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JPM | Fed likely to keep rates steady investors bet on June hike | By Lindsay Dunsmuir WASHINGTON Reuters The U S Federal Reserve is set to hold interest rates steady this week but will likely further encourage expectations that it will lift borrowing costs in June on the back of rising inflation and low unemployment Investors have all but priced out the chance of a rate hike at the end of the Fed s two day policy meeting on Wednesday particularly given its adherence in recent years to only raising rates at meetings that are followed by press conferences The central bank is due to announce its decision at 2 p m EDT 1800 GMT on Wednesday Fed Chairman Jerome Powell is not scheduled to hold a press conference Fed speakers have done little to push back against this expectation we expect no fireworks JPMorgan NYSE JPM economist Michael Feroli said in a note to clients The Fed raised its benchmark overnight lending rate at its March 20 21 meeting by a quarter percentage point to a target range of between 1 50 percent and 1 75 percent It currently forecasts another two rate rises this year although an increasing number of policymakers see three as possible The Fed s next policy meeting after this week is scheduled for June 12 13 Investors overwhelmingly see a rate hike then The pace of rate increases has picked up since the central bank began its tightening cycle in December 2015 It raised rates once in 2016 but lifted borrowing costs three times last year amid a strengthening economy Unemployment is at a 17 year low of 4 1 percent and the Trump administration s tax cuts and fiscal stimulus are expected to further juice the economy For a graphic on Fed targets click RISING INFLATION PRESSURES Ahead of this week s meeting Powell has stuck to flagging a middle of the road approach on rate increases in the face of data showing the robust economy had not yet triggered a jump in inflation Data on Monday however showed that price gains are now near the Fed s 2 percent target The Fed s preferred measure of inflation soared 1 9 percent in the 12 months through March the biggest increase since February 2017 after increasing 1 6 percent in the year through February the U S Commerce Department reported The real headache is that it is easy to be the Fed when inflation is below target a very important aspect as we go into this May meeting is the tone of the debate changes completely as we get to 2 percent and beyond said Torsten Slok an economist at Deutsche Bank DE DBKGn Other data last week showed that while U S economic growth slowed to an annualized rate of 2 3 percent in the first quarter wages and salaries shot up 0 9 percent during the same period That was the largest increase since the first quarter of 2007 Fed policymakers have also been wary about the potential negative impact of the Trump administration s protectionist trade policies A U S trade delegation is expected to meet Chinese officials in Beijing on Thursday and Friday after weeks of tensions between the world s two largest economies President Donald Trump has proposed imposing tariffs on 50 billion in Chinese exports and threatened to slap them on another 100 billion in Chinese goods China in response has said it will impose its own tariffs on American products
However few economists expect any mention of trade risks in the Fed s policy statement on Wednesday and see any tweaks as likely to be confined to upgrading the language on inflation to reflect that it is now effectively at target |
JPM | Wall Street Sees Trump Bump For The New York Times | Investing com The New York Times Company management team may want to send a thank you note to President Trump JPMorgan Chase NYSE JPM has upgraded the media company and also raised its stock price target citing what it calls a Trump bump to the circulation of its flagship newspaper In a note to clients the Wall Street firm said a strong news cycle driven by President Trump has boosted subscriptions JPMorgan raised its rating from neutral to overweight and its 12 month price forecast from 25 to 27 a share The firm said the Times digital sales grew 46 year over year matching those of Facebook NASDAQ FB s which surpassed initial expectations for subscriber growth Times shares are up some 60 in the past 12 months more than double the gain of the S P 500 |
C | SF Fed s Williams front runner for NY Fed post Wall Street Journal | NEW YORK Reuters John Williams president of the Federal Reserve Bank of San Francisco is the leading candidate to succeed William Dudley as head of the New York Fed the Wall Street Journal reported on Saturday citing unnamed people familiar with the matter The paper said the New York Fed s board of directors had recommended Williams for the job seen by many as the second most influential at the U S central bank though it added the situation could yet change The New York Fed and the San Francisco Fed declined to comment On March 16 the New York Fed said it was considering a handful of final candidates to replace Dudley who plans to step down by mid year The New York Fed s president has a permanent vote on interest rate policy serves as vice chair of the policy making committee oversees market operations including 4 4 trillion in assets and supervises Wall Street Williams a long time Fed economist who succeeded Janet Yellen as San Francisco Fed president in 2011 has supported the central bank s gradual interest rate hikes and has recently advocated for a reconsideration of the traditional inflation targeting regime Reuters reported on March 1 that Richard Clarida an economist at fund manager Pimco was front runner to become the Fed s vice chair a position chosen by the White House It also reported that Fed Chair Jerome Powell was playing a larger role than his predecessors in making his views known to the White House and to the New York Fed and that he had initially supported Williams for the Fed Vice Chair job The New York Fed directors and the Fed Board could face criticism were they to ultimately choose Williams The decision has attracted scrutiny from Democratic lawmakers and activists urging a candidate who breaks with past precedent
The Journal also reported that two other people short listed for the job are Raymond McGuire the corporate and investment banking head at Citigroup Inc NYSE C and Mary Miller a former senior Treasury official who Reuters previously reported was being considered |
C | White House investigating loans to Kushner s business official | WASHINGTON Reuters The White House is investigating whether two loans totaling more than 500 million to the family real estate business of U S President Donald Trump s son in law and senior adviser Jared Kushner violated any criminal laws or regulations according to the U S Office of Government Ethics Democratic lawmakers asked the White House and Kushner Cos for documents after the New York Times last month reported the loans extended in 2017 by Citigroup Inc N C and the private equity firm Apollo Global Management In a letter to a congressman made public on Monday David Apol acting director and general counsel of the Office of Government Ethics said I have discussed this matter with the White House Counsel s Office in order to ensure that they have begun the process of ascertaining the facts necessary to determine whether any law or regulation has been violated During that discussion the White House informed me that they had already begun this process Apol said in the letter dated March 22 to Democratic Representative Raja Krishnamoorthi Kushner s lawyer Abbe Lowell and the White House did not immediately respond to requests for comment The New York Times reported in February that Citigroup lent Kushner Cos and one of its partners 325 million in the spring of 2017 shortly after Citigroup s chief executive Michael Corbat met with Kushner in the White House It said Joshua Harris a founder of Apollo was advising Trump administration officials on infrastructure policy and held several meetings with Kushner and Apollo lent 184 million to Kushner Cos in November In a letter to Apol Krishnamoorthi had said that if the Times report was accurate it would raise serious ethical questions and asked whether Kushner s actions constitute a breach of his ethical obligations to the American people
Last year Kushner who is married to Trump s daughter Ivanka Trump resigned from Kushner Cos and sold his stake in a family trust as part of an effort to avoid conflicts of interests in his White House role The private real estate company owns or partially owns buildings in New York and New Jersey |
C | Citi upgrades Roku ahead of lockup expiration shares 3 2 | Citigroup NYSE C s Mark May upgraded Roku ROKU to neutral and raised PT to 36 citing stock underperformance as shares have been trading at close to price target after his January downgrade to sell The company s IPO lockup to expire on 27th March Q1 earnings in May new user interface and roll out of Roku Channel application on Samsung KS 005930 Smart TVs to serve as catalysts Shares 3 2 PM despite the upgrade Now read |
C | Rand Bears Keep Rushing for the Exits Even as Rate Cut Looms | Bloomberg Economists are predicting a South African rate cut on Wednesday The market s pricing in another later this year Rand traders it seems couldn t care less
Bearish bets on South Africa s currency versus the dollar are at the lowest level since before the 2008 financial crisis even with the South African Reserve Bank poised to loosen policy while the Federal Reserve tightens narrowing the rand s yield advantage over the greenback
A glance at the following chart shows why Having escaped a downgrade from Moody s Investors Service last week South Africa offers the highest yield among investment rated emerging market countries And yields could go much lower before that pickup disappears
That would help insulate South Africa from capital outflows as the policy paths of the SARB and Fed diverge according to Standard Bank Group Ltd Inflows into South African bonds have reached 16 5 billion rand 1 4 billion this year more than double the 7 2 billion rand in the same period last year according to Johannesburg Stock Exchange data
As long as our inflation premium is sufficient in a disinflationary environment and the South African Reserve Bank anchors rates we should be able to withstand any foreign selling of bonds said Zaakirah Ismail a Johannesburg based fixed income analyst at Standard Bank
South Africa s consumer inflation rate slowed to 4 percent in February from 4 4 percent the month before and has been within the central bank s 3 percent to 6 percent target range since April last year Policy makers will cut the benchmark repo rate by 25 basis points to 6 5 percent on Wednesday according to 12 out of 16 economists surveyed by Bloomberg
After securing its investment grade rating from Moody s which lifted its outlook to stable from negative the threat of an exit from Citigroup Inc NYSE C s World Government Bond Index has also receded giving investors who track the index confidence to hold the debt |
C | Leading Indicators Point To Higher Gold | Anticipation of a trade deal between the United States and China had investors and traders in a risk on mood as the week drew to a close
On Friday October 12 both the US dollar and gold were down sharply continuing a trend that started on Thursday after President Trump said he would meet with China s top trade negotiator Vice Premier Lui He at the Oval Office on Friday
Around 10 30 am PST prior to the Trump Lui He meeting Bloomberg tweeted that a partial trade had been reached The agreement has China making agricultural concessions and the US promising some tariff relief It could lay the groundwork for a broader deal that Presidents Donald Trump and Xi Jinping could sign later this year the news service said
At time of writing spot gold had dropped to 1488 80 oz about 10 less than Thursday s New York close Meanwhile the buck continued to slide with the US dollar index DXY showing 98 31 against a basket of currencies a fall of 0 84 compared to Wednesday s 99 15 A potential trade deal weighs on the dollar because it implies the USD and the Chinese yuan could be devalued
The Dow on the other hand rallied 400 points Friday morning on reports of better than expected progress at the first day of renewed trade negotiations at the Office of the US Trade Representative The stock bounce was also supported by a University of Michigan survey that indicated optimism among American consumers was at the highest in three months
While a trade deal or partial agreement was on the minds of precious metals investors as they headed into the Canadian Thanksgiving long weekend there are other factors to keep in mind with respect to future gold and silver prices
An AOTH analysis shows that despite there is plenty of fight left in the precious metals bull
Rush to ETFs
Our first sign of a better than average appetite for gold is the record breaking interest in gold backed exchange traded funds ETFs
WGC in September gold ETF funds grabbed an extra 75 tonnes with most coming from North America bringing the total to 2 808 tonnes worldwide the highest level of all time ETF holdings expanded for 17 days in a row as of October 9 which is the longest run of inflows since the financial crisis
COMEX net longs bets that bullion will climb higher reached an all time high of 1 134 tonnes in September
Central bank gold buying isn t letting up either China which has the seventh highest amount of gold 1 942 tonnes according to the latest WGC rankings bringing its bullion haul to 62 64 Moz That s the 10th straight month Beijing has increased its gold reserves
An aggregate 651 tonnes was amassed by central banks last year 74 more than 2017 and the highest amount since the end of the gold standard in 1971
The 2018 19 gold buying spree is being driven by the of countries like Russia China and Turkey which have an axe to grind with the US They want to get out from under the thumb of Uncle Sam
Why are they buying
The positive sentiment for gold shouldn t surprise anyone who has been following the negative financial news of late Hitherto the trade war has hit America s trading partners like the EU worse than itself but that is starting to change As Citigroup NYSE C puts it Markedly weak manufacturing and services ISM data recent indicators of US economic data show that the slowdown in global trade is starting to bite the U S economy
An ISM survey measuring the health of the US factory sector contracted for the second straight month
On October 8th World Bank President David Malpass said that global growth is deteriorating amid Brexit uncertainty the trade war and the downturn in Europe including Germany the engine of the EU s economy He said the world economy is weaker than the World Bank s June forecast of 2 6 growth in 2019
WGC points to a number of other catalysts for gold in October These include global uncertainty due to an impeachment investigation hanging over the White House the Brexit deadline looming at the end of October and better than normal US stock market performance in October normally a weak month for equities
Of course the immediate levers pulling on gold are interest rates and bond yields Gold generally climbs becoming more valuable to investors looking for income from their investments when interest rates and bond yields fall
This past week to 0 5 and its vice president hinted at further cuts saying the side effects of monetary policy are becoming more and more evident The ECB in September resumed a 2 6 trillion euro bond buying program
Japan s short term interest rates are at 0 1 and It too is continuing a massive asset buying program as it aims to stimulate a flagging economy
On Sept 18 the US Federal Reserve cut interest rates another quarter point to 2
Follow real rates not the dollar
As for bond yields gold is currently trading around 1 480 as US real Treasury yields T bill yield minus inflation skid along at practically zero the 10 year is currently yielding a net 0 03 and the 3 year is 0 21 That would normally be terrible for US Treasuries but they are in fact attractive among much of the world s sovereign debt which is offering far more negative yields
Currently a quarter of all sovereign debt worth a shocking 17 trillion is paying bond holders less than 0 Investors are so desperate for safe havens they are plunking savings into Greek bonds On Wednesday it was reported that The country that very nearly was kicked out of the EU and required a bail out sold 487 5 million euros of 13 week short term bills offering its first ever negative yield of 02 In 2017 the same bills fetched 2 7 Many are noticing the irony of investors grabbing onto debt instruments issued by highly risky Greece whose profligate spending put the country in such a debt quandary in the first place forcing it to accept a 281 9 billion euro loan that will take decades to repay
To sum up we have a whole cluster of factors that are shoring up gold prices despite a possible trade deal between the US and China hanging in the balance Even with the partial trade agreement announced on Friday gold only dropped 5 from Thursday in fact it gained 5 from its 10 drop earlier in the day
The big question mark though the elephant in the room concerning precious metals prices right now is the US dollar Notwithstanding this week s drop for both gold and the dollar why has the gold price been gaining along with the dollar Normally the two move in opposite directions Why hasn t a surging buck upended the current bull market for gold
The answer really has to do with economic growth and interest rate differentials the two main drivers of the dollar
Bond yields have been falling in the US and its two main competitors for sovereign debt the EU and Japan But the ECB and Bank of Japan both have yields more negative than US Treasuries in fact owning a US 10 year note compared to a 10 year in Germany or Japan would earn investors a respective 175 and 200 basis points The 10 year German bund currently carries a rate of 0 59
As mentioned Japan and the EU have both re started large scale bond buying programs otherwise known as quantitative easing The US hasn t yet taken that drastic step
And while growth in the US has been slowing from 3 1 in the first quarter to 1 8 in the second and third quarters the economy so far this year has performed better than the 1 4 the EU managed in the second quarter and Japan s sickly 1
writes an interesting piece arguing that those looking at the dollar for a signal on gold prices are barking up the wrong tree real rates are the better predictor of gold prices
T he primary driver of gold isn t the direction of the dollar but the direction of real interest rates Hence if US growth is accelerating in a non inflationary environment gold should suffer regardless of the direction of the US dollar Conversely the USD dollar can be in a bull market against a basket of fiat currencies as it has been for the past year and yet can still lose significant ground against gold as long as nominal interest rates are falling in an environment of rising inflation
Thus with core inflation the inflation rate after removing high volatility items like food and energy increasing to 2 4 in August subtracted from the interest on the US 10 year note which has plummeted from 3 yield to 1 6 over the past year real yields have been crashing as gold has been rising Pento writes He adds
These falling real yields were rocket fuel for gold and this was in spite of the USD s bull market against the euro and yen The price of gold increased by double digits even though the Dollar Index has also increased by nearly 5 in the last 12 months
Lying with statistics
Okay you say I now see how it s possible for gold to rise at the same time as the US dollar And I get that the US economy is growing faster than Europe and Japan s Surely though there is more to the ups and downs of the dollar
Indeed there is The dollar is a reflection of the US economy so now we have to look at economic indicators The trouble is there are so many indicators that accounting for all of them would be impossible Is the economy weak or strong It really depends on where you look
By two often cited variables unemployment and consumer spending the US economic engine appears to be chugging along just fine The latest job numbers show that only 3 5 of Americans actively looking for jobs are job less The United States haven t seen that few unemployed in 50 years Consumer confidence in October rose to 96 from 93 2 in September quite a bit better than the 86 59 average since 1952
However diving a little deeper into the recesses of the economy we find some troubling numbers that don t get exposed in most media reports Take manufacturing and employment as two examples
The IHT Markit US Manufacturing PMI fell to its lowest in 10 years in July 49 9 While September saw an uptick to 51 1 due to a rise in production the sector still looks pretty shaky US factory output also contracted for the first time in a decade in July to 50 4 August saw the sharpest downturn in order books in 10 years and the fastest reduction in export sales since 2009
The ISM Manufacturing Index which measures monthly production level based on a survey of purchasing managers at more than 300 manufacturing firms in September fell to 47 8 from 49 1 in August It was the second straight month the index was below 50 and is the lowest reading since 2009
The key takeaway from the report is that the contraction is a by product of weakening business confidence that is stemming in part from the trade uncertainty
The ISM Non Manufacturing PMI wasn t quite as bad it fell to 52 6 off 0 2 from August and the lowest reading since August 2016 with firms mostly concerned about tariffs labor resources and the direction of the economy
Notice the common thread here is the trade war
The 3 5 unemployment rate is hard to argue with but while employment conditions look to be holding steady a deeper look shows less reason to be confident
The US economy needs 150 000 jobs a month just to keep up with population growth So far in 2019 average monthly job creation is 161 000 vs 218 000 in 2018 It s actually not a great year to be unemployed in the United States
