off its Eagle Ford assets to investment firm KKR NYSE KRR for 800 million The move is in accord with the firm s strategy of divesting assets in order to concentrate on projects in the Permian Basin
BP NYSE LON BP has declined to engage in the first round of agreements to develop oil in Iran even as Royal Dutch Shell LON RDSa NYSE RDS A and Total NYSE TOT move ahead BP has the longest history in Iran out of any other major but has passed on reentering the country at this time citing more attractive opportunities elsewhere |
MPC | Activist fund year end returns boosted by Trump rally | By Michael Flaherty
NEW YORK Reuters Activist hedge funds recovered from a slow start last year ending 2016 with sharp gains spurred by a stock rally that followed the U S presidential election
Hedge fund managers who exclusively or partially manage an activist portfolio of stocks cited the election of President Donald Trump as a year end boost and a likely tailwind for 2017 though several expressed concern that the policy direction coming from the White House remains uncertain
Like it or not Donald Trump s presidency changes everything activist Raging Capital said in its fourth quarter letter The fund which manages around 900 million was up 27 percent last year
Unlike most of the hedge fund industry activist managers directly engage with chief executives and corporate boards to push changes sometimes publicly calling out the companies and pursuing proxy fights
The HFRI Event Driven activist index showed a 10 4 percent gain for the year compared with a 1 15 percent bump in 2015 In 2016 the S P 500 index ended the year up 9 5 percent
New activist targets in 2016 included restaurant chain Buffalo Wild Wings refiner Marathon Petroleum NYSE MPC and industrial retailer HD Supply
J P Morgan s David Hunker head of shareholder activism defense said activists showed more discipline toward the end of the year in targeting companies where a broader set of investors were unhappy
There s a lot more going on among activists to really understand what shareholder frustrations are and where they can drive a wedge between management teams the board and their investors Hunker said
Raging Capital s founder and chief investment officer William Martin said Trump s election and the anticipation of low tax pro business policies have handed the economic baton over to Congress from the U S Federal Reserve which had kept interest rates at near zero levels for nearly a decade
Many of the Republican proposals have potentially far reaching impacts on certain industries though sufficient detail does not exist to properly quantify these impacts or their timing according to hedge fund PSAM which manages around 2 billion and was up 14 percent last year
The hedge fund which occasionally takes activist positions said Trump s expected deregulation push could further accelerate merger deals in 2017 with media companies expected to lead the pack
Dan Loeb a veteran activist and founder of multi strategy hedge fund Third Point also said that the U S monetary policy pendulum was swinging away from low rates while fiscal policy was moving away from austerity
Click here for graphics Activist funds end 2016 up |
MS | Indonesia plans regulation to ensure bond dealers produce factual research | By Hidayat Setiaji and Gayatri Suroyo
JAKARTA Reuters Indonesia is planning regulation to ensure primary bond dealers produce only factual research senior government officials said in a move that is likely to add to bankers concerns about a growing backlash over negative investment commentary
The officials remarks came after the Indonesian government cut its business ties with JPMorgan Chase Co N JPM following a November downgrade by the U S bank in its Indonesian stocks recommendation to underweight from overweight
While Indonesia has subsequently sought to reassure banks and research firms that they will not be sanctioned for their assessment of the country as long as it is credible some Jakarta based analysts at foreign banks have said they were becoming more cautious
Suahasil Nazara the Finance Ministry s head of fiscal policy office said on Friday that primary bond dealers have to ensure their assessments of Indonesia are based on facts and do not cause a disruption to the financial system
The point is the analysis has to be credible and correspond to factual data Nazara said in a text message
A primary bond dealer is a bank or a securities firm appointed by the finance minister that can buy government bonds in auctions and resell them in the secondary market Indonesia had 19 such dealers as of Nov 25
The regulation will hopefully be released next week and will govern the accountability of analysis or the release of information Robert Pakpahan director general of budget financing and risk management said in a text message
The publication of analysis and opinion that is inaccurate speculative in nature and not based on facts will not be allowed Pakpahan said adding that the regulation has to be approved by the finance minister
In the JPMorgan case the Finance Ministry dropped the U S bank s services as a primary dealer for domestic sovereign bonds and as an underwriter for bonds sold to the global market The bank also no longer receives certain transfers of state revenue
JPMorgan said in response that the impact on its clients was minimal and that it continued to operate its business as usual in Indonesia
FOREIGN OWNERSHIP
Indonesia s sensitivity to negative commentary is likely enhanced due to the relatively high foreign ownership of its sovereign bonds and broader concerns over potential capital outflows analysts have said
Emerging markets including Indonesia are vulnerable to potentially disruptive capital outflows as expectations of faster U S interest rate hikes and President elect Donald Trump s promise of fiscal stimulus push the dollar higher
More protectionist trade policies under Trump could intensify that pressure
Foreigners hold more than 37 percent of Indonesia s government bonds while the local capital market lacks depth and liquidity making the perception of foreign investors particularly important for the Southeast Asian nation
Foreign investors sold 20 15 trillion rupiah 1 5 billion of Indonesian government bonds in the three weeks after Trump won the U S presidential election on Nov 8
JPMorgan s skirmish with the Indonesian government also highlights the conflicts that banks face when their analysts express a negative view on a country or a company
Banks ranging from Morgan Stanley N MS in China to Banco Santander MC SAN in Brazil have faced rows with governments in emerging markets although the pressure has usually been less explicit than faced by JPMorgan in Indonesia