Take payroll employment and household employment The former is the figure usually given but it does not include the agricultural sector ie farmers hard hit by Chinese import tariffs nor the self employed Third quarter payrolls of production and non supervisory workers gained 70 000 but that is well below the average monthly payroll gain of 98 000 during the second quarter It s the smallest quarterly gain since 2010
Payrolls of production and non supervisory workers in mining manufacturing retail trade utilities leisure and hospitality declined in Q3
How about part time workers Their numbers have stayed about the same Still that s 4 4 million people more than the population of Canada s largest city Toronto who would have preferred full time employment were working part time because their hours had been reduced or they were unable to find full time jobs
Average hourly earnings were also flat in September up 2 9 versus 3 2 in September 2018 That means wages are not growing much more than the 2 4 core rate of inflation Increases in worker pay over the past 12 months declined from 3 2 to 2 9 The participation rate was largely unchanged at 63
More rate cuts QE likely
The employment numbers are a good example of the glass half full or half empty analogy The number that everyone grabbed hold of last Friday was the 3 5 lowest unemployment rate since 1953 Reading the jobs report a little closer though shows the economy added 136 000 jobs less than the 150 000 expected
This is the slowest pace of job growth in four months as businesses grew more cautious about hiring
The markets are so addicted to cheap interest rates that this was actually seen as a positive in that negative economic news strengthens the possibility of another interest rate reduction
In fact there is now a 79 chance of another quarter point rate cut when the Federal Reserve meets again to set rates on October 28 29
How about more quantitative easing Although the Fed has been trying since 2017 to unwind the three rounds of QE by selling Treasuries and other assets known as quantitative tightening the Federal Reserve s balance sheet has actually expanded by 185 billion according to technical analyst During each of the last three QEs the balance sheet only increased by about 47 billion per month Chapman says his suspicion of a coming Q4 has centered on possible cash crunches and liquidity problems in the eurozone that could spread into the U S banking system
There s also something funny going on in the repo market Repo is short for re purchase agreements which are collaterized overnight loans made to big investors like mutual funds
The repo market facilitates the flow of cash and securities including the over 16 trillion US Treasury market However during the week of September 16 too much cash went out than securities came in meaning there suddenly wasn t enough cash for those who needed it Even more alarming for the Fed which controls the money supply the volatility in the repo market pushed the federal funds rate the benchmark interest rate above its acceptable range of 2 25 just as the Fed was preparing to drop the ceiling to 2 on Sept 18
That forced the Fed to lend up to 75 billion a day in temporary cash for four days to quell the funding crunch and to push the funds rate down
To avert such a crisis from happening again it s been recommended that the Fed increase its reserves by 250 billion over the next two quarters and possibly to keep expanding the Fed s balance sheet to suit the repo market The only way to do that will be to purchase assets in other words quantitative easing round 4
Monetary easing in the form of further interest rate cuts and large scale purchases of US Treasuries and other assets by the Fed always bode well for gold prices
Fresh safe haven demand
Depending on happens over the next few days one of the most confusing files of the Trump administration the trade war with China could finally be on track to a resolution Or not With Trump at the wheel you just never know
Notwithstanding the result of trade talks however there is so much turmoil going on in Washington and on multiple foreign policy fronts that safe haven gold is bound to benefit
And even if the US and China do come to an arrangement how about all the bad blood that has flowed between officials of the world number one and two economies Will all be suddenly forgiven will Xi and Trump be having perfect phone calls be sending each other love letters It s unlikely The White House is reportedly weighing policies that would restrict American capital going to the Chinese market including the ability of US pension funds to invest in Chinese stocks As Tyler Durden at argues
In reality the plan is just another way to impose soft capital controls to ratchet up the pressure on Beijing at a time when a weakening economy and currency have stirred up a wave of capital outflows adding stress to the already heavily indebted Chinese financial system
Washington has also reportedly been looking into restricting Chinese companies from listing on US exchanges and other restrictions on investments in Chinese markets These efforts are advancing even after American officials pushed back strongly against reports late last month claiming these measures were under review
Then there s the fact that the US blacklisted 28 Chinese tech companies due to them purportedly repressing Muslims in Xinjiang an autonomous territory in northwestern China the Chinese trade delegation tempered expectations of a deal when the blacklist came out Who knows it could still thwart an agreement
Consider too how Beijing swung a full court press onto the NBA telling the national basketball association it won t broadcast or stream any pre season games The flagrant foul came after the general manager of the Houston Rockets expressed support for pro democracy demonstrators in Hong Kong which reverted to Chinese rule from Britain in 1997
Finally there s the jumble of hot spots around the world that never far from the markets could flare up anytime They include the trade war Brexit US Iran tensions Hong Kong civil unrest and the latest Trump administration imbroglio over pulling troops out of northern Syria and giving Turkey a green light to attack the Kurds Turkey immediately mounted an attack against Kurdish forces prompting bipartisan accusations that Trump betrayed the Kurds a US ally Senator Lindsey Graham normally a vocal Trump supporter called the pullout the biggest mistake of Trump s presidency And now ISIS who President Trump said was defeated is
And Turkey because of sanctions from Germany and coming sanctions from the UK and the US might be driven out of NATO into Russia s arms Trump is going to have a lot of blood on his hands from this a second Republican double cross of the Kurds It also seems to your author that any time Trump meddles in international affairs regarding America s allies Russia come out ahead
And let s not forget the Democrats attempts to impeach Trump who have come forward to tell of the President s attempts to pressure the Ukraine into investigating Democratic presidential candidate Joe Biden upon which the impeachment inquiry is based
Conclusion
Gold investors love nothing more than a war economic crisis or any type of geopolitical instability to watch the value of their bullion grow Heightened global tensions such as terrorist attacks border skirmishes or civil unrest scare investors into putting their funds into safe havens like gold and stable sovereign debt like US Treasuries Take your pick from the aforementioned scenarios
The real kicker for gold though is negative real interest rates which notwithstanding a major global economic reset that gets growth moving again are likely to be with us for a long time
At AOTH it s our opinion that US interest rates and those at other G20 countries will keep falling They need to keep rates low to boost lending and hike insipid economic growth Trump s obsession with having a low dollar to increase exports and repair the mountainous trade deficit fits with this narrative
Also consider that rising levels of US debt are a major deterrent in raising interest rates the Fed has lowered rates by a total of 0 5 at its last two meetings a low rate environment is likely to continue for the foreseeable future considering the economic uncertainty both globally and domestically US manufacturing weakness and worse than reported unemployment are just two examples of the latter
I believe this is one of the best times in history to own precious metals and quality junior gold explorers upon which to leverage higher gold prices |
JPM | JPMorgan HSBC Credit Agricole To Be Fined For Rate Rigging | Business malpractices continue to be a cause of concern for banks As per persons familiar with the matter the European Union EU antitrust officials are giving final touches to the fines to be imposed on JPMorgan Chase Co NYSE JPM HSBC Holdings LON HSBA plc NYSE HSBC and Credit Agricole PA CAGR S A for alleged manipulation of Euro Interbank Offered Rate EURIBOR The penalties are expected to be announced as early as next month Subsequently this would end the five year probe by the EU into the matter These three banks were not part of the multi bank settlement deal that was announced by the EU in Dec 2013 An aggregate penalty of around 825 million 888 million was imposed on four banks Barclays LON BARC PLC NYSE BCS Soci t G n rale PA SOGN Deutsche Bank AG NYSE DB and The Royal Bank of Scotland LON RBS Group plc TO RBS over similar allegations Banks were accused of colluding to rig the key interest rate benchmark with an aim to influence the prices of several global financial instruments The commission accused HSBC JPMorgan and Credit Agricole of breaching the EU antitrust rules In May 2014 charges were levied against these three banks while they continued to deny any wrongdoing Hence there were delays in penalizing these banks Notably by rejecting to settle the probe banks forfeited the chance of 10 discount on fines to be imposed Nonetheless the EU can enforce a fine of up to 10 of a bank s global turnover for violating rules Nearly 9 billion fines in total have been imposed on several global banks by regulators across the globe for alleged rigging of London interbank offered rate LIBOR and many such benchmarks over the last four years Among the banks mentioned above JPMorgan HSBC Barclays Deutsche Bank and Royal Bank of Scotland carry a Zacks Rank 3 Hold You can see Where Do Zacks Investment Ideas Come From You are welcome to download the full up to the minute list of 220 Zacks Rank 1 Strong Buy stocks free of charge There is no better place to start your own stock search Plus you can access the full list of must avoid Zacks Rank 5 Strong Sells and other private research |
JPM | Is Trumponomics Inflationary | Trumponomics is a mix of demand and supply side economics The former tends to be inflationary while the latter tends to be disinflationary That s in theory In practice we will all find out together what the net result of mixing things up like this will do to inflation On the demand side President elect Trump proposes to spend 1 trillion on infrastructure over the next 10 years On the supply side he proposes to slash the corporate tax rate He also intends to reduce income tax rates on personal incomes which can have both inflationary demand side and disinflationary supply side effects
I think that on balance the disinflationary supply side effects will offset some but not all of the inflationary demand side effects of Trumponomics That certainly should greatly reduce the risk and fears of deflation If so then the 35 year bull market in bonds might have ended on July 8 of this year when the 10 year yield bottomed at a record low of 1 37 It is already back up to 2 23
Much of that backup was attributable to the perception that no matter who won the presidency there would be more fiscal stimulus Now that Trump has won that s become a virtual certainty After all Trump s specialty is building things Now let s consider the various inflationary and disinflationary forces that are likely to be unleashed by Trumponomics focusing on the data that will be especially important to monitor to assess how all these vectors will add up
1 Globalization vs protectionism Since the end of the Cold War I have argued that globalization is inherently disinflationary Now we are starting to see headlines such as Goodbye globalization It appeared at the top of a 11 13 Business Insider story that mentioned a cautionary note Bridgewater sent to clients on Friday which warned The political backdrop looks negative for globalization Crispin Odey another hedge fund manager wrote in a recent note to clients Globalisation competition internationalism are now firmly in the retreat Inflation and protectionism promise a future which is not as kind to financial assets as QE and deflation has been
Protectionism can be inflationary as long as it doesn t trigger a depression which would be deflationary The Smoot Hawley Tariff of June 1930 caused a depression and a collapse in commodity and consumer prices I recently have observed that the Reagan administration pursued policies that seemed protectionist at the time Our major trading partners were pressed to adopt fairer trade practices in exchange for free trade with the US The US economy continued to grow and inflation remained subdued I think that will be the outcome of the current protectionist wave So I expect that Globalization will survive the latest challenges
2 Labor market In a November 4 speech Federal Reserve Vice Chairman Stanley Fischer said that in his view the labor market is close to full employment He added that it wouldn t take much by way of job gains to maintain the unemployment rate near 5 That s because he expects that the labor force participation rate will continue to decline due to the likely drag from demographics
Specifically he said that job gains of as low as 65 000 to 115 000 would be sufficient to maintain full employment Even if participation rates were to remain unchanged Fischer said a range of 125 000 to 175 000 job gains would prevent unemployment from creeping up Nonfarm private payroll employment gains averaged 210 200 per month over the past five months through October
The unemployment rate has been around 5 since last fall Strong labor market indicators were also evident in the latest Job Openings and Labor Turnover Survey JOLTS and National Federation of Independent Business NFIB reports through September and October respectively According to both surveys the rate of job openings exceeds levels during two of the past three cyclical peaks Layoffs fell to the lowest on record while quits were near a record high during September Not surprisingly quits are highly correlated with the Consumer Confidence index which has been lagging but could jump higher now that the elections are over
This all points to higher wage inflation The Atlanta Fed s median wage growth tracker shows that job switchers enjoyed a wage gain of 4 4 y y during October versus 3 6 for job stayers Average hourly earnings for all private industry workers rose 2 8 y y during October the highest since June 2009
Trumponomics could put more upward pressure on wages given that most labor market indicators suggest that the economy is at full employment There is already a shortage of construction workers that will be hard to fill unless Trump allows special work visas for construction workers from Mexico See the 9 21 WSJ article titled How an Immigration Downturn Has Contributed to the Construction Worker Shortage
3 The dollar oil and other commodities The soaring dollar and falling oil prices should help to moderate inflationary pressures in the labor market The JPMorgan NYSE JPM trade weighted dollar is now up 24 from its low on July 1 2014 That along with OPEC s inability to agree on production cuts is depressing the price of oil Trump s commitment to lift the restriction on the US energy industry could very well drown the cartel in oil
On the other hand the CRB raw industrials spot price index is soaring However it is doing so as the dollar is doing the same which is unprecedented It is also extraordinary to see that inflationary expectations have jumped since the election while the dollar has soared In any event the strong dollar is bound to put downward pressure on nonpetroleum import prices
4 Productivity Over the past couple of years there has been a widening consensus that secular stagnation is here to stay I ve been there too Keynesian economists like Larry Summers and Stanley Fischer have argued that the only way out is more fiscal spending Supply siders have championed less government and tax cuts as the only sure way to revive growth I ve sided with the latter camp Now Trump is proposing to do all of the above
If he succeeds in boosting real economic growth it might not be inflationary if it is based on productivity I have argued that productivity has a demand side as well as a supply side The productivity of the most efficient widgets factory in the world will be zero if demand for widgets is zero Better economic growth could very well prove that the supply side of productivity can deliver more output thus limiting inflation |
MS | Deutsche Telekom CEO plays it cool on T Mobile US | By Harro Ten Wolde BARCELONA Reuters Deutsche Telekom DE DTEGn is not in the mood to sell T Mobile US O TMUS its chief executive said on Wednesday although it is watching for any change in the U S regulatory environment under Donald Trump s administration Deutsche Telekom which owns 65 percent of T Mobile US has twice tried to sell in the past five years Both attempts foundered on regulatory objections Since then T Mobile has made a turnaround and is growing every quarter overtaking Sprint N S as the third largest wireless operator in the U S That has transformed Deutsche Telekom s position CEO Tim Hoettges said We are not in the mood of selling the business We are not in the mood of Oh where is the partner we need he told investors at the Morgan Stanley NYSE MS annual TMT conference T Mobile US is now almost as big as Deutsche Telekom s German business bringing in 2 156 billion euros in adjusted EBITDA just below the 2 25 billion Germany generated in the third quarter Last month T Mobile US again raised its forecast for customer additions for the year after adding 969 000 postpaid customers in the third quarter ended Sept 30 up from 890 000 in the second quarter Analysts have suggested T Mobile US is Deutsche Telekom s only opportunity to grow We are now open to how we could create something beyond our execution which is creating value Hoettges said Repeating what he told investors last week at Deutsche Telekom s third quarter earnings but using stronger language Hoettges said he was hoping the political landscape would change and make a deal possible We compare a lot of variables With Trump the regulatory environment might change Everybody is expecting this At least the chance is bigger then it was under the Democrats he said All of this is helping us to be open and try to improve our situation I am not afraid about whether a pure mobile player can survive in this environment If there are any options we are going to consider Hoettges said Shares in T Mobile US hit an all time high last week as investors saw a greater chance of an acquisition being approved under the Trump administration due to take office early next year
T Mobile has a market capitalization of around 44 billion |
MS | Mouse maker Logitech finds success by moving beyond PC legacy | By Eric Auchard BARCELONA Reuters Pioneering computer mouse maker Logitech S LOGN isn t ready to walk away from the personal computer business just yet even though its chief executive spends all his time these days thinking how to expand into faster growing accessory markets Bracken Darrell the company s design minded president and CEO has devoted his four years in charge of the Swiss American electronic accessories maker to push Logitech into mobile music speakers gaming wearables and home and video controls The company recently introduced a home control device it calls Pop switch which can act as a remote control for lights door locks speakers thermostats and other household devices Everything we are doing today is creating cloud based peripherals Darrell told investors at Morgan Stanley NYSE MS European Tech Media and Telecom conference here on Wednesday I keep the PC business in a dark space in my mind he said The rest of the business has just been super exciting Darrell has transformed the financial results of a company previously in steady decline with Logitech now on track to report steady sales growth in constant currencies of around 10 percent and improving operating margins around the same level Founded 35 years ago in the early days of the PC era Logitech saw sales of PC pointing devices decline 1 percent in its latest quarter while mobile music speakers grew 20 percent other audio equipment rose 35 percent and video conferencing tools like webcams jumped 43 percent Worldwide shipments of new PCs are forecast to decline by 8 percent this year research firm Gartner predicts We are holding our own in the PC peripherals business which has no right to grow the Logitech CEO said Still PC accessories like mice and keyboards still accounted for nearly half of net sales of 564 million for the quarter ended in September Logitech is also gearing up to build virtual reality or augmented reality gadgets In a throwback its product developers are reusing technology from a pointing device the company developed in the early 1990s for an earlier generation of virtual reality systems that went nowhere Inventors have unprecedented scope to reinvent all manner of products now Darrell said as electronic components such as microprocessors storage network sensors and cloud based Internet connected services are virtually free Carrying his argument to an extreme he pointed at a wooden chair his interviewer was sitting on and declared that if it was to be redesigned craftsmen would take advantage of these four low cost components to create Internet connected furniture
That s true of that table that light that chair that plant he said Everything can be part of the Internet of Things |
MS | New F1 owner Liberty Media looks to expand number of races | By Harro Ten Wolde BARCELONA Reuters Liberty Media NASDAQ LMCA is looking to expand the number of Formula One races hoping to cash in on the glamorous appeal of its newly acquired asset chief executive Greg Maffei said on Wednesday Formula One has a record equalling 21 races this season and teams have historically been reluctant to go beyond that number but Maffei told investors at the Morgan Stanley NYSE MS Technology Media and Telecoms conference that there was room for more There is a general line of interest if you increase the number of races to a point The FIA the International Automobile Federation which governs the sport makes more money the teams make more money we make more money he said Formula One faces a major shake up after Liberty Media agreed to take control of the cash generating sport Liberty Media has acquired an initial 18 7 percent stake from controlling shareholder CVC Capital Partners CVC UL and plans to complete a cash and shares deal by the first quarter of 2017 The deal which has an enterprise value of 8 billion is expected to lead to a new push to develop the U S market and win fresh audiences around the world Expanding the racing calendar may be a way to do this Maffei said Obviously there is a limit on how much you can do Just getting the cars around the world but I think we can expect to grow the amount of races to a mild degree Maffei said there were opportunities to expand in Latin America Asia and the United States I particularly like the idea of a night race in Las Vegas the CEO said acknowledging that the heart of the Formula One sport is in Western Europe with famous circuits such as Monza and Monaco But new entrants tend to pay more the executive said Bernie Ecclestone Formula One s commercial supremo who has remained at the helm after the takeover recently appeared to pour cold water on the immediate prospect of adding races in the United States The 86 year old Briton has been talking to would be promoters of a Las Vegas race for several months without any sign of progress The future of South America s only current grand prix in Brazil is also uncertain due to the country s economic crisis Liberty Media has interests in the Atlanta Braves baseball team satellite radio service Sirius XM entertainment group Live Nation and minority interests in Time Warner and Viacom This story corrects to fix wrong word in headline |
MS | Deutsche Telekom chief Not in the mood to sell T Mobile | With consolidation fever sweeping the media and telecom industries Deutsche Telekom DE DTEGn OTCQX DTEGY 0 4 is playing coy about selling its interest in T Mobile U S TMUS 1 4 even if T Mobile chief John Legere has enthusiastically talked up the idea of partnering up in quarterly calls We are not in the mood of selling the business We are not in the mood of Oh where is the partner we need CEO Tim Hoettges told the Morgan Stanley NYSE MS conference in Barcelona But he s keeping an eye on the Trump administration as it takes shape and looking for any regulatory changes The company s last two attempts to sell T Mobile got tied up by government watchdogs and since then T Mobile has pulled off a recovery It s almost as big as DT s German business All of this is helping us to be open and try to improve our situation he says I am not afraid about whether a pure mobile player can survive in this environment If there are any options we are going to consider |
MS | UBS s head of U S wealth management bullish about growth | By Elizabeth Dilts NEW YORK Reuters For the first time since UBS Group AG bought PaineWebber 16 years ago the world s largest wealth manager s U S business has a smaller workforce than an independent rival Raymond James Financial But does Tom Naratil president of UBS s Wealth Management Americas care No We don t Naratil told Reuters on Wednesday For six years we ve said it was all about the productivity of advisers and not the number of advisers In June Naratil launched plans to cut the firm s costly recruiting efforts by 40 percent streamline broker s compensation and eliminate some middle management The cuts are part of a broader effort to boost lagging revenue Some of the money saved from recruiting will go to pay existing advisers bonuses for growing their business It is already working Naratil said pointing to the record revenues income and pre tax profit margins reported in the third quarter There are costs to leaving the recruiting game amid a decade long trend of advisers moving from Wall Street brokerages to independent outfits like Raymond James St Petersburg Florida based Raymond James reported it had 7 146 advisers across its employee and independent channels in the third quarter compared to UBS s 7 087 We don t need to wake up every morning and pray for the independent adviser model to fail in order for us to succeed said Naratil who took on the top job in January The cuts combined with an expected increase in the Federal Reserve s interest rate in December will help the firm reach its goal of 15 25 percent pre tax profit margins Naratil said Additionally the uncertainty for some investors created by the surprise election of Republican Donald Trump as U S president is also good for business said the former PaineWebber bond trader A UBS survey of 1 200 wealthy investors found that half missed money making opportunities because they raised cash or moved into conservative investments ahead of the election Any kind of uncertainty that people have as a result of geopolitical events or domestic events is good for the advice markets said Naratil who declined to say whether UBS had been in touch with Trump s transition team Naratil also declined to comment on the firm s plans to comply with the Labor Department s Fiduciary Rule which is designed to protect retirement savers by requiring that brokers put their clients best interests ahead of their own bottom line It is set to take effect in April Rival firms like Morgan Stanley NYSE MS and Bank of America s Merrill Lynch announced their plans last month It is unclear if Trump will try to delay implementation of the rule Regulators have also narrowed in on the securities industry since the sales scandal at Wells Fargo NYSE WFC Co s retail bank which opened 2 million accounts for customers without their knowledge Groups like the Financial Industry Regulatory Authority have ordered brokerages to hand over information about bonuses that brokers can earn for meeting sales targets Naratil said UBS has examined its sales goals and bonuses
We don t see anything similar to what went on at Wells Fargo s retail bank Naratil said I don t think it is a problem across the wealth management industry as a whole |
JPM | No risk of NAFTA termination despite Trump s bravado economists | By Bruno Federowski and Miguel Gutierrez BRASILIA MEXICO CITY Reuters U S President Donald Trump s threats to scrap the North American Free Trade Agreement NAFTA will soon be a distant memory likely to be supplanted by only slight changes to the 24 year old pact a Reuters poll of economists suggested None of the 80 forecasters most based in Canada the United States and Mexico polled by Reuters April 16 24 expect NAFTA to be terminated A large majority said the most likely outcome is a marginally different agreement with only six expecting radical changes The results though mostly in line with a January poll showcase growing conviction among economists and analysts that months of thorny conversations will deliver a good outcome for all parties The findings come despite Trump s decision to deliver on some of his campaign trail protectionist threats by hiking tariffs on steel and aluminum imports This suggests companies and policymakers may have convinced Trump to focus on China instead of the pact underpinning over 1 trillion per year in trade between Mexico the U S and Canada The U S government has acknowledged the strong economic ties between the three North American economies a result of efforts by pressure groups signaling to Trump s administration the relevance of that treaty said Jes s L pez an analyst at Banco BASE in Mexico City His remarks underline a recent swing toward optimism in official communications around NAFTA as negotiators stepped up efforts to reach an agreement ahead of Mexico s July 1 presidential elections Trump said this week that a new NAFTA could be agreed on quickly as Canada hailed progress on forging new rules for the auto industry the main standing point in talks to revamp the trade pact A preliminary agreement could be announced as soon as this month respondents said May 1 seems to be a key date to watch not only because it signals the expiration of the exemption of Canada and Mexico from the steel and aluminum tariffs announced last month but also because we would be six months apart from the U S midterm election JPMorgan NYSE JPM economist Gabriel Lozano based in Mexico City wrote in a report Auto rules of origin as well an opt in mechanism for conflict resolution are likely to be the main area of change said Barclays LON BARC analyst Marco Oviedo in New York The rest is likely to amount to marginal updates A new NAFTA is likely to push the region s automakers to source more parts from North America to create more jobs but also raise costs for Detroit s main car manufacturers Trump s negotiators initially demanded North American built vehicles contain 85 percent content made in NAFTA countries by value up from 62 5 percent now But industry officials say that has been cut to about 75 percent with certain components coming from areas with higher wages Though a preliminary agreement would leave many details to be ironed out in coming months it would ease uncertainty that has capped business investment in both Canada and Mexico NAFTA will not be gone as a topic of conversation going forward but even some kind of preliminary announcement is likely to be seen as a strong positive signal and have some effect on growth said Scotiabank deputy chief economist Brett House in Toronto The optimism around North American trade negotiations contrasts with escalating tensions between the U S and China that have stoked fears of a trade war between the world s top two economies
Trump s administration proposed 25 percent tariffs on some 1 300 Chinese industrial technology transport and medical products driving China to shoot back with a list of similar duties on major American imports including soybeans planes cars beef and chemicals |
JPM | China Factory Gauge Holds Up as Services Beat Forecast | Bloomberg A gauge of activity at China s manufacturers remained robust as services strengthened for a second month signaling that the economic expansion is intact
The manufacturing purchasing managers index stood at 51 4 in April versus the 51 3 estimate in a Bloomberg survey and 51 5 last month The non manufacturing PMI covering services and construction rose to 54 8 the statistics bureau said Monday beating estimates Levels above 50 indicate improvement
Factories are holding up even as debt curbs and a trade dispute with the U S add uncertainty to the outlook The trade spat easing inflation and cooling investment may weigh on manufacturing activities with the economy forecast to slow this year
The numbers are pretty solid Zhu Haibin chief China economist at JPMorgan Chase Co NYSE JPM in Hong Kong told Bloomberg Television after the report This news suggests growth momentum is still fine though risks still remain he said
Corrects to remove incorrect month reference in headline
To contact Bloomberg News staff for this story Xiaoqing Pi in Beijing at xpi1 bloomberg net
To contact the editors responsible for this story Jeffrey Black at jblack25 bloomberg net Jeff Kearns
2018 Bloomberg L P |
JPM | Wall Street Turns Bullish On Chipotle Turnaround | Investing com Fresh off an earnings beat Chipotle s stock price target was raised by half a dozen Wall Street firms Stifel JPMorgan Chase NYSE JPM Wedbush Securities Cowen Company SunTrust Robinson Humphrey and RBC Capital Markets all raised their 12 month forecasts seeing better fundamentals at the company under new management The restaurant chain reported better than expected earnings in its first quarter thanks to new store openings a surge in mobile orders and menu price hikes Shares are up about 64 since Brian Niccol was named to replace founder Steve Ells as CEO in February following a sharp two year slump triggered by food safety concerns |
JPM | JPMorgan Allowed to Deal in Indonesia Bonds After Ban Lifted | Bloomberg Indonesia reappointed JPMorgan Chase Co NYSE JPM as a primary dealer of sovereign bonds more than a year after banning the U S bank from doing business with government entities
The bank was included in a list of 20 banks and securities firms enlisted by the government as primary dealers of bonds Finance Ministry said in a statement in Jakarta on Monday JPMorgan s reinstatement is effective from May 2 the ministry said
JPMorgan s reappointment comes amid an exodus by foreign investors from the nation s stocks and bonds as a tumbling currency increases the odds of an interest rate hike President Joko Widodo s government snapped ties with JPMorgan in January last year after it downgraded the nation s equities by two notches While the bank subsequently upgraded Indonesia s stocks the government maintained the ban
The reappointment of JPMorgan could be a strategy by the government to better attract international investors and to create higher appetite for Indonesian assets during volatile times like this said I Made Budhi Purnama Artha head of treasury at PT Maybank Indonesia Before the ban JPMorgan was one of the players along with Deutsche Bank DE DBKGn with significant market making in the U S
Private Clients
The return of JPMorgan as a dealer of bonds may also open doors for it to be appointed as an underwriter of sovereign bonds overseas and securities issued by the state owned enterprises While the U S bank missed out on being part of the government s fund raising program for 16 months it continued to serve its private clients in Indonesia where it provides investment and commercial banking services
JPMorgan s reappointment followed an application made by the bank in February after the one year ban ended said Luky Alfirman director general for budget financing and risk management at the Finance Ministry JPMorgan is now committed to follow all rules he said
The bank believes a primary dealer license will strengthen our ability to service our clients who invest in Indonesia more effectively Li Anne Wong a spokeswoman for JPMorgan in Singapore said
Research Curbs
In the days following the crackdown against JPMorgan Finance Minister Sri Mulyani Indrawati s ministry ordered primary bond dealers to uphold the nation s interests and maintain relations with the government that are based on professionalism integrity and avoiding conflicts of interest The move was seen as an attempt to gag critical research as violation of the rule meant underwriters risked losing their dealership licenses
Indonesia s rupiah is trading near a 27 month low even after aggressive interventions by the nation s central bank as investors exit emerging markets amid higher U S Treasury yields and a stronger dollar The rout in the currency has now extended to the nation s stocks and bonds
Indonesia s government is set to borrow a total of 856 5 trillion rupiah 62 billion this year with about 80 percent of it likely to be raised through the sale of bonds and sukuks in the local market and the rest from a combination of dollar euro and samurai bonds overseas according to finance ministry data
Updates with trader s comment in fourth paragraph |
JPM | Mexico Tells Banks to Take Steps to Guard Against Suspected Hack | Bloomberg Mexico s monetary authority asked about a dozen banks to take emergency measures to shore up the country s electronic payment network after a suspected cyber attack disrupted some transfers last week
The lenders have been instructed to connect to the system via a backup method that s seen as less vulnerable to outside intrusions but has never before been so heavily utilized The three banks believed to have been targeted in the attack were also ordered to hire external consultants to investigate what exactly caused the issue according to the central bank
One thing we re certain of is that the system s infrastructure has not been compromised said Lorenza Martinez the head of operations at Banco de Mexico The main question is what was the origin of the problem
Consumers could see a slowdown in transfers this week especially on Monday which is a pay day for many Mexican employers according to officials at Grupo Financiero Banorte which confirmed it is using the alternate connection system The lender as well as Banco del Bajio SA and Banco del Ejercito were the firms that were directly targeted last week in the suspected cyber attack according to people familiar with the matter The central bank said it s too early to tell whether the problems were a result of a malicious hack
Cyber attacks targeting banks appear to be happening with more frequency in Mexico said one of the people who asked not to be identified without authorization to speak publicly A spokeswoman for Mexico s banking association known as the ABM declined to comment
No deposits have been compromised in the incident and all the money in the system has been accounted for the central bank said in a statement Friday evening
Banorte which handles the most payroll deposits after BBVA MC BBVA Bancomer had its connection to the transfer system interrupted a little before 6 p m Thursday evening and problems continued for most of Friday according to data from Mexico s central bank Banjercito lost connection Tuesday morning and disruptions continued through Friday BanBajio saw temporary connection disruptions Thursday that extended into Friday
Other banks while not directly targeted in the apparent attacks also suffered from the fallout Corp Actinver s transfers were interrupted Thursday and Friday while the local unit of JPMorgan Chase Co NYSE JPM Mexico development bank Banobras and Banco Base also experienced minor outages last week the data show
The payment system known as the SPEI was established in 2004 and lets users electronically transfer money between deposit accounts through a private encrypted network operated by Mexico s central bank
Payment systems around the world are easy targets for hackers because they ve been around a long time and typically lack the security measures that today s world needs said Eldon Sprickerhoff founder of eSentire a cybersecurity firm based in Canada
Worldwide a string of attacks on banks connection to the Swift network the global equivalent of the SPEI has prompted the 12 000 member group to enact new security measures The most famous of those attacks came in 2016 when criminals initially siphoned off more than 100 million from the central bank of Bangladesh a portion was later recovered In January hackers attempted to steal money from Mexico s Bancomext the government owned export bank by attacking its Swift connection causing the lender to temporarily suspend operations in its international payment platform While the cases involved breaches at firms not the network itself Swift set out to ensure members were taking necessary steps to protect confidence in a global system that moves roughly 5 trillion daily
Banxico doesn t have any reason to believe the current issues with domestic payment transfers is related to the attempted heist of Bancomext funds in January Martinez said
About 10 percent of the global network s members had failed to comply with the new measures such as improving passwords and adopting multi step authentication by the end of December highlighting the lack of resources at small institutions dedicated to cyber defense as well as the inadequate attention paid by regulators in some emerging markets
It s very hard to implement fixes and upgrades to payments systems because they re being used constantly with millions of transactions taking place every day Sprickerhoff said
Banco de Mexico alerted the public to the dangers of cyber attacks in a report in October saying that regulators have acknowledged the possibility that these could include systemic attacks on financial systems In the report the central bank played up the importance of the authorities in preserving the stability of financial systems when faced with such attacks
The central bank held a conference call Saturday afternoon with Mexican banks to discuss the cyber attacks one person familiar with the matter said |
C | MasterCard Willing to Use State Issued Non Anonymous Crypto | MasterCard is willing to embrace cryptocurrencies but under certain conditions The global payments processor has expressed its openness to exploring digital currencies as long as they are central bank issued
In an interview with the Ari Sarker co president of MasterCard s Asia Pacific business said the company would be receptive to the prospect of facilitating national government backed digital currencies only
If governments look to create national digital currency we d be very happy to look at those in a more favourable way So long as it s backed by a regulator and the value it is not anonymous it is meeting all the regulatory requirements I think that would be of greater interest for us to explore
Cryptocurrencies have not been received warmly by governments and regulatory authorities worldwide owing to their anonymity the difficulty of regulating and classifying digital assets and their potential for usage in criminal activities such as money laundering and fraud
Numerous governments have been contemplating the idea of a state backed cryptocurrency such as Russia s ideas for a CryptoRuble Singapore s Project Ubin and Israel s plans for a digital version of the shekel but none of these plans have been realized as yet While Venezuela released the state issued Petro the digital currency has been mired in controversy with the USA having recently all transactions with the Petro