In some cases that had led to a chilling effect where analysts cut back on even run of the mill research leaving investors in the dark as to any risks or opportunities
David Sumual chief economist at PT Bank Central Asia Tbk BCA said the fire wall between the bank s business and research divisions had been reinforced since the global financial crisis in 2008
Sumual said his research is based on the data that is available to him but there s still a disclaimer that this can change from time to time and the ultimate decision still lies with the investors
BCA JK BBCA is Indonesia s biggest bank by market value and one of the country s primary dealers
1 13 360 00 rupiah |
MS | The yuan is under pressure again | The offshore yuan is under pressure again
China s currency is down by 0 4 at 6 8762 per dollar as of 7 56 a m ET after earlier slipping by about 0 5 to 6 8844 per dollar
This follows Friday s drop of 0 9 which was the biggest in about a year Meanwhile the onshore yuan is weaker by about 0 3 at 6 9390 per dollar
Last week s RMB short squeeze coming on the back of sharply higher RMB denominated short term funding costs bear goods news It shows that China s authorities pre empted the increased accumulation of outflow risks which is good news for risk takers wrote a Morgan Stanley NYSE MS team led by Hans W Redeker
However should China fail to remain on top of this issue it may have the potential to undermine the global reflation trade with falling commodity prices acting as a catalyst
Additionally China s foreign currency holdings dropped for a sixth consecutive month to a new five year low of 3 01 trillion in December The State Administration of Foreign Exchange said in a statement that the central bank s efforts to stabilize the yuan was the main reason for the drop
As for the rest of the world here s the scoreboard as of 8 19 a m ET
The British pound is down by 1 3 at 1 2130 against the dollar after UK Prime Minister Theresa May said in an with Sky News on Sunday that Brexit will be about getting the right relationship with the European Union and not about keeping bits of membership
The euro is weaker by 0 2 at 1 0513 against the dollar after data showed that German industrial production rose 0 4 month over month in November below expectations of a 0 6 gain Moreover German exports rose by 3 9 month over month in November significantly above the forecasted 0 5
The Russian ruble is lower by 0 2 at 59 7430 per dollar while Brent crude oil the international benchmark is down by 2 1 at 55 92 per barrel
The US dollar index is up by 0 2 at 102 38 ahead of a quite data day Consumer credit will be out at 3 p m ET
The Japanese yen is up by 0 3 at 116 71 per dollar |
MS | Morgan Stanley partners with Addepar to see more of clients wealth | NEW YORK Reuters Morgan Stanley NYSE MS is rolling out a new software platform to 20 of its top financial advisory teams to help them see more of their wealthiest clients assets The bank which manages most of its technology in house said late Tuesday that part of its private wealth management division will use Addepar a Mountain View California based technology firm that already partners with family offices and independent investment advisers Ultra wealthy clients typically hold their assets in limited partnerships family trusts or in alternative and illiquid investments spread across a number of banks and accounts Addepar s platform will allow Morgan Stanley with clients permission to gather information from those various accounts in one place and to quickly parse the data to answer individualized questions said Addepar s chief executive Eric Poirier The tailored reporting is what Morgan Stanley really liked said Poirier who used the example of different client preferences The patriarch might want performance data by country and asset class But the son wants to know the fee agreements they have with each fund manager and how that correlates with the fund manager s performance Gathering that information putting it into spreadsheets and calculating answers used to take so long that advisers had to limit client meetings to once a quarter Poirier said Morgan Stanley s Chief Information Officer Chris Randazzo said advisors will use Addepar to deliver a differentiated service to high net worth clients
Poirier declined to disclose how much in client assets the 20 Morgan Stanley wealth management teams will move to the platform but the California company ended 2016 with 560 billion on its platform |
JPM | JPMorgan pushes ECB rate hike forecast to June 2019 after PMI fall | LONDON Reuters JPMorgan NYSE JPM said on Wednesday it has pushed back rate hike expectations from March 2019 to June 2019 after a business survey showed that euro zone economic growth slowed much more sharply than expected this month IHS Markit s Euro Zone Composite Flash Purchasing Managers Index PMI considered a gauge of economic health slowed in May to an 18 month low of 54 1 from 55 1 below all forecasts in a Reuters poll which predicted a reading of 55 0 JPMorgan said it has also cut its growth forecast for the second quarter of 2018 to 2 5 percent from 3 percent previously
The level is still consistent with growth a tick above a 2 percent pace which is in line with the latest ECB staff forecast But the trajectory remains a concern analysts for the bank said in a note |
JPM | Tight supply weighs on U S home sales job market strengthening | By Lucia Mutikani WASHINGTON Reuters U S home sales tumbled in April as an acute shortage of properties limited choices for potential buyers the latest sign that the housing market was struggling to regain momentum While other data on Thursday showed an increase in the number of Americans filing for unemployment benefits last week the trend in claims continued to point to a tightening labor market A robust labor market is fueling demand for housing The National Association of Realtors said existing home sales fell 2 5 percent to a seasonally adjusted annual rate of 5 46 million units last month The NAR attributed April s weak sales to an utter lack of available listings on the market to meet the strong demand for buying a home Economists polled by Reuters had forecast existing home sales which account for about 90 percent of U S home sales declining only 0 2 percent last month April s drop followed two straight monthly increases Sales fell 1 4 percent on a year on year basis in April While the number of previously owned homes on the market increased 9 8 percent from the prior month to 1 80 million