Financial institutions have also been hesitant to join the crypto craze banks which have banned the purchase of crypto via credit cards include J P Morgan Chase and Citigroup NYSE C In general MasterCard has not been a fan of Bitcoin last year in October CEO Ajay Banga the company would find a way to be in the game if governments started to issue digital currencies and went on to state that non government mandated currency is junk
Earlier this year MasterCard and Visa made the process of buying Bitcoin even more difficult for customers by reclassifying crypto purchases as cash transactions which means added fees
However despite all this MasterCard does appear to be approaching cryptocurrencies albeit cautiously Sarker told the Financial Times that MasterCard currently has a test program in Japan and Singapore under which cardholders are allowed to cash out Bitcoin on to a MasterCard however the program involves strict adherence to both KYC and AML rules
We are not operating trading of Bitcoin through the MasterCard network The pilot is a toe in the water we re fully cognisant of the reputational risk Sarker clarified |
C | Trade War Lite Between U S China to Hurt Both But Not Fatally | Bloomberg A trade war between the U S and China probably would take a bite out of the world s two largest economies but wouldn t do enough damage to pitch either into recession provided it s contained
The nations would suffer a material reduction in output from the disruption in trade and higher prices that would result from a tariff battle economists say The damage could be compounded if the back and forth moves trigger a confidence sapping swoon in global stock markets
Yet even with all that the betting is that both economies are strong enough to take the hit and keep on growing soundly unless the clash spirals out of control to include an ever widening range of products increasingly higher import levies and a complete collapse of equity prices
A trade war lite between the U S and China does meaningful damage but doesn t trigger a recession in either country said Mark Zandi chief economist at Moody s Analytics Inc in West Chester Pennsylvania
President Donald Trump plans to impose tariffs worth as much as 60 billion on Chinese products as early as this week to punish Beijing for what the U S perceives as intellectual property theft from American businesses according to two people familiar with the matter
The administration is said to be considering wide ranging levies on everything from consumer electronics to shoes and clothing made in China as well as restrictions on Chinese investments in the U S
Relax Tensions
China has sought to play down the possibility of a confrontation with the U S Speaking Tuesday at the end of the annual National People s Congress Premier Li Keqiang said that the government plans to further open the manufacturing sector to competition and won t force foreign companies to transfer technology to domestic ones while doing so
We don t want to see a trade war Li said
Chinese policy makers sound like they may want to avoid a clash with the U S and could offer to allow more foreign firms into the services sector in order to avert one said Larry Hu chief China economist at Macquarie Securities Ltd in Hong Kong
The looming trade spat is taking place against the backdrop of an 80 trillion global economy that is firing on all cylinders and is projected by the International Monetary Fund to expand at its fastest pace in seven years in 2018
It also comes as U S growth is being buttressed by a double dose of fiscal stimulus in the form of lower taxes and higher government spending and while U S inflation remains below the Federal Reserve s 2 percent target
Trade Fight
Economists say that a tit for tat tariff battle between the U S and China would pose a bigger threat to global growth than the import levies that Trump has already announced on steel and aluminum
In terms of the potential for a major escalation and therefore for a major disruption of world trade world growth and also financial markets the risk is much higher said Ebrahim Rahbari director of global economics at Citigroup NYSE C in New York
U S retailers have warned that the imposition of tariffs on a broad range of Chinese imports would lift costs for American consumers
Tariffs are a hidden tax on Americans Rick Helfenbein president of the American Apparel Footwear Association said in a statement More than 41 percent of clothing 72 percent of footwear and 84 percent of travel goods sold in the U S are made in China
Muted Impact
Be that as it may the overall impact on the U S and Chinese economies will be limited even if China responds in kind with as much as 60 billion in tariffs of its own said Peter Hooper chief economist for Deutsche Bank DE DBKGn Securities in New York
He reckons that the level of U S gross domestic product not its growth rate may be reduced about by a quarter to a half percent although there is much uncertainty around that estimate
It could cost quite a few jobs in some sectors but it s not a recession inducer Hooper said
His estimate is roughly in line with similar calculations by Zandi and by Cornerstone Macro LLC economists Nancy Lazar and Stephanie Roth who also reckon that a tariff battle would lift the U S inflation rate by about 0 3 percentage point and depress monthly job gains by some 50 000 Since January 2017 payrolls have risen an average 196 000 per month
Zandi said the hit to China could be greater on the order of 0 9 percent of GDP although Deutsche Bank economists expect the Asian nation to offset any impact through looser fiscal policy
Escalation Risk
Both China and the U S are strong enough to withstand a limited trade war said Xia Le chief Asia economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong
The risk though is that things don t end there with Bloomberg Economics estimating that a global trade conflagration could wipe 470 billion off the world economy by 2020
Once a round of such tariffs and counter measures are started it can become very unclear when such tit for tat actions will stop said Nelson Dong senior partner at the Dorsey Whitney law firm and former director of the New York based National Committee on U S China Relations That is the essence of the fear of a widespread trade war due to such tariffs |
C | Formerly detained Saudi businessmen Alwaleed and Alhokair in talks for loans | By Davide Barbuscia Tom Arnold and Marwa Rashad DUBAI Reuters Two businessmen formerly detained a part of Saudi Arabia s anti corruption campaign are now in talks with banks for loans for their firms in excess of 3 billion sources said suggesting that bank markets are open again for those who have reached financial settlements with the government Saudi Prince Alwaleed bin Talal s investment firm Kingdom Holding SE 4280 is in talks for a loan worth up to 1 billion while Saudi fashion retailer Fawaz Abdulaziz Alhokair SE 4240 whose major shareholder Fawaz Alhokair was also detained is in discussions with banks for a loan of around 8 billion riyals 2 13 billion Local banks are expected to provide most of the debt while international banks appear to be more cautious given the lack of clarity over the terms of settlements the business figures reached with the Saudi authorities banking sources said Alhokair was not immediately available for comment while Kingdom Holding confirmed in an email to Reuters that it has started talks again with local and international banks in order to raise up to 1 billion Saudi Arabia s Crown Prince Mohammed bin Salman launched a sweeping anti graft crackdown last November arresting dozens of princes senior officials and top businessmen accused of crimes such as money laundering bribing and extorting officials Saudi officials said earlier this year that several detained businessmen had reached financial settlements with the government amounting to over 100 billion in total Among them were prince Alwaleed Saudi Arabia s most prominent business figure and Fawaz Alhokair released from detention at the end of January Prince Alwaleed confirmed to Bloomberg TV this week that he had reached an agreement with the government although he did not disclose any details saying the agreement was confidential and secret No details of the financial settlement reached by Fawaz Abdulaziz Alhokair has been made public either bankers said According to one banking source familiar with the matter the settlement could involve Alhokhair s personal wealth rather than shares in his company Kingdom Holding s plans to borrow funds for new investments stalled last November when the prince was detained several sources told Reuters at the time indicating that the crackdown had slowed down new Saudi business activity Discussions on the 8 billion riyals loan for the retailer Alhokair had also started before the anti graft campaign but the financing was held up when Fawaz was detained The loan is now about to be completed It will be used to refinance existing debt and will be provided by a group of local banks including Al Rajhi Bank and Samba Financial Group sources said Kingdom Holding is working with a group of banks including Arab National Bank and Samba Financial Group for the new financing which would be backed by the company s shares in Banque Saudi Fransi sources said Prince Alwaleed told Bloomberg TV earlier this week that he was on the verge of obtaining debt facilities worth 1 billion and 2 billion He also said Kingdom Holding was planning to split its 13 billion of assets by spinning off its domestic property and other holdings None of the banks responded to a request for comment The planned loan has no recourse to Kingdom Holding itself Ultimately the financing was never dependent on the credit worthiness of Alwaleed himself the loan was always going to be secured against the shares in Saudi Fransi and probably some top up shares in Citigroup But with him in detention banks put everything on hold obviously one source said Alwaleed is a longstanding major shareholder in Citigroup N C Two bankers working in the region at international banks said however that too many questions have remained unanswered regarding Prince Alwaleed s release and his financial settlement and that international lenders are likely to be more cautious than their local counterparts in dealing with Kingdom Holding Further clarity is still required about the future The only thing I know is that they might split the assets into two That s not enough information to convince me to lend one of them said
1 3 7498 riyals |
C | Europe Blowback Shows There s No Neutrals in Global Trade Fracas | Bloomberg Even the prospect of the European Union securing exemptions from U S tariffs couldn t shield the region s financial markets from the crossfire of escalating global trade tensions
Equities in Europe slumped the most in three weeks a swath of IPOs were rattled and government bonds surged as President Donald Trump slapped tariffs on Chinese goods Earlier in the day the tone was set when a wave of output reports from across the region all missed estimates The euro which started the day in the green eventually reversed
The European economy wouldn t be directly affected by Trump s tariffs but the blowback would affect everyone said Will Hobbs head of investment strategy at Barclays LON BARC Plc in London With the global economy now so tightly intertwined and supply chains so complex a trade war would be painful for all
In some ways Thursday became a perfect storm for European risk assets Technology companies were already under pressure in the wake of Facebook Inc NASDAQ FB s data scandal while a selloff in commodities has battered miners The disappointing economic data undermined expectations that euro area interest rates will rise sooner rather than later and banks duly slumped
The three industries led the equity selloff as the Stoxx Europe 600 Index fell 1 6 percent the most since March 2
Bund Rally
The yield on 10 year bunds dropped six basis points the most since December The securities are rising as Citigroup Inc NYSE C s economic surprise index shows economic data from the continent trailing expectations by the most since March 2016 with inflation still languishing well below the European Central Bank s just less than 2 percent goal
As investors start to look past the end of the ECB s quantitative easing market pricing has now pushed back the estimated timing of a rate increase to mid 2019 That compares with a projection for next March as recently as two weeks ago and helped spur the decline in banking stocks
There s a combination of many factors all pointing in the direction of lower bund yields said Antoine Bouvet an interest rate strategist at Mizuho International Plc The ECB has reassured the market about the risk of premature tightening and the supply demand picture in the coming weeks is supportive for bunds Add to that the growing worries about the trade tensions and euro fixed income looks more attractive than riskier alternatives
German 10 year yields fell to 0 529 percent as of 6 11 p m in London the lowest level since Jan 11 Those on similar French debt dropped six basis points Thursday to 0 77 percent
Money markets are now pricing a 10 basis point hike in the ECB s deposit rate in June 2019 which would be the first increase in a benchmark rate since 2011
IPO Woes
Amid the turmoil the biggest IPO in Norway since 2010 a 6 4 billion krone 830 million sale by silicon manufacturer Elkem ASA slumped on its first day of trading Thursday after pricing at the lower end of the price range
In the Netherlands whose offerings market is just heating up Alfen Beheer NV s IPO priced at 10 euros a share below the 11 25 euros to 15 euros sought by the maker of charging stations for electrical vehicles
Two Finnish companies appliance maker Harvia Oyj and alcoholic beverage producer Altia Oyj also sold stock at the bottom of their respective ranges |
C | Citigroup C Stock Moves 0 04 What You Should Know | Citigroup C closed at 68 15 in the latest trading session marking a 0 04 move from the prior day This change was narrower than the S P 500 s 0 45 loss on the day At the same time the Dow lost 0 36 and the tech heavy Nasdaq lost 0 33
Heading into today shares of the U S bank had gained 2 77 over the past month outpacing the Finance sector s gain of 1 83 and the S P 500 s gain of 0 59 in that time
Investors will be hoping for strength from C as it approaches its next earnings release The company is expected to report EPS of 1 97 up 13 22 from the prior year quarter Meanwhile our latest consensus estimate is calling for revenue of 18 54 billion up 0 82 from the prior year quarter
Looking at the full year our Zacks Consensus Estimates suggest analysts are expecting earnings of 7 60 per share and revenue of 73 97 billion These totals would mark changes of 14 29 and 1 53 respectively from last year
Any recent changes to analyst estimates for C should also be noted by investors These revisions typically reflect the latest short term business trends which can change frequently With this in mind we can consider positive estimate revisions a sign of optimism about the company s business outlook
Based on our research we believe these estimate revisions are directly related to near team stock moves We developed the Zacks Rank to capitalize on this phenomenon Our system takes these estimate changes into account and delivers a clear actionable rating model
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 Within the past 30 days our consensus EPS projection has moved 0 29 lower C is currently a Zacks Rank 3 Hold
Looking at its valuation C is holding a Forward P E ratio of 8 97 Its industry sports an average Forward P E of 10 97 so we one might conclude that C is trading at a discount comparatively
Investors should also note that C has a PEG ratio of 0 74 right now This metric is used similarly to the famous P E ratio but the PEG ratio also takes into account the stock s expected earnings growth rate Banks Major Regional stocks are on average holding a PEG ratio of 1 36 based on yesterday s closing prices
The Banks Major Regional industry is part of the Finance sector This group has a Zacks Industry Rank of 180 putting it in the bottom 30 of all 250 industries
The Zacks Industry Rank gauges the strength of our 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
Make sure to utilize Zacks Com to follow all of these stock moving metrics and more in the coming trading sessions |
C | Why Citigroup C Could Beat Earnings Estimates Again | Looking for a stock that has been consistently beating earnings estimates and might be well positioned to keep the streak alive in its next quarterly report Citigroup C which belongs to the Zacks Banks Major Regional industry could be a great candidate to consider
This U S bank has seen a nice streak of beating earnings estimates especially when looking at the previous two reports The average surprise for the last two quarters was 3 93
For the most recent quarter Citigroup was expected to post earnings of 1 78 per share but it reported 1 83 per share instead representing a surprise of 2 81 For the previous quarter the consensus estimate was 1 78 per share while it actually produced 1 87 per share a surprise of 5 06
Price and EPS Surprise
For Citigroup estimates have been trending higher thanks in part to this earnings surprise history And when you look at the stock s positive Zacks Earnings ESP Expected Surprise Prediction it s a great indicator of a future earnings beat especially when combined with its solid Zacks Rank
Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank 3 Hold or better produce a positive surprise nearly 70 of the time In other words if you have 10 stocks with this combination the number of stocks that beat the consensus estimate could be as high as seven
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change The idea here is that analysts revising their estimates right before an earnings release have the latest information which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier
Citigroup has an Earnings ESP of 0 51 at the moment suggesting that analysts have grown bullish on its near term earnings potential When you combine this positive Earnings ESP with the stock s Zacks Rank 3 Hold it shows that another beat is possibly around the corner
When the Earnings ESP comes up negative investors should note that this will reduce the predictive power of the metric But a negative value is not indicative of a stock s earnings miss
Many companies end up beating the consensus EPS estimate but that may not be the sole basis for their stocks moving higher On the other hand some stocks may hold their ground even if they end up missing the consensus estimate
Because of this it s really important to check a company s Earnings ESP ahead of its quarterly release to increase the odds of success Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they ve reported |
C | HSBC To Reduce 10 000 Jobs In Europe Amid Cost Saving Drive | A few months after being appointed as the interim CEO of HSBC Holdings LON HSBA plc NYSE C Noel Quinn has initiated a new round of cost cutting per The Financial Times According to people familiar with the matter this will lead to a reduction of nearly 10 000 jobs particularly in Europe and the higher paid roles globally This move is part of the bank s broader objective of reducing almost 4 000 jobs globally accounting for nearly 2 of its total workforce HSBC has realized that to enhance operating efficiency amid challenging market conditions it has to reduce costs substantially Over the past few years HSBC has been trying to shift operations to the most profitable businesses and hence achieve operating efficiency through Project Oak The latest job cuts come amid increasing geopolitical tensions including the US China trade war and the uncertainty related to Brexit Apart from HSBC other companies have also been reducing workforce to grapple with unfavorable market conditions Deutsche Bank NYSE DB is expected to cut 18 000 jobs and close the equity sales and trading business Nomura Holdings Inc NYSE NMR said that it would slash nearly 150 jobs this year while Citigroup NYSE C planned to cut at least 100 jobs in its equities business Concurrent with the second quarter 2019 earnings release it was announced that John Flint stepped down as the CEO of HSBC Flint remained CEO for nearly 1 5 years after joining the company in 1989 Thus Quinn the chief executive of global commercial banking was asked to take on the responsibility as the interim CEO and join the board as an executive director Through Project Oak Flint wanted to achieve his positive jaws target He deliberately wanted to keep revenues growing at a faster rate than expenses But last year Flint was unable to achieve his positive jaws target as growth in revenues did not outpace rise in expenses Nonetheless while first quarter 2019 witnessed expense rise of nearly 3 2 due to increase in the number of investments for business growth programs the company was able to meet Flint s target of positive jaws Moreover the second quarter witnessed a marginal decline in adjusted expenses on a year over year basis Now as the interim CEO Quinn is working with Ewen Stevenson the chief financial officer of the company to achieve his goal of reducing expenses Despite the job cuts HSBC remains on track to strengthen performance with special focus on building operations in Asia including Hong Kong and China to deliver high single digit revenue growth annually from the region Shares of the company have lost 13 8 over the past six months compared with an 8 5 decline of the Currently HSBC carries a Zacks Rank 4 Sell You can see Today s Best Stocks from ZacksWould you like to see the updated picks from our best market beating strategies From 2017 through 2018 while the S P 500 gained 15 8 five of our screens returned 38 0 61 3 61 6 68 1 and 98 3 This outperformance has not just been a recent phenomenon From 2000 2018 while the S P averaged 4 8 per year our top strategies averaged up to 56 2 per year |
JPM | Citigroup C To Relocate 900 Jobs From London To Dublin | Post Britain s exit from the European Union Citigroup Inc NYSE C is formulating the relocation of up to 900 jobs from London to Dublin This is part of the company s contingency plan to deal with the growing uncertainties of Brexit Per The Sunday Times Citibank conducted a board meeting in Dublin last month and was trying to explore options for office space in the Irish capital The company s chief executive Mike Corbat and Chairman Michael O Neill attended the meeting The newspaper quoted a source saying They have been testing the Irish political and regulatory regime on a macro level Per the U K head of Citi regardless of what deal Britain will enter into for access to the financial services market in the European Union jobs in London will be shifted to other countries Notably U K Citi has 9 000 employees According to some Irish officials many banks are reconsidering using London as their workplace and hence are preparing to move some of their business from London to Dublin Moreover currently Ireland is being presented as the only country in Europe that uses English as their language and therefore can help banks near London to continue their operations Also its labor laws are flexible and it has good transportation links to the U S Additionally the country has a good reputation with regards to back office fund management operations Apart from Citi various other banks like JPMorgan Chase Co NYSE JPM and Bank of America Corp NYSE C have either already established their offices in Dublin or have the license to conduct business there Currently Citigroup carries a Zacks Rank 3 Hold You can see A better ranked stock in the finance space is Carolina Financial Corporation NYSE C sporting a Zacks Rank 1 It has witnessed an upward earnings estimate revision of 12 9 over the last 30 days and its share price is up 38 9 year to date Confidential from ZacksBeyond this Analyst Blog would you like to see Zacks best recommendations that are not available to the public Our Executive VP Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand |
JPM | JP Morgan Stock Is Up 13 Since Earnings What s Next For JPM | A month has gone by since the last earnings report for JP Morgan Chase NYSE JPM Shares have added about 13 21 in the past month in that time frame
Will the recent positive trend continue leading up to their next earnings release or is the stock due for a pullback Before we dive into how investors and analysts have reacted as of late let s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts for JPM investors
Recent Earnings
JPMorgan Q3 Earnings Easily Top on Solid Trading LendingDriven by improved trading and mortgage banking revenues JPMorgan s third quarter 2016 earnings of 1 58 per share handily surpassed the Zacks Consensus Estimate of 1 40 However the figure reflects a 6 decline from the year ago period Notably the results included a legal benefit of 71 million Improved fixed income and equity trading revenues higher mortgage banking fees and growth in investment banking income drove the results Further higher net interest income perhaps attributable to the rise in loan supported top line The overall performance of JPMorgan s business segments in terms of net income generation was impressive All segments except Corporate and Consumer Community Banking reported a rise in net income on a year over year basis Higher Trading Mortgage Banking Revenues Lower CostsManaged net revenue of 25 5 billion in the quarter was up 8 from the year ago quarter Also it compared favorably with the Zacks Consensus Estimate of 24 billion A 48 jump in fixed income markets revenue and 21 growth in mortgage banking income were the primary reasons for top line improvement Non interest expense was 14 5 billion 6 lower than the year ago quarter The decline was primarily due to lower legal expenses and consistent cost reduction initiatives partially offset by a rise in compensation costs Credit Quality A Cause of ConcernJPMorgan s credit quality deteriorated during the quarter As of Sep 30 2016 non performing assets were 7 8 billion up 7 from the year ago period Net charge offs were up 16 year over year to 1 1 billion Further provision for credit losses surged 86 year over year to 1 3 billion primarily due to increases in consumer reserves Fourth Quarter 2016 OutlookManagement anticipates a modest rise in NII on a sequential basis on the back of continued growth in loans Further managed non interest revenue is expected to decline sequentially reflecting projected a fall in markets revenue seasonally lower Mortgage Banking Revenue and higher Card new account origination costs Specifically Securities Services revenue is likely to be nearly 875 million depending on market conditions In Card Commerce Solutions Auto revenue is expected to fall roughly 200 million on a sequential basis due to higher Card new account origination costs on strong but slowing demand for Sapphire Reserve through fourth quarter 2016 In addition investment banking fees are anticipated to be down sequentially but relatively flat year on year Operating expenses are projected to be essentially flat On the assumption that there will no further deterioration in oil prices management expects no additional significant reserve builds for energy sector loans 2016 OutlookWith the December rate hike and the expected loan growth the company projects to deliver about 2 2 5 billion increase in NII Further total non interest income will be around 50 5 billion almost stable on a year over year basis On the expense front management expects adjusted expenses to be nearly 56 billion relatively stable on a year over year basis Management projects average core loan growth to be around 15 year over year Given the stress in the energy sector and loan growth the company projects NCOs to be roughly 4 75 billion up year over year Further the company is expected to build reserves for auto loan portfolio How have estimates been moving since then
Following the release and in the last month investors have witnessed an upward trend for fresh estimates There have been seven revisions higher for the current quarter compared to one lower in the time frame Overall it looks like things are starting to turnaround for JPM on this front
JPMORGAN CHASE Price Consensus and EPS Surprise
VGM Scores
At this time JP Morgan s stock has a poor Growth score of F but its momentum is doing a lot better with a C Charting a somewhat similar path the stock was allocated a grade of D on the value side putting it in the bottom 40 for this investment strategy JPM has a poor historical EPS growth level of about 4 74 From a momentum outlook it is worth noting that the stock has good earnings estimate momentum which includes rising estimates putting the stock into B territory from this look
The company s stock is suitable soley for momentum based on our styles scores
Outlook
With estimates broadly trending higher for the stock the near term looks promising for JPM investors Based on this it shouldn t be shocking to note that JPM has a Zacks Rank 2 buy and we are expecting outperformance from JPM in the next few months
Want the latest recommendations from Zacks Investment Research Today you can download 7 Best Stocks for the Next 30 days |
JPM | Russell 2000 Surges On Trump Presidency 6 Top Mutual Funds | Following a month long uncertainty over U S Presidential election results markets registered strong gains last week following Donald Trump s surprise victory Following this development the Russell 2000 Small Cap Index emerged as the top performer among the key benchmarks in the last one month timeframe While the Dow the S P 500 and the Nasdaq gained 4 3 1 8 and 0 4 respectively in the Oct 17 to Nov 11 period the Russell 2000 increased 7 3 Moreover last week the Dow posted the best weekly gain of 5 6 since 2011 Like the blue chip index the Russell 2000 registered its best increase since December 2011 with a more than 10 jump indicating strong growth for small cap funds Both small cap growth and value funds registered better one month returns than their large and mid cap counterparts Small cap value mutual funds posted a return of 7 5 in the last one month while the large and mid cap value funds registered gains of 3 8 and 4 5 respectively Also small cap growth mutual funds posted a return of 4 2 in last one month while mid cap growth funds registered gains of only 1 5 and large cap growth funds incurred a loss of 0 7 In the current scenario investing in small cap mutual funds could be a wise option What Drove the Small Cap Index Higher Domestic Economy in FocusIn his victory speech Trump said that the current economic growth pace of 2 will be doubled and almost 25 million jobs will be created in the coming 10 years Moreover he aims to make the U S economy the strongest in the world He also said that he will not only boost military spending but will also revive the domestic manufacturing sector Loosing financial regulations and homeward looking policies are likely to boost the growth pace of the domestic economy After the 2008 financial crisis the banking sector faced revenue pressure following stringent regulatory measures However it is expected that Trump will get rid of Dodd Frank regulations A few months ago Trump had said Dodd Frank has made it impossible for bankers to function and that needs to be repelled This in turn will help boost the net profit margin of banks Higher Infrastructure SpendingTrump is expected to increase public spending on infrastructure by a trillion of dollars over the next 10 years Moreover he proposed to offer 137 billion in tax credits to private construction companies undertaking infrastructure projects Trump s spending proposals might have a positive impact on the overall industrials industry Investors are now expecting Trump s policies to result in strong growth for the U S economy and eventually prompt the Fed to raise interest rates Rising rate hike chances led the dollar to increase 2 4 for the week against a basket of 16 major currencies registering its best weekly percentage rise since May 2015 Buy These 6 Small Cap Mutual FundsThe Russell 2000 Index gained following Trump s economic proposals of looser financial regulations and higher fiscal spending Moreover small cap funds are favorable investment choices as they have lesser international exposure and are thus protected from the adversities of a rising dollar Though small cap funds are believed to have a higher level of volatility compared to their large and mid cap counterparts they show greater growth potential when markets see an uptrend Hence risk loving investors can pick these funds to gain following the recent gains in the Russell 2000 In this scenario we highlight two mutual funds from each of the three small cap categories growth blend and value that either have a Zacks Mutual Fund Rank 1 Strong Buy These funds also have impressive one month and three month returns Also these funds have a low expense ratio and their minimum initial investment is within 5000 We expect these funds to outperform their peers in the future Remember the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers Unlike most of the fund rating systems the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund Small Cap GrowthFidelity Small Cap Growth invests a major portion of its assets in equity securities of small cap companies The fund invests both in domestic and foreign companies which are expected to have an above average growth prospect FCPGX has 1 month and 3 month returns of 1 4 and 0 6 respectively It has an expense ratio of 1 11 as compared to the category average of 1 37 TCM Small Cap Growth invests a large share of its assets in companies having market capitalizations similar to those listed in the Russell 2000 Index TCMSX has 1 month and 3 month returns of 4 8 and 4 6 respectively It has an expense ratio of 0 93 as compared to the category average of 1 37 Small Cap BlendPrincipal SmallCap S P 600 Index R3 invests the majority of its assets in firms listed in the Standard Poor s SmallCap 600 Index PSSMX also invests in index futures and equity ETFs in order to reduce tracking error by gaining exposure to the index Both its 1 month and 3 month returns were 5 1 The fund has an expense ratio of 0 73 as compared to the category average of 1 25 Federated MDT Small Cap Core Fund Class A Shares invests the majority of its assets in stocks of small cap companies QASCX invests mostly in companies listed in the Russell 2000 Index The fund has 1 month and 3 month returns of 4 9 and 7 4 respectively It has an expense ratio of 1 13 as compared to the category average of 1 25 Small Cap ValueJPMorgan NYSE JPM Small Cap Value A uses the value based strategy to invest in equity securities of small cap firms having market capitalization similar to those included in the Russell 2000 Value Index The fund has 1 month and 3 month returns of 6 1 and 5 7 respectively It has an expense ratio of 1 25 as compared to the category average of 1 34 CRM Small Cap Value Investor invests in securities of small cap companies having market capitalization similar to those listed in the Russell 2000 Value Index CRMSX has 1 month and 3 month returns of 6 5 and 6 1 respectively It has an expense ratio of 1 12 as compared to the category average of 1 25 Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
MS | Asia struggles on forex and flows after Trump win | By Saikat Chatterjee HONG KONG Reuters There is much uncertainty in Asia over what U S President elect Donald Trump will do when he takes office next year but markets seem sure of two things his policies will be inflationary and there are unlikely to be any big winners in the trade driven region U S Treasury bond yields have surged to their highest levels since January on expectations Trump s spending promises will push U S inflation higher and emerging Asian currencies have fallen partly because uncertainty always prompts a flight to safer assets but also because Trump s campaign rhetoric has stoked fears of a more protectionist trade environment As the global opportunity cost of capital rises alongside Treasury yields and as the dollar surges simultaneously investors once again will fear another exodus of capital from emerging markets Citi analysts said in a report noting that the U S 10 year treasury yield has risen by 45 basis points in less than two days on expectations of expansionary fiscal policy The effect is already being felt in Asia The Malaysian ringgit fell more than 5 percent against the dollar in the offshore market on Friday prompting a blowout in spreads and forcing the central bank to limit offshore based transactions to check the slide The Indonesian rupiah has also come under selling pressure prompting authorities to sell dollars to stabilize it Hong Kong and Singapore Asia s two city state trading hubs are among the most exposed however not only because of their big trade links with the United States but also their use of the dollar in policymaking Hong Kong has a direct currency peg with the greenback while Singapore uses a currency basket in which the dollar forms a substantial component Trump s fiscal and pro business policies will lead to higher inflation and interest rates putting Singapore and Hong Kong at the front and center for any adjustment said a portfolio manager at a U S firm in Hong Kong Not only is a rising U S dollar equivalent to tightening monetary conditions in those cities but if the Federal Reserve raises rates faster than had been expected it will drain the cheap funding that has kept emerging markets flush with cash PROTECTIONIST PROSPECTS Corporate leverage within Asia now accounts for half of the region s debt to GDP and companies in China and India have taken on the most debt according to bond giant PIMCO Moreover rising interest rates on U S debt will erode the relative appeal of higher yielding debt in Asian countries causing an outflow of capital For example the yield gap between 10 year U S debt and a simple average of the three highest yielding countries in Asia India China and Indonesia has narrowed by 41 basis points to 350 basis points in just two days Taiwan and Indonesia have seen the biggest capital inflows so far this year at more than 10 billion each according to economists at Credit Suisse SIX CSGN which makes them most vulnerable to a rapid reversal We have started to see some reversal to the large inflows into Asian equities and debt in the last few days but it would be difficult to say at this point whether it is sustainable said Jonathan Garner chief Asia and emerging market equity strategist at Morgan Stanley NYSE MS who expects a further 5 percent downside to the emerging markets equity index from current levels Beyond the immediate market impact there is another risk overshadowing much of Asia how will Trump keep his campaign promises to rework trade deals and punish countries such as China While exports to the United States from Asia excluding China have fallen steadily in the last 15 years China still accounts for half of the U S trade deficit with the world and any signs that Trump might follow through with protectionist policies could trigger a currency war On Friday Beijing fixed the yuan s daily midpoint at a six year low but on a trade weighted basis it still remains near an all time high hit last year Some economists say pursuing more protectionist policies may play into China s hands to promote the use of its currency in international trade
The RMB internationalization drive may receive a boost if the U S becomes more isolationist and China s political standing increases said Mark McFarland Asia chief economist at Union Bancaire Privee |
MS | Buy steel stocks into Trump presidency Morgan Stanley says | AK Steel AKS 8 8 shoots to a new 52 week high after Morgan Stanley NYSE MS upgrades steel company shares SLX 1 7 including AKS to Overweight from Equal Weight with an 11 price target up from 5 The firm cites Pres elect Trump s proposals for increased infrastructure spending and increased trade protection as having the potential to push the U S steel market into meaningful undersupply for the first time since the financial crisis Trump s stimulus plan could conservatively boost steel demand by 20 year for five years and means continued efforts on the steel trade protection front Stanley says raising its mid cycle price estimate to 225 ton from 175 Stanley also upgrades U S Steel X 7 to Overweight from Equal Weight with a 46 price target hiked from 19 Tenaris TS 0 3 to Overweight with a 42 price target and Cliffs Natural Resources CLF 2 3 to Equal Weight from Underweight with a 9 target raised from 3 |
MS | First Republic Bank sets capital raise | Up 28 YTD and racing to a 52 week high today First Republic Bank NYSE FRC is selling 3M shares with an underwriter greenshoe of 450K shares BAML JPMorgan NYSE JPM Morgan Stanley NYSE MS and UBS are the underwriters Shares are down 0 9 after hours following a 2 8 gain in the regular session |
MS | Exclusive Four large Wells Fargo shareholders want more action from board | By Dan Freed NEW YORK Reuters Several large Wells Fargo Co N WFC investors say they are looking for changes on the board of directors in the wake of a sales scandal that has caused months of upheaval for the bank and cost its former chief executive his job Four shareholders who spoke to Reuters voiced concerns about the 15 member board s initial response to the crisis its size directors responsibilities and their outside commitments Another Gamco CEO Mario Gabelli would not discuss the board s performance However he said he would welcome Warren Buffett whose company is Wells Fargo s top investor becoming a director Reuters contacted more than two dozen of the top 100 Wells Fargo investors to determine whether the sales scandal affected their views on the stock Five the California State Teachers Retirement System CalSTRS New York City Retirement Systems union affiliated CtW Investment Group and fund managers Gardner Russo Gardner and Gamco Investors Inc N GBL offered comments Others declined to be interviewed or did not respond Investors who spoke to Reuters directly own or advise others who own about 71 million Wells Fargo shares 1 4 percent of all outstanding stock worth about 3 7 billion as of Friday s close One key criticism the board was slow to tackle and disclose sales practices that led to the opening of as many as 2 million accounts without customers permission Shareholders also said they had trouble understanding who was responsible for what on various board committees For instance the finance committee oversees financial risk and reputation risk according to its charter However there is also a separate risk committee and a corporate responsibility committee that monitor s the company s reputation generally Committee chairs are supposed to coordinate to avoid unnecessary duplication Until we get a bit more of this information it s hard to know whether the board should change or who should be held accountable Anne Sheehan director of corporate governance at CalSTRS told Reuters CalSTRS had just under 500 million worth of Wells Fargo stock in its most recent disclosure Three of the shareholders told Reuters it was too early to tell whether they would bring any of the issues to a vote at the annual shareholder meeting in April or take any other action if the results of the bank s internal investigation and their conversations with the board proved unsatisfactory Shares of Wells Fargo the third largest U S bank lost as much as 12 percent of their value in the weeks after the scandal erupted The stock began to recover after former Chairman and CEO John Stumpf resigned on Oct 12 Tim Sloan replaced him as CEO and independent director Stephen Sanger became chairman In step with other banks Wells Fargo s stock has soared since the U S presidential election The bank s shares are down 2 1 percent so far this year compared with a 12 1 percent gain for the S P 500 Banks Index A Wells Fargo spokesman declined to comment for this story and said neither Sloan nor Stumpf were available A spokesman at Sard Verbinnen representing outside directors declined to comment as did Buffett Individual board members either declined to comment did not return requests for comment or could not be reached TAKING ACTION Since Wells Fargo reached a settlement with regulators on Sept 8 it has launched an internal probe apologized to customers and employees changed compensation plans and hired a consultant to review sales practices A seldom used clawback provision was also triggered to recover 41 million in stock compensation from Stumpf and 19 million from Carrie Tolstedt who ran the retail banking unit in which 5 300 employees were fired for improper account openings Earlier this month Sloan said management would leave no stone unturned in its review and that the bank would learn from its mistakes Encouraged by Wells Fargo s response to the crisis Morgan Stanley NYSE MS analyst Betsy Graseck has recommended its shares saying management is strong and the board is taking action In a CNN interview last week Buffett said he did not sell any Wells Fargo shares because he has faith in the bank over the long term as well as Sloan whom he described as exactly right for the CEO job Buffett declined to make further comment to Reuters However Thomas Russo managing member at Gardner Russo Gardner Wells Fargo s 40th largest shareholder said the board allowed problems to fester I d say that was tone deaf on the part of the board he told Reuters Russo nevertheless said he was optimistic the bank would seek a smaller and more responsive board with more regulatory banking and technology experience but has no plans to lobby the management for action SEEKING CHANGES CtW Investment Group which works with union pension funds that manage more than 250 billion said it will keep pushing for change in private discussions with the board CtW will be meeting with them soon and expects progress before the next proxy statement is filed a spokesman said The group had asked Wells Fargo to appoint two new directors before Stumpf resigned Wells Fargo typically files its proxy statement which lists matters that will be up for a vote in March Its annual meeting is scheduled for April 26 CtW has been in contact with several other shareholders said executive director Dieter Waizenegger who declined to name them Officials at New York City s pension funds which together own more than 500 million worth of Wells Fargo told Reuters they also wanted fewer directors and more clarity about responsibilities In the coming months my office will continue to engage Wells Fargo and ensure they make real reforms New York City Comptroller Scott Stringer said in a statement California s teacher pension system is in discussions with Wells Fargo said Sheehan who declined to elaborate CalSTRS has a policy of opposing directors who have several outside duties Last April it voted against three Wells Fargo board members because they served on more than two boards Stumpf Blackberry Ltd TO BB CEO John Chen and Inseego O INSG CEO Susan Swenson The three received fewer votes than any other directors but all got approved each with close to 4 billion shares voted in their favor and less than 200 million against We are concerned about directors serving on too many other outside boards which was certainly the situation here and could have contributed to lapsed oversight Sheehan said