units in April housing inventory was down 6 3 percent from a year ago Supply has declined for 35 straight months on a year on year basis Houses for sale typically stayed on the market for 26 days in April the fewest since the NAR started tracking the series in May 2011 That was down from 30 days in March and 29 days a year ago Fifty seven percent of homes sold in April were on the market for less than a month With inventory tight the median house price increased 5 3 percent from a year ago to 257 900 in April That was the 74th consecutive month of year on year price gains U S financial markets were little moved by the data as investors digested news that U S President Donald Trump had canceled a planned summit with North Korean leader Kim Jong Un Stocks on Wall Street were trading lower while prices for U S Treasuries rose The dollar DXY fell against a basket of currencies RISING MORTGAGE RATES House price increases have far outpaced wage gains annual wage growth has remained below 3 percent Economists said there was no sign yet that rising mortgage rates were having an impact on home sales They however cautioned that higher borrowing costs could worsen the housing shortage But rising rates may be making homeowners less likely to sell because they could be trading a very low mortgage on their existing home for a higher one on another home said Robert Frick corporate economist at Navy Federal Credit Union in Vienna Virginia The 30 year fixed rate mortgage rate averaged 4 61 percent in the week ended May 17 the highest level since May 2011 according to mortgage finance agency Freddie Mac That compared to an average of 4 55 percent in the previous week The weak existing home sales report came on the heels of data on Wednesday showing a 1 5 percent drop in new home sales in April Investment in homebuilding was unchanged in the first quarter Early on in our tracking of the second quarter housing data it looks like real residential investment will decline during the quarter said Daniel Silver an economist at JPMorgan NYSE JPM in New York Given labor market strength and rising inflation economists said the sluggish housing market was unlikely to deter the Federal Reserve from raising interest rates next month Minutes of the Fed s May 1 2 policy meeting published on Wednesday showed most officials believed that if incoming information broadly confirmed their current economic outlook it would likely soon be appropriate to take another step in removing policy accommodation The Fed raised borrowing costs in March and has forecast at least two more rate hikes for this year In a separate report on Thursday the Labor Department said initial claims for state unemployment benefits rose 11 000 to a seasonally adjusted 234 000 for the week ended May 19 Economists polled by Reuters had forecast claims slipping to 220 000 in the latest week The labor market is viewed as being close to or at full employment with the jobless rate near a 17 1 2 year low of 3 9 percent The unemployment rate is within striking distance of the Fed s forecast of 3 8 percent by the end of this year The four week moving average of initial claims viewed as a better measure of labor market trends as it irons out week to week volatility increased 6 250 to 219 750 last week
The labor market is undoubtedly in good health said Kathryn Asher an economist at Moody s Analytics in West Chester Pennsylvania |
JPM | Brazilian electronics company Multilaser files for IPO | SAO PAULO Reuters Brazilian electronics company Multilaser Industrial SA on Thursday filed for regulatory clearance to launch an initial public offering according to a securities filing
The company and its owners will sell an undisclosed amount of shares joining online lender Agibank and Bunge s Brazilian sugar unit efforts to price their offerings by July
The investment banking units of Ita Unibanco Holding SA JPMorgan Chase Co NYSE JPM Banco BTG Pactual SA Citi Credit Suisse SIX CSGN Group AG and Banco Safra SA will manage the offering |
C | Australia s NAB considers business exit as inquiry exposes misconduct | By Paulina Duran SYDNEY Reuters National Australia Bank AX NAB said on Tuesday it is considering selling its financial advice business as a major inquiry into the country s financial sector continued to reveal widespread misconduct by advisers with the big banks Andrew Hagger a member of NAB s 11 strong executive leadership team said the bank was continually looking at its portfolio mix as he responded to questions at the inquiry about the future of its financial advice business model Facing mounting regulatory pressure and public disgust at their abuse of market power Australia s major banks are increasingly moving to exit non core business with high compliance risks such as wealth management NAB is continually looking at our overall portfolio but there s no announcement to make here today Hagger told barrister Rowena Orr assisting the Royal Commission inquiry into the financial sector NAB s wealth management assets are worth about A 4 billion 3 billion according to Citigroup NYSE C analysts Commissioner Kenneth Hayne whose recommendations at the end of the year long inquiry could include tighter rules on the financial planning industry then pressed Hagger about an internal NAB document from 2017 talking about the need to review the business model associated with aligned advisers Hagger said that legislation in 2012 designed to ensure financial planners acted in the best interests of clients had changed the risk reward equation for the bank and made it less attractive for NAB to remain in the business NAB has admitted to the inquiry that some of its advisers had engaged in dishonest and illegal conduct such as misappropriation of client funds It has paid A 19 million in compensation to customers Haggard said It has also admitted that for years it charged advisory fees to hundreds of thousands of clients without providing them with services or allocating them an adviser The inquiry has heard that such practices were rife throughout Australia s financial industry leading to calls for much higher penalties and tougher oversight The inquiry had previously heard that Australia and New Zealand Banking Group AX ANZ had decided to sell its wealth management and advisory businesses after years of failing to have adequate controls to ensure its advisers were complying with the law by acting in the interest of clients ANZ said on Monday it would book a loss of A 632 million on the divestment of two of its wealth businesses in 2017 which will be reflected in its half yearly results due May 1 Under questioning at the inquiry on Tuesday ANZ head of wealth solutions and partnerships Kieran Forde admitted the bank had failed to properly investigate alleged fraud by one of its financial advisers because of concerns about potential commercial damage to its wealth management unit REGULATORY CAPTURE With revelations of bank wrongdoing making headlines almost daily Australia s corporate watchdog the Australian Securities and Investments Commission has been accused of being litigation shy Where it does go to court it tends to have a fairly heavy emphasis on small fry Allan Fels former head of the competition regulator told ABC radio ASIC representatives declined to comment On Friday the government vowed to double prison terms for financial crimes dramatically increase financial penalties and ramp up ASIC s investigative powers Australian Competition and Consumer Commission Chairman Rod Sims on Monday lent his support to the push to increase penalties saying banks should not be allowed to treat fines as a cost of doing business In 2016 ASIC sued ANZ NAB and Westpac Banking Corp AX WBC for rigging a key interest rate one of the few times it has taken any of the major banks to court It settled the case with NAB and ANZ without charging any individuals after the banks admitted the accusations In January it also filed a suit against Commonwealth Bank of Australia AX CBA over similar claims Westpac and CBA are still defending the claims in court
1 1 3151 Australian dollars |
C | Venezuelan banks shrivel as inflation roars and credit dries up | By Corina Pons CARACAS Reuters Venezuela s hyperinflation has turned the struggling OPEC nation s once powerful banks into warehouses of useless cash that are worth a total of only 40 million according to a Reuters analysis of regulatory data Although banks such as Citigroup Inc N C and Spain s BBVA MC BBVA are maintaining operations in the hopes of better times the value of the country s 31 banks in 2017 was equivalent to that of a single mid sized bank in the Dominican Republic according to bank regulator data The combination of annual inflation estimated at 8 000 percent and state regulated interest rates has left banks with little motivation to lend and little reason to inject capital onto their balance sheets meaning credit is steadily disappearing The banks are unlikely to fold due in large part to the huge potential upside if the economy turns around according to financial industry consultants and bank executives Venezuela is a tragedy BBVA Executive Chairman Francisco Gonzalez told reporters at a meeting in Davos in February Of course we do not want to leave I trust that something will happen he added without elaborating BBVA did not respond to an email seeking further comment Meanwhile the disappearance of credit threatens to aggravate an already brutal recession that has led hundreds of thousands to flee the country amid chronic product shortages rising malnutrition and increased incidence of preventable disease Caracas resident Beglis Villanueva is a private school teacher with three credit cards issued by BBVA subsidiary Banco Provincial and a combined total credit limit of 2 I use them to buy bread which is the only thing I can buy with them she said They used to get me out of trouble in an emergency situation I showed my new salary to the bank but they won t raise my credit limit MAKING ENDS MEET Though private banks return on equity hit an eye popping 115 percent in December of 2017 that was devoured by an estimated 2 600 percent inflation in the same month The central bank does not provide inflation statistics and estimates are given by the opposition run National Assembly Unlike previous hyperinflationary periods in Peru and Brazil banks cannot make ends meet through hard currency operations because the country s 15 year old currency control system makes such financial maneuvers impossible Venezuelan banks as of January were lending only 28 percent of their deposits compared with an average of 100 percent in the region last year according to data from the Venezuelan government and the Latin American Federation of Banks or Felaban Citibank Venezuela began suspending accounts and credit cards to clients in 2017 as part of a strategy to minimize operations while it waited for the situation to improve according to two industry sources The local affiliate of Citi reported a return on equity of 43 1 percent in December according to regulatory data Citi has already sold off its consumer banks in economically healthier Colombia and Brazil to cut costs but there are no obvious buyers for the Venezuelan one Citi declined to comment Neither Venezuela s Superintendence of Banks Sudeban nor the Information Ministry responded to emails seeking comment As of December Venezuelan banks on average were lending 13 per person per year in a nation with 30 million inhabitants compared with more than 2 000 per person in 2017 in other countries in the region according to Sudeban and Felaban data For large and medium sized companies local private banks lend no more than the equivalent of 25 000 and in almost all cases require guarantees in dollars said one consultant who works for large companies operating in the country Most of those loans are for less then 2 years according to a banking sector executive The credit crunch hurts entrepreneurs like fashion designer Yenny Bastida This year her bank lent her the equivalent of 300 and required that she pay it back in six months one fifth of the amount and half the duration of a loan she received in 2016 to open a second store in an elite Caracas shopping center
The amount is ridiculous said Bastida who says she now has to self fund any growth in her business |
C | Citi chairman says all options being considered for his replacement | CHICAGO BENGALURU Reuters Citigroup Inc N C Chairman Mike O Neill said on Tuesday all options were being considered for his replacement when he will retire in the next 12 months The options include having Citigroup Chief Executive Officer Mike Corbat taking on the additional role of chairman O Neill said at the Wall Street bank s annual shareholder meeting
O Neill has said is preparing to retire from Citi s board because he will turn 72 the company s retirement age for directors |
C | World s Largest IPO Drowns The Voice Of An Oil Bull Turned Bear | When one of the most respected oil bulls ever gives you a surprisingly bearish view of the market in coming years what do you do
Well traders who are long oil sent crude prices up again this week giving little immediate regard to the wisdom of Andy Hall the former high riding BP LON BP executive 100 million bonus guy of Citigroup NYSE C and billionaire manager of the now shuttered Astenbeck oil fund