A spokeswoman for Blackberry said Chen was not available to comment Swenson declined comment |
MS | ViaSat 2 8 sa it plans 6 5M share public offering | ViaSat VSAT 0 3 is off 2 8 after hours after word of a proposed public offering of 6 5M of its shares The company will grand underwriters a 30 day greenshoe option for another 975 000 shares With after hours price at 78 50 gross proceeds could come to nearly 586 8M The company intends to use net proceeds for general purposes which might include acquisitions or joint ventures as well as financing satellites BofA Merrill Lynch J P Morgan Credit Suisse SIX CSGN and Morgan Stanley NYSE MS are joint book runners |
JPM | China Quotas for Outbound Investment Trials Hit 10 Billion | Bloomberg China s currency regulator more than doubled quotas for outbound investment in Shanghai and Shenzhen allowing fund companies to invest a total of 10 billion in assets overseas
The State Administration of Foreign Exchange boosted the Qualified Domestic Limited Partnership and Qualified Domestic Investment Enterprise trial programs in the two cities to 5 billion each the currency regulator said late Tuesday SAFE raised the quota from 2 billion for the QDLP program in Shanghai and 2 5 billion for QDIE in Shenzhen according to a note from United Overseas Bank Ltd
In recent months Chinese authorities have stepped up efforts to grow the two way flow of both inbound and outbound investments in their on going effort to further liberalize China s financial markets and open up China s capital account UOB said
China s leaders unveiled a series of steps earlier this month aimed at opening their financial system and more fully integrating into global capital markets Foreign firms are watching to see whether People s Bank of China Governor Yi Gang was serious in his pledge to move quickly to level the playing field with domestic financial companies
QDII Program
The currency regulator is also set to allow bigger investments overseas under the Qualified Domestic Institutional Investors program which was halted for three years
The moves come after pressure on the yuan and for potentially destabilizing capital outflows diminished The onshore yuan had its biggest gain in nine years in 2017 against the dollar while the Bloomberg Dollar Spot Index is trading near its lowest level since early 2015 Foreign holdings of onshore Chinese bonds rose to a record this year more evidence of the yuan s appeal
This opens the door for some meaningful capital outflow which should partly balance portfolio inflows into the mainland bond market said Samsara Wang an emerging markets strategist at Credit Agricole PA CAGR CIB The news is modestly renminbi negative as the amounts are greater than expected the timing is faster
BNP Paribas PA BNPP SA s asset management arm is among those approved for the QDLP program Several institutions including JPMorgan NYSE JPM Asset Management were reported to have been granted QDLP quotas last month
Adds fifth sixth paragraphs on QDII yuan |
JPM | High Yield Bond Sales Ramp Up Amid Concerns Over Volatility | Bloomberg Europe s high yield market has sprung back to action this month with 6 0 billion euros equivalent 7 3 billion of new supply as borrowers of all shapes and sizes take advantage of a window for issuance The potential for market volatility may soon close that window however with the European Central Bank set to signal how it ll end quantitative easing in July
The threat of volatility is here to stay with many moving pieces on the economic and monetary policy front said Kevin Foley head of loan and high yield capital markets EMEA at JPMorgan Chase NYSE JPM Bank For issuers the key remains preparing in advance so that they are in a position to take advantage of issuance windows
The recent sales uptick is expected to continue into May albeit at a slower pace which should help boost volumes in a year that has so far underwhelmed At 23 9 billion euros equivalent issuance so far this year is 17 percent down on the same period of 2017 However nearly a fifth of that priced in the last week alone making it the busiest week for sales since Jan 19 according to data compiled by Bloomberg
Credit spreads are expected to widen materially from here according to Uli Gerhard a senior portfolio manager at Insight Investment which manages 791 billion of assets But the conundrum that investors are facing now is that current valuations look attractive versus low default rates yet we can all foresee a rate rise on the horizon so naturally investors are more cautious Gerhard added
Returns so far this year for high yield bonds are back in the black however at 0 41 percent according to the Bloomberg Barclays LON BARC Pan European High Yield Index This month option adjusted spreads on the index have tightened by 25 basis points and yields have narrowed to 3 6 percent from a one year wide point on April 4
After a period of weakness which was largely sparked by trade tensions fund flows are much more stable and have helped the high yield market find its feet said Tom Ross a portfolio manager at Janus Henderson Investors who manages 2 7 billion of assets And right now it seems at the moment that syndicates are very confident that they can get these deals done
Pick and Choose
But while the market is open for business investors are making it clear they are remaining disciplined especially around tricky credits Bonds and loans are generally clearing at wider levels than they would have back in January according to JPMorgan s Foley
A deal that caught investors attention for its 8 5 percent coupon and backstory is Yell Bondco Plc The company was created via a corporate reorganization at Hibu Group Ltd which twice restructured its debt in 2014 and 2016 Oilfield services company CGG SA was another company returning to the market after restructuring its debt The borrower sold 300 million and 280 million euros of bonds earlier in the month with 9 percent and 7 875 percent coupons respectively
The market is wide open and difficult credits with a checkered past such as Yell are taking advantage of this Insight Investment s Gerhard said The deals in the market at the moment finally require more credit work but one has to be selective and disciplined in this market
Signs of investor discipline have have also been evidenced by push back on aggressive covenants U K watchmaker Aurum Holdings Ltd was recently forced to sweeten a 265 million pound bond offering by removing the clause that would have allowed it to pay additional dividends to its owner Apollo Global Management LLC Consequently Aurum had to increase the yield to 8 5 percent from 7 5 percent
The most egregious language we ve seen recently allowed a company to access the restricted payments basket in the period after a coupon should have been paid and the end of the grace period Janus Henderson s Ross said We pushed back on that in the Selecta deal and got the language changed |
JPM | Twitter 2 as it earns fourth upgrade since earnings | After a day of retrenching following earnings that featured a softer look ahead on its conference call Twitter NYSE TWTR is up 2 premarket alongside an upgrade to Outperform at Macquarie That followed on an upgrade to Buy from UBS part of four upgrades Twitter s received since posting earnings Wednesday morning and several more price target hikes Macquarie expects Twitter s cautious guidance to come out conservative amid strong usage and advertising trends The company s long term opportunities are solid it says Raymond James upgraded to Market Perform from Underperform pointing to ad growth trends and sales execution international growth and a mix shift to video topping 50 h t Bloomberg JPMorgan NYSE JPM has raised its price target to 39 implying 31 upside urging buys on weakness Cowen bumped its target to 24 Mizuho raised its target to 25 and Jefferies raised its target to 33 Earnings call transcript Now read |
C | As copper booms miners take hunt to Mongolian dunes | By Barbara Lewis LONDON Reuters When temperatures rise and winds drop in the coming weeks a band of explorers will hunt for copper riches in Mongolia s Gobi Desert For years Rio Tinto has been the sole international copper mine operator in Mongolia bound closely to a country where it has bet billions of dollars on the giant Oyu Tolgoi project Others have steered clear due to the risks of operating in a nation with an unpredictable and young democracy and judiciary a frail economy and extreme weather Now rising global demand for a metal used in electric cars and renewable energy at a time of increased costs and depleted deposits in the world s biggest copper producer Chile is driving miners to riskier locations Some are looking to Mongolia Geologists say deposits like Oyu Tolgoi meaning Turquoise Hill because of the staining of the rocks by oxidized copper rarely occur in isolation That means for some miners the chances of finding another make the east Asian nation worth a calculated gamble especially given its proximity to the world s biggest copper consumer China The new charge is led by a group of about half a dozen smaller players including Australia s Xanadu Mines AX XAM Canada s Kincora Copper V KCC and U S company Wood Capital Partners which have higher risk appetites and are seeking to steal a march on competitors Wood Capital Partners set up by two former Citigroup NYSE C bankers and specialized in acquiring distressed assets told Reuters it had invested several million dollars in exploration territory in the Southern Gobi Co CEO and Managing Partner Stephen Dizard said the firm bought the concession which is 364 square km or about six times the size of Manhattan from a frontier markets fund which was in liquidation He wanted to get into Mongolia ahead of a rush driven by the global hunt for new copper He said miners would become increasingly confident in buying assets in the country because the economy was slowly improving aided by an International Monetary Fund bailout It Mongolia was distressed financially and distressed across the sector Dizard added We took the view the situation had to improve It has Beginning in March and April he said the company s drilling budget would be a minimum of a seven figure number Sam Spring CEO of Kincora said it raised about 4 5 million last year to fund its Mongolian exploration The company which has licenses for more than 1 400 square km of land drilled 6 000 meters last year and results were promising and that it would step up activity in late March or early April We ve started to see a change of investor sentiment There is increasing infrastructure and hopefully we are seeing tailwinds rather than headwinds added Spring who describes Mongolia as one of the last frontiers for top quality copper assets Andrew Stewart CEO of Xanadu thinks he will be able to gather enough information over the coming months to determine whether he can justify establishing a mine in the country He is planning drilling using four rigs compared with two last year Mongolia is very good because it has the prospectivity he said DESERT LABYRINTH The dream is another discovery on the scale of Rio Tinto s Oyu Tolgoi a chain of deposits in the southern Gobi about 550 km south of the capital Ulaanbaatar and 80 km north of the border with China But even Rio Tinto L RIO AX RIO which is relying on Mongolia to drive growth after committing about 12 billion to the project only resumed exploration there last year after a five year hiatus during the copper market downturn The Anglo Australian miner says it has still to make any return on its investment but in January it announced an exploration office in Ulaanbaatar its first formal office in the capital This was a symbolic move intended to underline to the government its commitment to the country according to industry sources Rio Tinto says the office will employ 80 staff and cover technology as well as exploration To make up for dwindling output at the open pit mine Rio Tinto is building a labyrinth of underground tunnels that will increase annual output to 560 000 tonnes about three times current production from the open pit Ramping up the underground operations will begin around the start of the next decade As well as the market downturn Rio Tinto has had to contend with wrangles with the Mongolian government over taxes and power supply The mine is jointly owned by the government with 34 percent and Turquoise Hill Resources TO TRQ with 66 percent Turquoise Hill is in turn 51 percent owned by Rio Tinto Rio Tinto CEO Jean Sebastien Jacques said problems were inevitable but his company was there for the long haul My personal experience over the last five years is that you know lots of issues as you would expect but each time we have been able to work through them he said last month I m not saying it s going to be easy 40C TO 40C Miners and political analysts say that while the economy in Mongolia is gradually improving the legal system is opaque and frequent changes in government since the country became a democracy three decades ago have created policy uncertainty making investors wary The Mongolian mining ministry did not respond to Reuters requests for comment Miners must also deal with temperatures that can swing from 40C to 40C and ferocious winds that can last for days As a result they tend to limit drilling programs in the Gobi to between late March and November By contrast drilling can take place all year round in Chile and other Latin American countries Such considerations have deterred most miners for many years BHP Chief Executive Andrew Mackenzie for example told Reuters his preference was for safe jurisdictions namely the Americas He described Mongolia as potentially very prospective but not without security and geopolitical challenges But copper market conditions are slowly driving change Rio Tinto s renewed activity and the exploration of rivals comes as demand increases for a metal needed in large quantities for the electric vehicle and renewable energy industries Copper prices have rebounded to nearly 7 000 a tonne from lows around 4 300 a tonne hit in early 2016 which was their weakest since 2009 At the same time Chile s long exploited ore bodies are ageing and challenged by arsenic concentrations and proximity to large populations Mine workers there have also been demanding higher wages adding to costs Such is the draw of Mongolia which has the same type of porphyry rock formations that even Chile s giant state copper company Codelco has said it is considering investing in the Asian nation An advantage of the porphyry formations is that the copper is often accompanied by gold which can effectively subsidies the copper production Mongolia represents a very prospective region for copper deposits of the porphyry type said Jamie Wilkinson research leader in mineral deposits at London s Natural History Museum Oyu Tolgoi was found in 2001 There have been some small discoveries since then but nothing on the same scale There is lots of potential for future discoveries NOT FOR FAINT HEARTED However while there may be geological potential there is no guarantee of unearthing commercial volumes of copper and luck is always a significant factor The interest from overseas explorers if sustained could nonetheless prove crucial for Mongolia itself which is heavily dependent on commodities and had to turn to the IMF last year following a collapse in foreign investment About 30 percent of its 3 million people live in poverty according to 2016 figures from the World Bank and Mongolia s national statistical office Moody s raised the country s sovereign debt rating by a notch in January following the IMF bailout deal but it is still deep in junk territory The deal has helped the country pay off its sovereign debt and stabilized the local currency the tugrik but required Ulaanbaatar to introduce measures such as higher taxes and cuts to social welfare Iain Watt CEO of mining business IGI s UK operations said it too was exploring possibilities in Mongolia as well as central Asia and that there was clear potential for investors
Mongolia is definitely on the up but it s not for the faint hearted |
C | Exclusive Saudi businessman al Sanea seeks last ditch debt deal sources | By Davide Barbuscia and Tom Arnold DUBAI Reuters Saudi Arabia s collapsed Saad Group led by businessman Maan al Sanea has called a meeting with creditors in a last ditch attempt to end a dispute over 16 billion riyals 4 3 billion of claims sources close to the matter said Advisers to the group have asked creditors to meet in Dubai over the next few days seeking a deal before Saudi authorities start auctioning from March 18 billions of dollars of assets including machinery real estate vehicles belonging to Maan al Sanea and his company the sources added Maan al Sanea ranked in 2007 by Forbes as one of the world s 100 richest people was detained in Saudi Arabia s Eastern province last October for unpaid debt His case is separate from the dozens of Saudi businessmen and prominent figures who have been held in a corruption crackdown Saad Group defaulted together with Ahmad Hamad al Gosaibi and Brothers AHAB in 2009 in what was Saudi Arabia s biggest financial meltdown leaving local and international banks with unpaid debt of about 22 billion Advised by Reemas a financial consultancy Maan al Sanea has asked some of Saad s creditors to meet in order to appoint a steering committee to coordinate negotiations between lenders and debtors Saad Group and Maan al Sanea himself ahead of a potential debt settlement sources who have seen the term sheet that sets the framework for a deal told Reuters The proposal sent to creditors on March 7 concerns 42 eligible banks that have obtained final non appealable judgments against Maan al Sanea Saad Group or both from a court in Saudi Arabia s Eastern Province the sources said speaking anonymously due to the sensitivity of the matter Local regional and international banks eligible for a settlement have claims totaling 16 billion riyals with international banks such as BNP Paribas PA BNPP and Citi N C and regional lenders such as Mashreq having claims of over 1 billion riyals each the sources said Some observers estimate Saad s total debt to be between 40 billion and 60 billion riyals The information sent to creditors does not include a settlement offer but lists assets that could be discussed as part of a potential deal These include 12 3 million riyals in credit balances with Saudi banks and an additional 22 2 million riyals with other financial companies the sources said They also include a total of 1 57 billion riyals of shares in companies including National Commercial Bank Kingdom Holding Samba Financial Group and Riyad Bank 3 21 billion riyals of real estate assets stakes in four companies and so called top up assets to be contributed by relatives of Maan al Sanea the sources said They said Saad Group and Maan al Sanea would provide a list of such top up assets to the creditors shortly and that there was no indication in the term sheet of their value A meeting between Saad Group representatives and creditors was scheduled for March 14 but to ensure full attendance it has been rescheduled for next week two sources familiar with the matter said Some creditors said the urgency to hold the meeting was to ensure the value of the assets at stake could be preserved better than under a liquidation process But one source familiar with the matter said the Saad assets to be sold on March 18 as part of the liquidation process included items such as machinery and were not the principal assets used in Reemas proposal which are real estate and equities and that the outcome of the sale would not have any significant impact on the proposed settlement talks