The street cred and chops of someone like Hall may run deep in the oil market but no crude trader is worth his salt if he doesn t decide his own trades
Hall Gives Oil 10 Years Investors Are Betting On 30 Years Of Aramco
Hall s verdict last week that oil s demand growth will end in about 10 years or more was drowned out by noise around the initial public offering of Saudi state oil company Aramco which investors ironically believe will continue enjoying oil market dominance for another 30 years
Proving the disconnect sometimes between fundamentals and rising oil prices both the U S West Texas Intermediate and U K Brent benchmarks jumped 5 over the past two days recovering all they lost in two earlier sessions on demand worries The rebound was short on fundamentals and long on theatrics by the Saudi led OPEC cartel to prop the market up ahead of the IPO of Aramco which is slated to become the world s most valuable listed firm
Leaving aside the current state of the market that an established fan of high crude prices like Hall can predict the demand destruction that s coming for oil shows the realities of today s disruptive forces in business finally catching up with some in the industry
Most if not all of Hall s devotees of one time would be shocked by his turn
I certainly was
How Hall Went On And On Talking Up Oil
Each month from the Westport Connecticut offices of Astenbeck Hall would write 10 to 12 page long letters to investors in the fund arguing his case against a market that often went against him since his first trading loss in 2012 after more than a decade of supercharged profits I still remember the remark by an editor with whom I shared one of the letters There is only story here a lecture on why oil prices should go higher and higher the editor said
But Hall persisted in being a perma bull a tag given by detractors for his permanently bullish outlook on oil His investors mostly pensions and other institutions with tens of millions of dollars invested each in Astenbeck somehow stayed as he lost money for them while insisting that 80 100 per barrel oil will return The reality was the market was pretty comfortable at under 40 falling even near 25 once due to the oversupply of shale crude By the time he retired in the summer of 2017 Astenbeck was worth less than a tenth of the 5 billion it once managed
Re emerging for old times sake last week at an energy event in New York organized by Orbital Insight a Californian technology company that now consults him Hall alluded to present day oil dynamics
Now He Talks About Electric Cars And Renewables
By 2030 the world will see a plateauing or decline in global oil consumption because of technology and electric cars he said And yes renewables would be the new fossil fuels he said As though answering his audience s questions about his earlier bets he said those were based on the logic that oil consumption would grow from here to eternity except we knew logically that couldn t happen
Which brings us to the point of this story The Aramco IPO and how that listed company plans to interact with the oil market of the future needs logical explaining too
As Reuters commodities columnist Clyde Russel said in a post last week the crude market s complacency over Aramco turning into a public company seems misplaced
Aramco has committed to paying an annual dividend of at least 75 billion for the next five years That means it will be under some pressure to maintain its existing strong profitability One way to achieve that will be to optimize its business of oil production refining and shipping
Saudi Arabia Needs To Cut Aramco May Have To Produce More
The only problem is Saudi Arabia as a nation needs to cut oil production if it wants to keep oil prices from tanking As custodian of the Organization of the Petroleum Exporting Countries Riyadh has a production cutting pact with allies like Russia under the so called OPEC The main reason for Thursday s 2 price jump in crude was a Reuters report suggesting that OPEC cuts will continue until June I m willing to bet it will be for the foreseeable future if not forever
Even with Aramco s position as the lowest cost producer for a barrel I m not sure the Saudis can smoothly reconcile the twin objectives of cutting production to get higher prices while at the same time ensuring their listed oil company runs at max to boost its revenue
As Russell himself posits What if U S shale oil output continues growing as it has in recent years with boom as well from other producers outside the OPEC agreement
Will Aramco continue to advocate for output cuts by OPEC and its allies Or will it be tempted to run the numbers i e once again chase volume over value given its inherent advantage of being the lowest cost major oil producer
OIl Is Bigger Than Aramco Not The Other Way Round
My other surprise is the Wall Street generated hype that the crude market has bought into that oil prices need to go up before the Aramco listing and should remain higher to show the success of the float
The Saudi government s choice of a local bourse listing instead of New York or London indicates the level of transparency it wishes for the soon to be public company and how it intends to manage any fallout from the listing Already disappointment that Aramco s valuation will be less than the desired 2 trillion is eating into the kingdom apparently
What needs to be reinforced across the industry is that the oil market will always be bigger than Aramco
Oil as a commodity will be priced primarily on supply demand of crude its delivery to the marketplace and related variables
Aramco as a listed company will be judged by its investors according to its financial performance and health of business
The two should never be confused whatever Wall Street s motives |
C | Citi Slapped With GBP43 9M Fine For Reporting Discrepancies | Citigroup NYSE C recently got embroiled in legal issues related to its reporting to regulators The Wall Street biggie has been penalized by the Prudential LON PRU Regulation Authority PRA the Bank of England s BoE banking supervisory arm for inaccurate reporting to regulators related to its capital and liquidity levels for years The penalty amount comes in at 43 9 million pounds 57 million AllegationsA combined financial penalty has been imposed on Citigroup Global Markets Limited CGML Citibank N A London branch CBNA London and Citibank Europe Plc UK branch CEP UK the three U K units of Citigroup accusing for internal controls and governance arrangements failure Per PRA compliance issues with PRA regulatory reporting requirements existed Specifically between June 2014 and 31 December 2018 units of Citigroup failed to comply with the U K regulatory reporting framework effectively Following such flaws in the systems incomplete and inaccurate regulatory returns have been submitted to the PRA The errors had material or potentially material impact on the returns according to the PRA Sam Woods deputy governor for Prudential Regulation and chief executive officer of the PRA said Accurate regulatory returns from firms are vital for the PRA in fulfilling our role Citi failed to deliver accurate returns and failed to meet the standards of governance and oversight of regulatory reporting which we expect of a systemically important bank Though London based regulatory teams were responsible for validation of the reports Citigroup s units heavy reliance on employees in Budapest and Mumbai for preparing those led to such failures Notably the bank s own management control assessments were of the view that these teams needed very close monitoring While Citi remained in surplus to its liquidity and capital requirements at all times the failings persisted over a significant length of time and were serious and widespread in nature the BoE said PRA cited several issues including manual preparation of reports ambiguity over the quality of the data used the bank s systems failure leading to usage of incorrect currency for some positions settlement and heavy reliability on a single individual in Budapest for managing some of the reports Citi has fully remediated the past regulatory reporting issues identified by the PRA and settled this matter at the earliest possible opportunity Citigroup said in a statement Citi co operated fully with the PRA throughout the process and in 2019 a leading independent accountancy and audit firm confirmed that Citi had remediated the material issues identified further noted the bank Citigroup s co operation in resolving this matter has reduced the fine imposed by the PRA by 30 Else the penalty amount would have summed 62 7 million Bottom LineHeightened investigations surrounding banks regulatory reportings reflect regulators efforts to bring transparency and stability in the industry Though Citigroup has undertaken special measures to combat the rise in expenses persistent litigation issues might be a headwind for the company in the forthcoming quarters Shares of Citigroup have gained around 18 3 over the past six months compared with 19 1 growth recorded by the Citigroup currently carries a Zacks Rank 3 Hold
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Stocks to ConsiderEnova International Inc NYSE ENVA has been witnessing upward estimate revisions for the past 30 days Additionally the stock has jumped more than 17 so far this year It currently sports a Zacks Rank of 1 Encore Capital Group Inc NYSE C has been witnessing upward estimate revisions for the past 30 days Also the company s shares have risen nearly 53 6 year to date It holds a Zacks Rank of 2 at present CURO Group Holdings Corp NYSE C has been witnessing upward estimate revisions for the past 30 days Also the company s shares have risen nearly 39 3 year to date It carries a Zacks Rank of 2 at present Looking for Stocks with Skyrocketing Upside Zacks has just released a Special Report on the booming investment opportunities of legal marijuana Ignited by new referendums and legislation this industry is expected to blast from an already robust 6 7 billion to 20 2 billion in 2021 Early investors stand to make a killing but you have to be ready to act and know just where to look |
MPC | Marathon sues BP for breach of contract in Texas oil refinery sale | HOUSTON Reuters Marathon Petroleum Corp N MPC alleged BP Plc L BP failed to deliver a Texas oil refinery and three products terminals in the condition promised under a 2 4 billion sales agreement signed in 2012 according to a federal lawsuit filed on Monday Marathon took over the 459 000 barrel per day bpd refinery in Texas City Texas and terminals when the transaction closed on Feb 1 2013 and began finding problems that breached the sale agreement according to the lawsuit After assuming operation of the refinery Marathon Petroleum discovered that in numerous respects the refinery and the terminals were not in compliance with environmental laws according to the lawsuit BP also failed to maintain process safety information on 3 756 pressure vessels at the refinery Marathon alleged BP began a project in 2010 to compile the process safety information on the pressure vessels but it abandoned this project in April 2012 having only completed documentation for 555 of the vessels according to the lawsuit Marathon also said BP planned to carry out an overhaul of an aromatics recovery unit prior to the sale being complete but did not do so after signing the sale agreement according to the lawsuit Marathon also wants to terminate payments as of July 31 2016 it has been making to BP for servicing retail stations Marathon received as part of the sale according to the suit The BP Texas City refinery was the site of a March 23 2005 explosion that killed 15 workers and injured 180 others BP was fined 84 6 million by the U S Occupational Safety and Health Administration between 2005 and 2012 for safety rules violations found at the refinery in investigations following the blast BP pleaded guilty to a federal environmental law violation and paid 50 million to the U S Justice Department in 2009 BP also paid more than 2 billion to settle lawsuits stemming from the 2005 explosion Monday s lawsuit was filed in the U S District Court for Southern Texas in Galveston Texas by Marathon subsidiary Marathon Petroleum Co LLC against BP subsidiaries BP Products North America Inc and BP Pipelines North America Inc |
MPC | Some Iowa landowners raise concerns about Dakota Access pipeline work | Some Iowa landowners are complaining about construction of the Dakota Access oil pipeline saying crews have left behind debris released cattle from grazing areas and disrespected their land according to the Des Moines Register Several Iowa landowners have petitioned county inspectors supervisors and state regulators claiming that questionable construction practices are worsening tensions between landowners and builders of the 1 170 mile pipeline Dakota Access says it takes its construction commitments seriously but that none of the complaints filed with the Iowa Utilities Board has been validated so far Energy Transfer Partners NYSE ETP is the project leader other relevant tickers include SXL PSX MPC ENB EEP |