1 3 7502 riyals |
C | Bitcoin exchange reaches deal with Barclays for UK transactions | By Tommy Wilkes and Emma Rumney LONDON Reuters One of the biggest bitcoin exchanges has struck a rare deal which will allow it to open a bank account with Britain s Barclays L BARC making it easier for UK customers of the exchange to buy and sell cryptocurrencies the UK boss of the exchange said on Wednesday Large global banks have been reluctant to do business with companies that handle bitcoin and other digital coins because of concerns they are used by criminals to launder money and that regulators will soon crack down on them San Francisco based exchange Coinbase said its UK subsidiary was the first to be granted an e money license by the UK s financial watchdog a precursor to getting the banking relationship with Barclays The Barclays account will make it easier for British customers Previously they had to transfer pounds into euros and go through an Estonian bank Having domestic GBP payments with Barclays reduces the cost improves the customer experience and makes the transaction faster said Zeeshan Feroz Coinbase s UK CEO The UK is the largest market for Coinbase in Europe and the exchange said its customer base in the region was growing at twice the rate of elsewhere Feroz said that it took considerable time to get a UK bank on board partly because Barclays needed to be sure that Coinbase had the right systems in place to prevent money laundering Regulators across the globe have warned that cryptocurrencies are used by criminals to launder money and some exchanges have been shut down It s a completely brand new industry There s a lot of understanding and risk management that s needed Feroz said Despite growing interest in both digital currencies and the technology behind them some big lenders have limited their customers ability to buy cryptocurrencies fearing a plunge in their value will leave customers unable to repay debts In February British banks Lloyds LON LLOY and Virgin Money LON VM said they would ban credit card customers from buying cryptocurrencies following the lead of JP Morgan and Citigroup NYSE C
Coinbase said it had also become the first crypto exchange to use Britain s Faster Payments Scheme a network used by the traditional financial industry |
C | Citigroup CEO earns 369 times average employee | Reuters Citigroup Inc N C Chief Executive Michael Corbat s annual pay for 2017 was 369 times the median annual pay of all employees the bank said in a regulatory filing Corbat s annual total compensation was 17 8 million while the median annual total compensation of all Citi employees was 48 249 the bank said in the filing The bank in February announced that it had raised Corbat s annual compensation by 48 percent for 2017 a year in which the bank made more money from operations but still fell short of earlier targets
The change in Corbat s pay compares with annual raises of 5 to 20 percent for other Wall Street bank chief executives |
C | 4 Trade Ideas For Citigroup Bonus Idea | Here is your Bonus Idea with links to the full Top Ten
Citigroup NYSE C C has been bumbling along between 60 and 73 since moving off of the December low and settling in January Coming into the week it is consolidating in the upper part of the zone with 55 upside to the top The RSI is turned back up in the bullish zone with the MACD flat avoiding a cross down
There is resistance at 70 20 and 72 then 73 and 75 20 before 76 30 and 77 70 then the cycle high at 80 Support lower comes at 68 and 66 50 then 64 50 and 62 before 61 30 and 60 Short interest is low under 1 The company is set to report earnings the morning of October 15th The stock pays a dividend with an annual yield of 2 94 and went ex dividend last August 2nd
The weekly options chain shows big open interest at the 68 50 put and at 66 50 and 70 50 on the call side The October chain covering the earnings report shows the biggest open interest on the put side at the 65 strike On the call side it is much bigger and focused at the 70 strike as well as 67 50 and 72 50 November options suggest a possible draw to the 62 50 to 65 area and the December options are biggest there on the put side as well But on the call side they are focused from 70 to 75
Citigroup NYSE C Ticker C
Trade Idea 1 Buy the stock on a move over 70 with a stop at 69
Trade Idea 2 Buy the stock on a move over 70 and add an October 69 65 Put Spread 1 05 while selling the November 72 50 Call 1 20
Trade Idea 3 Buy the October November 72 50 Call Calendar 65 cents and sell the October 11 Expiry 67 50 Puts 62 cents
Trade Idea 4 Buy the December 70 75 Call Spread 2 00 and sell the December 60 Put 95 cents
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 |
C | Citigroup C To Report Q3 Results Wall Street Expects Earnings Growth | Wall Street expects a year over year increase in earnings on higher revenues when Citigroup C reports results for the quarter ended September 2019 While this widely known consensus outlook is important in gauging the company s earnings picture a powerful factor that could impact its near term stock price is how the actual results compare to these estimates
The earnings report might help the stock move higher if these key numbers are better than expectations On the other hand if they miss the stock may move lower
While the sustainability of the immediate price change and future earnings expectations will mostly depend on management s discussion of business conditions on the earnings call it s worth handicapping the probability of a positive EPS surprise
Zacks Consensus Estimate
This U S bank is expected to post quarterly earnings of 1 97 per share in its upcoming report which represents a year over year change of 13 2
Revenues are expected to be 18 54 billion up 0 8 from the year ago quarter
Estimate Revisions Trend
The consensus EPS estimate for the quarter has been revised 0 89 lower over the last 30 days to the current level This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period
Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts
Price Consensus and EPS Surprise
Earnings Whisper
Estimate revisions ahead of a company s earnings release offer clues to the business conditions for the period whose results are coming out Our proprietary surprise prediction model the Zacks Earnings ESP Expected Surprise Prediction has this insight at its core
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate The idea here is that analysts revising their estimates right before an earnings release have the latest information which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier
Thus a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate However the model s predictive power is significant for positive ESP readings only
A positive Earnings ESP is a strong predictor of an earnings beat particularly when combined with a Zacks Rank 1 Strong Buy 2 Buy or 3 Hold Our research shows that stocks with this combination produce a positive surprise nearly 70 of the time and a solid Zacks Rank actually increases the predictive power of Earnings ESP
Please note that a negative Earnings ESP reading is not indicative of an earnings miss Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and or Zacks Rank of 4 Sell or 5 Strong Sell
How Have the Numbers Shaped Up for Citigroup
For Citigroup the Most Accurate Estimate is lower than the Zacks Consensus Estimate suggesting that analysts have recently become bearish on the company s earnings prospects This has resulted in an Earnings ESP of 0 29
On the other hand the stock currently carries a Zacks Rank of 3
So this combination makes it difficult to conclusively predict that Citigroup will beat the consensus EPS estimate
Does Earnings Surprise History Hold Any Clue
While calculating estimates for a company s future earnings analysts often consider to what extent it has been able to match past consensus estimates So it s worth taking a look at the surprise history for gauging its influence on the upcoming number
For the last reported quarter it was expected that Citigroup would post earnings of 1 78 per share when it actually produced earnings of 1 83 delivering a surprise of 2 81
Over the last four quarters the company has beaten consensus EPS estimates four times
Bottom Line
An earnings beat or miss may not be the sole basis for a stock moving higher or lower Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors Similarly unforeseen catalysts help a number of stocks gain despite an earnings miss
That said betting on stocks that are expected to beat earnings expectations does increase the odds of success This is why it s worth checking a company s Earnings ESP and Zacks Rank ahead of its quarterly release Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they ve reported
Citigroup doesn t appear a compelling earnings beat candidate However investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release |
JPM | Trumpnomics And Global FX | Some of the heat has come out of the Trumpnomics inspired rally in equities and sell off in fixed income That said we are still seeing the Dow Jones index trade to a new record high while the S P 500 eyes one of its own A seven basis point bp move higher in the US 10 year treasury has resulted in a further steepening of the US yield curve and of course that is another positive for US financials with the sector up 3 8 Long US banks is the trade du jour and traders have been expressing this through individual equity positions or through ETF s like the Financial Select Sector SPDR NYSE XLF or SPDR S P Bank NYSE KBE
One of the more controversial issues in US trade was talk that Trump could be positioning JPMorgan NYSE JPM CEO Jamie Dimon at the helm of the US Treasury This seems against the social change underway in the US with the rise against the establishment and rejection of all things Wall Street but personally speaking I feel this would be a fantastic appointment and the financial markets should like this Any distancing of US financial institutions away from Elizabeth Warren and all things Dodd Frank i e higher regulation will be welcomed by the markets
In the FX market the talking point continues to be how the rise in inflation expectations due to Trump s fiscal stimulus plans will result in the Federal Reserve potentially having to act more aggressively in 2017 The USD is the natural beneficiary here and again we have seen strong USD flows overnight USD JPY has been the poster boy of the USD move and the bulls have pushed the pair into 107 overnight If you want to express a view on a higher USD this is the vehicle of choice and one just has to look at the huge moves in US fixed income to see why USD JPY has rallied from 102 54 to 106 80 at the time of writing Any Japanese investor craving yield has just seen the spread between the US five year treasury and the Japanese government bonds widen from 1 44 to 1 70 since 4 November and this can t be ignored There is seemingly a rush in Japan to buy US assets again and recall the FX markets are just a play on capital flows at the end of the day For what it worth the last time we saw the bond market hold this sort of yield differential USD JPY was trading around 119 00 One for the radar
AUD USD has fallen from a session high of 0 7742 to 0 7616 at the time of writing Interestingly iron ore had another huge move higher with spot and futures closing up 4 4 and 2 7 respectively while copper has rallied for an incredible fourteenth day putting on 3 5 Coking coal and steel futures have dropped a touch but while I am not one to advocate shorting any commodity that is in such a powerful uptrend I would be cautious here as all of these mentioned commodities are grossly overbought and we are hearing Source SCMP that China s securities regulator the CSRC is trying to take the heat out of the space by banning margin financing by all futures brokers in Chinese commodity futures This may be a short term AUD negative so watch bulks for a reversal
Equity traders would also be wise to watch price action in steel futures especially as the leading light for Iron ore and other metals The gains in this space have been pretty crazy as well although we should see the likes of BHP Billiton NYSE BHP open around 3 higher this morning The Aussie banks look supported as well and what didn t work yesterday REITS utilities and to a lesser extent telco s will like not work today The SPI futures are largely unchanged but I would still expect a slightly stronger open for the ASX 200 Clearly the index is going to buck a four week losing streak and the bulls have seemingly wrestled back control here
So it seems all is well in financial markets with the Dow at all time highs credit spreads narrowing relative to US treasuries and the market holding a base case we see a December rate hike What does make me slightly nervous though is while equity has rallied we are seeing rising concern in emerging markets The NYSE EEM ETF is another 3 lower and presumably we will see another move to weaken the CNY at 12 15 aedt the Chinese CNY fixing While US assets seem to be responding to domestic inflation expectation increasing this may not suit other economies especially those leveraged to a higher USD |
MS | Analysts split on Cempra price target range 5 40 | Unsurprisingly analysts have a range of opinions regarding Cempra CEMP 12 4 after Friday s close Ad Comm vote on solithromycin On the bullish side WBB Securities RBC Capital Markets and Needham all rate the stock a Buy with price targets of 40 567 upside 27 50 358 upside and 15 150 upside from 36 respectively Three shops downgraded Morgan Stanley NYSE MS from Overweight to Underweight with a 5 17 downside risk price target from 35 Jefferies from Buy to Hold with a 10 67 upside price target from 36 and Gabelli from Buy to Hold The day before the Ad Comm review Stifel Nicolaus and JPMorgan NYSE JPM downgraded it to Hold and Neutral respectively with price targets of 8 33 upside from 37 and 6 0 upside from 25 respectively Shares have lost 67 of their value since last week |
MS | Senior Morgan Stanley banker Donald Moore to retire memo | By Anjuli Davies LONDON Reuters Senior Morgan Stanley NYSE MS banker Donald Moore will retire from the Wall Street bank at the end of the year according to a memo seen by Reuters on Tuesday Moore a 65 year old American native spent 41 years at the firm most recently as chairman of the Global Financial Institutions Group FIG based in London A spokesman for Morgan Stanley in London confirmed the contents of the memo Moore joined the Wall Street bank in New York in 1975 and worked his way up to head of the global FIG group from 1986 to 1997 a period during which he advised on 120 equity and M A transactions in the banking industry according to the memo In 1997 he moved to London as vice chairman of Morgan Stanley where he was involved in over 500 billion euros 552 billion worth of transactions including spearheading a 5 5 billion euro rescue rights issue for French Bank Societe Generale PA SOGN in the wake of the Jerome Kerviel trading scandal in 2008 Donald has been the embodiment of doing first class business in a first class way and has been a role model and mentor for an entire generation of investment bankers at Morgan Stanley Morgan Stanley President Colm Kelleher and global co heads of investment banking Franck Petitgas and Mark Eichorn said jointly in the memo |
MS | FINRA names former JPMorgan top lawyer to its board of governors | NEW YORK Reuters The Financial Industry Regulatory Authority named Stephen Cutler vice chairman and former linchpin lawyer for JPMorgan Chase Co N JPM to its board of governors Thursday He replaces Greg Fleming Morgan Stanley s N MS last head of wealth management who resigned from the board earlier this year FINRA s organizing rules require that the securities industry self regulator be overseen by a board of 10 industry governors three of whom must come from large firms Cutler who will step into one of the large firm seats has been on the regulatory side before as head of the U S Securities and Exchange Commission s enforcement division However he has clashed with them too As chief counsel for JPMorgan Cutler played a key role in the bank s 13 billion settlement with the federal government over charges that JPMorgan overstated the quality of mortgages it sold to investors in the run up to the financial crisis
Months later at a conference sponsored by the Clearing House Cutler said that regulation of the banks was spiraling out of control and what had become enforcement worthy has changed |
MS | Carlyle unloads 19 7M shares of CommScope rest of its holdings | CommScope COMM 1 3 has announced the sale of nearly 19 72M shares of its common stock by the Carlyle Group NASDAQ CG That marks the rest of Carlyle s stake after gradual sales earlier this year in August and September of about 10M shares each CommScope is off 1 2 after hours as with the other divestments it won t see any proceeds from the sale which is set to close about Nov 16 Morgan Stanley NYSE MS and Jefferies are joint book running managers |
JPM | U S consumer confidence housing data highlight economy s strength | By Lucia Mutikani WASHINGTON Reuters U S consumer confidence rebounded in April and new home sales increased more than expected in March pointing to underlying strength in the economy despite signs that growth slowed in the first quarter Other data on Tuesday also showed house prices increasing solidly in February Strong consumer confidence and rising house prices should underpin consumer spending which appears to have braked sharply at the start of the year Americans appear to think the economy is headed in the right direction and it s not just all talk because their greater confidence is leading them to buy more new homes said Chris Rupkey chief economist at MUFG in New York Everywhere you look confidence seems to be a rising tide that will lift all the boats The Conference Board said its consumer confidence index increased to a reading of 128 7 this month from a downwardly revised 127 0 in March The index was previously reported at 127 7 in March Confidence raced to more than a 17 year high of 130 0 in February Consumers short term expectations also improved in April with the share of those expecting their incomes to decline over the coming months reaching its lowest level since December 2000 But the survey s so called labor market differential derived from data on respondents views on whether jobs are plentiful or hard to get fell to 22 9 from 23 8 in March That measure closely correlates to the unemployment rate in the Labor Department s employment report The jobless rate has been stuck at 4 1 percent for six straight months The economy added 103 000 jobs in March the fewest in six month Though economists shrugged off the modest job gains as payback after February s outsized increase in hiring they also acknowledged that employment growth was slowing We have now seen two straight months of weakening in the labor market differential since the high for the cycle to date that was reached in February said Daniel Silver an economist at JPMorgan NYSE JPM in New York Several other labor market indicators have also cooled off over the past month or so Consumer confidence has remained strong despite stock market volatility which was in part triggered by fears of a trade war between the United States and China as well as geopolitical worries In April confidence was high among households with an annual income below 25 000 and those in the 75 000 125 000 bracket U S financial markets were little moved by the data Stocks on Wall Street reversed earlier gains as the yield on the 10 year U S Treasury note breached 3 percent for the first time in more than four years Prices of U S Treasuries were mostly trading lower while the dollar DXY dipped against a basket of currencies STRONG HOUSING DATA In a separate report the Commerce Department said new home sales increased 4 0 percent to a seasonally adjusted annual rate of 694 000 units last month as sales in the West surged to their highest level in more than 11 months Adding to the report s strength February s sales pace was revised up to 667 000 units from the previously reported 618 000 units Data for January was also revised to show sales unchanged instead of declining 4 7 percent New home sales which account for 11 percent of housing market sales jumped 8 8 percent from a year ago While the bullish new home sales report did little to change economists expectations that residential investment fell in the first quarter it supported the view that an anticipated economic growth slowdown during that period would be temporary Gross domestic product estimates for the January March quarter are below a 2 percent annualized rate largely reflecting weak consumer spending First quarter GDP also tends to be soft because of a seasonal quirk The economy grew at a 2 9 percent rate in the fourth quarter The government will publish its snapshot of first quarter GDP on Friday A third report on Tuesday showed the S P CoreLogic Case Shiller composite index of home prices in 20 metropolitan areas increased 6 8 percent in the 12 months to February after rising 6 4 percent in January House prices are being driven by an acute shortage of properties available for sale Rising prices are a mixed bag for the housing market said Danielle Hale chief economist for realtor com While homeowners benefit from extra equity potential buyers can get discouraged as the dream of homeownership becomes more elusive Strong house price inflation was also corroborated by a fourth report from the Federal Housing Finance Agency FHFA that showed its house price index rising a seasonally adjusted 0 6 percent in February after a 0 9 percent increase in January