MPC | Dakota Access pipeline decision said due in next few days | A decision on completion of the Dakota Access Pipeline near tribal lands in North Dakota will come in the next few days possibly by Monday says an Army Corps of Engineers spokesperson The Obama administration intervened in September to temporarily halt construction under Lake Oahe so the Army Corps could review permitting pipeline owner Energy Transfer Partners ETP 0 9 has continued to build to the edge of the federal land where the lake is located and earlier this week said it was moving equipment to prepare to tunnel under the lake Other relevant tickers include SXL PSX MPC ENB EEP |
MPC | U S government extends Dakota Access pipeline review | Energy Transfer Partners NYSE ETP 1 2 AH on news that the Obama administration plans to extend its review before deciding on a permit for the 3 8B Dakota Access crude pipeline further delaying work on a segment of the project that has been stalled since September The U S Army Corps of Engineers says further talks are warranted given the importance of the lake to the Standing Rock Sioux Tribe and that it will work with the tribe on a timeline that allows for robust discussion and analysis to be completed expeditiously The setback likely will prove temporary as the incoming Trump administration is expected to grant approval to finish the project Other relevant tickers SXL ETE PSX MPC ENB EEP |
MS | Dollar retreats from 14 year high Swedish crown has best day in six months | By Jamie McGeever LONDON Reuters The dollar took a breather on Wednesday after reaching a 14 year high the previous day while the Swedish crown chalked up its biggest rise in six months after the Riksbank voted to ease policy further only by the narrowest of margins Sweden s central bank kept interest rates on hold at 0 50 percent and extended its bond buying program after a split board forced Governor Stefan Ingves to use his casting vote for the first time since 2008 The crown rose to its highest in more than two months against the euro The dollar drifted lower meanwhile giving back some of the ground gained since the Nov 8 U S presidential election The greenback has chalked up all its 4 5 percent gains for the year since the election as traders have bet that Donald Trump s administration will go on a growth boosting tax cut and fiscal spending spree With no major economic data or policymaker speeches scheduled and the Christmas holiday approaching the euro dragged itself from Tuesday s 14 year low back above 1 04 The biggest mover was the Swedish crown With central bank stimulus housing debt and private sector borrowing all looking stretched according to many economists foreign exchange traders bet on this being the beginning of the end of QE This one is probably the last QE extension in our view said Daniele Antonucci economist at Morgan Stanley NYSE MS Stimulus monetary and fiscal is unlikely to be extended much further At 1115 GMT the euro was down 0 7 percent against the crown below 9 64 crowns EURSEK for the first time since October 11 and marking its biggest one day fall since June 20 The euro was up 0 2 percent on the day against the dollar however at 1 0405 rebounding from as low as 1 0352 on Tuesday a level last seen in January 2003 Traders are casting a wary eye on Italy s troubled bank Monte dei Paschi di Siena MI BMPS which needs to raise 5 billion euros by the end of the year to avoid being wound up by the European Central Bank And dollar bulls say the greenback could resume its climb later in the day if the Dow Jones Industrials Average hits the psychological 20 000 level DJI The euro is in a fight between short covering pressure and political angst Economics doesn t come into it at all If Dow 20 000 is just a number but a magnet all the same euro parity with the dollar will be every bit as magnetic said Kit Juckes at Societe Generale PA SOGN We ll get there and get over excited before too long The dollar was down 0 3 percent against the Japanese yen at 117 50 yen down more than one yen from its 10 1 2 month high of 118 66 touched on Dec 15 The dollar s trade weighted index against a basket of six major currencies DXY USD fell 0 2 percent to 103 11 On Tuesday it hit a 14 year high of 103 65 U S Treasury yields slipped on Wednesday The 10 year yield was down a basis point on the day at 2 55 percent US10YT RR and almost 10 basis points off last week s two year peak
For Reuters new Live Markets blog on European and UK stock markets see reuters realtime verb Open url |
MS | Dollar stirs from slumber as yield gap yawns | By Marc Jones LONDON Reuters The dollar oil and world stocks rose on Wednesday following upbeat U S data that saw the gap between Treasuries and other benchmark global government bonds hit new highs Europe s main stock market London s FTSE FTSE reopened with a gain of 0 5 percent as it played catch up after similar run ups in Germany DAX and France FCHI and as Wall Street s Dow Jones index DJI eyed another crack at 20 000 points N The dollar DXY also drove higher after U S consumer confidence shot to its loftiest in more than 15 years in December on hopes that President elect Donald Trump will nurture further improvements in the world s biggest economy Having already jumped 16 percent against the Japanese currency since the U S election the greenback gained a further 0 2 percent to 117 65 yen It was up a similar amount against the euro and sterling at 1 0390 per euro and 1 2213 to the pound FRX Everything is broadly dollar supportive said Societe Generale s head of currency strategy Kit Juckes We have come back from Christmas with some good U S data U S bond yields are at the top end of their recent range oil is edging higher and the Dow is flirting with 20 000 points Euro zone bond yields fell across the board as concerns about the strength of a rescue plan for Italian banks and normal year end caution pushed investors to the safety of government debt Germany s 10 year yields hit their lowest in seven weeks at 0 18 percent That in turn widened the yield gap to U S Treasuries which act as the world s benchmark borrowing rate to a record high of 237 basis points Oil prices the other major market driver in recent weeks climbed back toward a 1 1 2 year high as promised output cuts loomed O R Oil has surged more than 50 percent this year despite plunging to a 12 year low in January Brent was at 56 50 a barrel LCOc1 and U S crude CLc1 at 54 25 after an overnight gain of 1 7 percent In a sign that the world s major oil producers may abide by their output agreement Iraqi Oil Minister Jabar Ali al Luaibi said on Wednesday his country which has seen fast production growth in the past two years would cut supply by between 200 000 and 210 000 barrels per day from January O R Gazprom Neft MM SIBN also said it planned to boost oil output by less than it had intended before Russia joined the deal to cut supply EMERGING JITTERS Helped by the broadly robust tone to stock and commodity markets the Australian dollar firmed Australian stocks AXJO gained 1 percent Indonesian shares JKSE added 1 9 percent while Japan s Nikkei N225 rose 0 1 percent Shanghai SSEC dipped 0 3 percent to continue a dire 2016 It has slumped the best part of 18 percent this year having been a star performer in 2015 dampening an otherwise strong rebound in emerging markets after three straight years of losses With the dollar and bond yields on the rise again and China s yuan on the slide investors are wondering whether the rally could falter Data from Morgan Stanley NYSE MS showed EM equity funds logged weekly outflows of 3 35 billion the second largest of the year while EM bond funds saw outflows of 800 million which made it seven straight weeks of outflows It said the cumulative drop in equity funds over the last eight weeks totaled 11 1 billion Gold dipped though firmer oil prices and the upbeat U S data continued to support the wider commodity market Copper on the London Metal Exchange was up 1 percent at 5 513 a ton as trading resumed after the Christmas holidays MET L Iron ore on the Dalian Commodity Exchange extended gains after breaking a nine day slump the previous day It was up 3 5 percent at 569 0 yuan 81 82 per ton and has now risen about 170 percent this year boosted by expectations of Chinese stimulus and hopes that the incoming Trump administration will increase U S infrastructure spending
There is strong positive sentiment on the outlook for these industrial metals going into 2017 said a Perth based commodities trader |
MS | Battered Toshiba out of easy options to plug nuclear hole | By Makiko Yamazaki and Taro Fuse TOKYO Reuters Faced with the prospect of a multi billion dollar writedown that could wipe out its shareholders equity Japan s Toshiba is running out of fixes it is burning cash cannot issue shares and has few easy assets left to sell The Tokyo based conglomerate which is still recovering from a 1 3 billion accounting scandal in 2015 dismayed investors and lenders again this week by announcing that cost overruns at a U S nuclear business bought only last year meant it could now face a crippling charge against profit Toshiba says it will be weeks before it can give a final number but a writedown of the scale expected as much as 500 billion yen 4 3 billion according to one source close to Toshiba would leave the group scrambling to plug the financial hole and keep up hefty investments in the competitive memory chip industry which generates the bulk of its operating profit Shareholder equity which represents its accumulated reserves stood at 363 2 billion yen at the end of September already just 7 5 percent of total assets Toshiba cannot raise cash by issuing shares because of restrictions imposed by the stock exchange after last year s scandal One source close to the matter said Toshiba had been considering a share issue of around 300 billion yen but the imminent lifting of those restrictions are now unlikely Private equity funding could be an option but financial sources and investors said Toshiba would likely be forced to sell off more assets and stakes months after having sold its two most easily marketable businesses white goods and medical devices Toshiba s immediate problem is that it is burning cash at an alarming rate and this will be more than challenging said Ken Courtis chairman of Starfort Investment Holdings I see little option but to sell a slew of non core assets Its loss making PC and TV businesses would be poor candidates for sale while its many cross shareholdings are unlikely to fetch enough Toshiba doesn t have many saleable assets in hand Standard Poor s analyst Hiroki Shibata said after the ratings agency downgraded Toshiba It has mostly sold assets which have big price tags or that could easily find buyers already It would be difficult to secure big funds through asset sales One source in the semiconductor industry said Toshiba could revive plans to list a slice of the memory chip business which though highly profitable burns through cash for reinvestment Toshiba will probably need to sell 30 40 percent of the NAND business in an IPO to secure enough cash the source said adding China s aggressive drive into NAND flash memory chips could make the timing reasonable The group has already said it could reconsider the positioning of its nuclear business deemed core last year and has signaled it could trim an 87 percent stake Toshiba has said it will consider a capital strategy but has given no details CASH GAP For now creditor banks are expected to step into the liquidity breach betting on Toshiba s growing chips business though they were blindsided by the news and expressed concerns over continued governance and disclosure issues Some bankers had been on a factory tour with Toshiba on the day before the announcement two of the banking sources said They were told about the writedown that night Two days later Toshiba s top executives including Chief Executive Satoshi Tsunakawa were asking for help We really need a proper explanation of how and to what extent President Tsunakawa came to know of this said an executive at one of Toshiba s regular bankers It just defies common sense that this would come out only now about a deal done a year ago Just last month Toshiba raised its annual profit forecast thanks to strong demand for its NAND flash memory chips Bankers and analysts said the latest shock should at least push Toshiba to resolve long standing headaches like its poor disclosure and governance and could force it to offload some cross shareholdings One Toshiba shareholder estimated that the book value of all its cross shareholdings would be about 3 2 billion and it could get more than that based on past experience
Sale options would include its roughly 50 percent stakes in Toshiba Plant Systems and Services and Toshiba Tec 6588 T both worth around 670 million at current market prices according to Thomson Reuters data If the company wants to survive it needs to go through a scrap and build process said Norihiro Fujito senior investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities Right now even if banks are assisting it s like they are throwing their money down the drain |
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