Home prices advanced 7 2 percent on a year on year basis in February |
JPM | Treasury yield milestone may augur changing tide for risk | By Lewis Krauskopf NEW YORK Reuters The march higher in bond yields reached a critical level on Tuesday that could prompt portfolio managers to weigh moving money into safer fixed income securities at the expense of riskier assets like stocks and emerging markets The yield on 10 year U S Treasuries US10YT RR a global benchmark for interest rates on everything from home loans to corporate bonds hit 3 percent for the first time in more than four years The move above the closely watched threshold comes as bond investors grow more wary of signals that inflation is picking up and the U S Federal Reserve is in no mood to put the brakes on its own rate hiking program Rising interest rates pose several problems for stocks in particular Higher borrowing costs threaten to eat into the robust profit growth that has underpinned a nine year bull market during which the S P 500 has delivered a total return including reinvested dividends of 367 percent But just as importantly higher bond yields offer a safer alternative for generating income something largely lacking through years of rock bottom rates after the financial crisis Stocks are no longer the only game in town The increase that we ve seen in bonds recently has definitely made bonds more attractive than some of the stocks out there especially with stocks continuing to struggle said Mary Ann Hurley vice president in fixed income at D A Davidson in Seattle I think these higher yield points on the 10 year and longer will be bringing in some real money to put away at levels that we haven t seen in a long time A BIG LEVEL The 10 year yield has climbed steadily since ending 2017 at 2 41 percent Its breach of the 3 percent level helped focus investors on rising risks for equities providing a catalyst for a shakeup in stocks that drove the S P 500 SPX back into negative territory for the year down 1 4 percent It s a big level in the global marketplace it s a big psychological level said Justin Lederer interest rate strategist with Cantor Fitzgerald in New York Moreover it s a threat to riskier assets beyond just U S stocks Investment grade and high yield corporate bonds are also now negative on the year and the rise in Treasury yields appeared to be rippling through emerging markets as investors eye shifting money into safer U S debt Benchmark measures of emerging market stocks and bonds from MSCI MSCIEF and JPMorgan NYSE JPM respectively both closed at two month lows At least in the currency world rising yields in the U S severely undermine the appeal of riskier assets particularly higher yielding and emerging market currencies said Omer Esiner chief market analyst at Commonwealth Foreign Exchange in Washington REAL YIELDS STILL LACKING Not all investors were ready to seize on the 10 year s move as the spark to shift money around especially in the midst of a corporate earnings season that is on track to be the strongest period in more than seven years I don t think that the 3 percent level necessarily makes bonds a buy said Alan Gayle president of Via Nova Investment Management in Fredericksburg Virginia I don t think investors should be abandoning stocks when the economy is growing and earnings are up roughly 20 percent from a year ago Given their expected returns stocks continue to look relatively attractive said Jason Ware chief investment officer at Albion Financial Group in Salt Lake City That is particularly the case when you look at what Treasuries yield after inflation their so called real yields I still don t think there s much competition from an asset allocation decision perspective Ware said We re talking about a 3 percent 10 year after inflation a 1 percent yield Both bond and stock funds have drawn interest from investors this year So far in 2018 about 67 billion on a net basis has flowed into all equity mutual and exchange traded funds bringing the total in such funds to 12 3 trillion according to Lipper data Taxable bond mutual funds and ETFs have drawn 68 billion in net inflows this year bringing the total in those funds to 4 9 trillion according to Lipper Some investors were shrugging off the 10 year s milestone preferring to watch the path of rates from here
I don t think there s anything magical about 3 percent said Willie Delwiche an investment strategist at Baird in Milwaukee If rates rise quickly from here I think that s a headwind for stocks and for the economy But if we have a slow drift higher I don t see any reason why it has to be a headwind |
C | Citigroup Zurich Insurance consortium to develop cyber security norms FT | Reuters A consortium led by Citigroup Inc N C Zurich Insurance Group AG S ZURN and Depository Trust Clearing Corp DTCC will develop a set of cyber security standards that fintech companies can sign up to the Financial Times reported on Tuesday The group was formed as a result of a meeting held by the World Economic Forum last year to promote cooperation between the public and private sectors the FT said Founding members of the grouping which include Hewlett Packard Enterprise Co N HPE and U S based online lender Kabbage and participants say they aim to produce a set of standards within the next six to 12 months according to FT Citi Zurich Insurance and DTCC were not immediately available for comment outside regular business hours
Last month the U S Securities and Exchange Commission called for clearer cyber risk disclosure and asked companies to adopt specific policies restricting executive trading in shares while a hack was being investigated |
C | Eyeing the easy money exit Five questions for the ECB | By Dhara Ranasinghe and Ritvik Carvalho LONDON Reuters As European Central Bank policymakers get ready to meet on Thursday market focus turns once more to just when the central bank will wind up its massive stimulus scheme While the ECB is expected to maintain a cautious policy stance economists say a robust economic backdrop could make it increasingly difficult to maintain the so called easing bias a stipulation that the bank can increase asset purchases if necessary Here are some of the main questions on the radar for markets ahead of Thursday s meeting 1 Could the ECB drop its easing bias on QE Policymakers are likely to discuss dropping their easing bias but a broader revision of the bank s policy guidance is likely to happen later possibly during the summer sources close to discussions told Reuters last week While no major change is expected at the March 8 meeting almost a third of 56 economists polled by Reuters said the central bank could drop its easing bias on asset purchases Analysts said any drop in the bias could strengthen the euro and push up bond yields although bigger changes to the ECB s forward guidance are more likely to come in June GRAPHIC The ECB s QE programme 2 Does that mean we can expect a hawkish ECB meeting Hardly The ECB is likely to avoid any steps that would spark an unwarranted rise in the single currency or euro area borrowing costs That means any drop in the QE easing bias would probably be balanced by an overall cautious tone No major policy shifts are expected on Thursday sources told Reuters last week Recent market turbulence a strong euro a dip in inflation and political deadlock in Italy after weekend elections could encourage policymakers to strike a cautious tone But there is little doubt about the direction of policy and investors still anticipate an ECB rate rise in early 2019 GRAPHIC Money markets bring forward bets on timing of ECB rate hikes 3 How does a strong euro feed into the ECB s deliberations Since the ECB s Jan 25 meeting the pace of the euro s rise has cooled a bit and the currency has declined nearly 2 percent But the euro has not lost any ground when measured on a trade weighted basis and briefly hit a more than a three year high above 1 25 EUR EBS last month ECB chief Mario Draghi skirted the question of the strong euro in January by saying the bank did not target exchange rates but he may be confronted on the currency again as economic momentum stalls after a strong start to 2018 A Citigroup NYSE C economic surprise index has fallen to its lowest level since 2016 dropping into negative territory which reflects that economic releases have on balance come in below consensus forecasts GRAPHIC Economic surprises in Europe turn negative Any word of caution on the firm euro could spark a washout of long positions in the markets where bets on further euro strength are near a record 4 Could the ECB change its inflation forecasts The ECB is due to publish its economic forecasts on Thursday but significant changes to its estimates of future inflation and economic growth are not expected by economists The combination of slightly higher oil prices food prices and a stronger currency is likely to be neutral in terms of inflation projections said Pictet Wealth Management economist Frederik Ducrozet Euro zone inflation slowed to a 14 month low in February and remains below the ECB s near 2 percent target A key market gauge of euro zone inflation expectations is at 1 70 percent and close to its lowest this year highlighting that low inflation remains a key obstacle to policy normalization GRAPHIC Inflations drifts further away from ECB target 5 How worried is the ECB about a global trade war Given that Draghi took a swipe at Washington at his last news conference for talking down the dollar investors will listen out to any comment from the ECB chief about U S President Donald Trump s plan to slap steep import tariffs on steel and aluminum Worries about a trade war have rattled world markets dealing a blow to the dollar and threatening further upward pressure on euro an unwelcome development for policymakers since the strong euro keeps inflation down and could complicate the ECB s exit strategy from quantitative easing GRAPHIC Euro strength |
C | World Economic Forum leads creation of fintech cyber security consortium | By Anna Irrera NEW YORK Reuters The World Economic Forum has led the creation of an industry consortium focused on improving the cybersecurity of financial technology companies as collaboration between fintechs and financial institutions grows The consortium s founding members include Citigroup Inc N C online lender Kabbage the Depository Trust Clearing Corporation Zurich Insurance Group S ZURN and Hewlett Packard Enterprise N HPE the companies said on Tuesday The group will create a framework to assess the security level of fintech companies and data aggregators whose preparedness against hacks is seen as increasingly important to the stability of the wider financial industry the companies said The financial services sector is among the most vulnerable to cyber crime because of the vast amount of money and valuable data that banks and investment firms process each day Over the past few years banks and other finance firms have been strengthening their ties with young tech savvy startups which are aiming to revamp the way financial services are created and consumed The growth in collaboration is occurring either voluntarily with banks looking to remain competitive or due to new regulation such as the European Union s revised Payment Services Directive This has heightened the need for fintech companies to implement sturdy cybersecurity measures said Matthew Blake head of the Financial and Monetary System Initiative at the WEF Many partnerships are forming between financial technology companies and incumbent institutions Blake said in an interview Through those linkages there is a potential introduction of risk The need for better cybersecurity assessment mechanisms was identified in a WEF report published on Tuesday as one of the solutions to the security challenges posed by the increased use of digital services in finance The report noted that the use of technology innovations such as robotics and biometrics was expanding the amount of customer data at risk While we are excited by the innovation of fintech it also creates risks that I think need to be identified and worked on to establish standards Michael Bodson president and CEO of DTCC said in an interview The new consortium which will be managed by the WEF and work with the organization s new Geneva based Global Center of Cybersecurity will develop a point based scoring system for fintech firms
This story fixes spelling of Michael Bodson s last name in 10th paragraph |
C | BOJ Should Focus on Equities Not Inflation Steven Englander | Bloomberg View The Bank of Japan s policy meeting Thursday and Friday is likely to focus on its inability to spark a sustained rise in the inflation rate despite years of negative interest rates and quantitative easing That emphasis would be missing the point The BOJ s big problem is that its policies have effectively forced Japanese investors out of bonds and into equities which are now tanking and that it has not been able to fix the damage done to banks by negative rates The Topix Index is off 13 percent since the January peak and Japanese banks have underperformed the broad index by almost 20 percent since the end of 2015
The good news is that investors are probably wrong in sensing that the BOJ might be shifting into a hawkish mode That course of action would do more harm than good because it would strengthen the yen and there wouldn t be an offsetting benefit
The BOJ has an inflation target so it s natural that it measures monetary policy success in inflation terms However most major central banks have failed to reach their inflation marks Nonetheless economic performance has been strong globally in recent years If the inflation process makes it difficult to hit the inflation target all the central bank can do is keep trying
Still no one forced the BOJ to pursue negative rates in early 2016 That decision was based on the central bank s view that it would be a way of providing additional stimulus But forcing investors out of bonds and cheerleading them into equities is fine when equities are rising but not when they are falling
The Topix index of bank shares has dropped 10 percent since the end of 2015 while the broader Topix index has risen 13 percent That makes it hard to argue that negative rates are beneficial Japan s 20 year government bond yields are 75 basis points higher than one year yields down from a spread of about 100 basis points before the move into negative rates Borrow short lending long is not very profitable for banks
Compared with the rest of the Topix Japanese banks are very close to their lows of the first quarter of 2016 There are two reasons for this weakness The first has to do with translation effects or the way companies report the effects of changes in exchange rates Although the yen s strength isn t to blame for all the problems with Japanese banks there is a close enough relationship between the currency and the Topix that it bears some responsibility
The second reason is that since 2017 Japanese banks have become more sensitive to interest rates Figure 3 shows the relative performance of Topix banks and Japanese five year yields but the dynamic applies to all maturities The relationship is pretty tight
Japanese equities overall are largely driven by global sentiment and the yen Figure 4 shows the actual and estimated level for the Topix based on a regression of its movements compared with the S P 500 and the yen since 2016 Broadly speaking the Topix has gone up about one point for every 1 percent move in the S P and yen That is not a relationship that you would want to bet strongly against
In theory the BOJ cannot do much about the level of the S P 500 but it might consider buying U S exchange traded funds rather than domestic shares Purchasing U S equities or the MSCI global index is much more benign than buying U S bonds President Donald Trump would probably be upset if the BOJ started to buy U S notes as some have suggested but he may not be as bothered if the BOJ were to help the S P 500 The knock on effect would benefit Japanese equities almost one for one and the foreign exchange impact of weaker yen and stronger dollar would make it a double win
That would provide scope for a gentle bump higher in Japanese bond yields to help the banks BOJ policy makers would have to go about this carefully conveying to the market that they were carrying out a one off steepening of the yield curve not stealth tightening This may be more credible it were done as part of a stimulus package
The BOJ s problems run much deeper than inflation alone Addressing them will require stimulus a weaker yen and a one off upward shift in yields
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners
Steven Englander is the head of research and strategy at Rafiki Capital He was previously the head of G10 currency strategy at Citigroup NYSE C and the chief U S currency strategist at Barclays LON BARC |
C | Will Gold Reach For The Stars Or Just Hit The Tree Tops | The ECB has finally cut its deposit rate to a record low of minus 0 5 And the Fed gets its chance to cut rates next along with a host of other central banks including Japan s The question is what will gold do
Compared to its scintillating run between May and August gold s performance in recent days has been nothing short of anemic
Even after the European Central Bank s return to quantitative easing on Thursday the yellow metal barely settled higher The only consolation is that it got a huge pop early in the day that vanished on profit taking before the close
How High Will Gold Go How Long Will It Last At Those Peaks
All this makes gold s next breakout hard to predict from how high it will go to how long the run up will last
So to reprise the question What will gold longs do if the Federal Reserve cuts rates on Sept 18 as widely expected even if for a nominal 25 basis points
And what if that action is followed through by a rash of easing by the central banks of Japan Taiwan and Indonesia all of which have policy decisions on Sept 19 just a day after the Fed s
Will gold longs reach for the stars then Or will they be content to just land on the tree tops
Two Schools Of Thought
There are two schools of thought on the direction for the world s favorite safe haven
One is that the gold rally has reached exhaustion point meaning there will be fewer of the kind of outsize gains seen over the past four months Even if there are those advances are likely to be returned quickly
The other is that longs in the precious metal are virtually unstoppable and could if the stars align rewrite the 2011 record high of above 1 900 per ounce
RBC Calls For 1 500 Gold
Canadian banking group RBC belongs to the first school of thought forecasting on Thursday a modest assumption of 1 500 for the remainder of 2019 and 2020 It s previous call was 1 350
While the Fed s expected action will be the underlying driver for 1 500 gold RBC said the precious metal
at this point appears to be pricing in a no successful completion for a U S China free trade agreement before year end
It added
We expect a seasonal rally in the gold price in the December January period
Even so RBC had a more low key projection for 2021 and above forecasting an average price of 1 450 versus earlier estimates of 1 300 For the long term it put down a price of 1 400
RBC did not explain its restrained outlook
After hitting 6 year peaks of 1 565 in August U S gold futures on Comex are holding just above 1 500 now accruing a gain of 17 on the year versus a previous high of 20 Spot gold which reflects trades in bullion is hovering just under 1 500 with an annual gain of 15
Disappointment In Fed May Prevent Outperformance Says TD Group
TD Securities another Canadian financial institution also expects the yellow metal to maintain its bullish tilt although gold longs disappointment with Fed cuts may prevent an outperformance
The group said in a note
The ECB s notion of QE infinity until inflation converges to 2 represents a dovish tilt and will continue to see rates moving lower amid reach for yield ultimately supporting gold
But it also said that President Donald Trump s relentless push for the Fed to outdo its peers in cutting rates was unlikely to see corresponding action Earlier this week Trump called officials at the U S central bank boneheads for their tame rate cuts and praised the ECB on Thursday for acting quickly while the Fed sits sits and sits
Overall TD Securities said that underlying economic weakness dovish central bank tilt and shortage of safe haven assets as the negative yielding debt pile surges suggests the path of least resistance for gold and friends is higher
Citihgroup Sees 2 000 Gold In The Next 2 Years
Meanwhile Wall Street s investment bank Citigroup NYSE C belongs to the school of thought that expects gold to reach for the stars
Gold could hit historic highs and even break 2 000 per ounce in the next couple of years if recession risks and rate cuts continue analysts at Citi said in a Tuesday note
The group upgraded its fourth quarter target for gold to 1 575 and its 2020 target to 1 675
It added
We find it reasonable to consider an increasing probability that bullion markets can retest the 2011 to 2013 nominal price peaks and trade to 1 800 2 000 per ounce by 2021 and 2022 on the back of a U S business cycle turn towards slower growth recession on top of election uncertainty |
JPM | ETFs To Watch If Trump Makes It To White House | As the prime election day is breathing on your neck the gap between Republican and Democrat presidential candidates is narrowing though Clinton is still ahead Polls in favor of Clinton and Trump are 45 3 and 43 respectively as per the national polling average published on
Early last week the situation turned sour for Clinton with the FBI probing into her emails In fact as of November 3 polls showed that both candidates have about chances of winning read
But now with the FBI clearing Clinton off allegations the wind is again in her favor But there is a section that still believes Trump s recent popularity is not just because of the FBI probe It definitely has something to do with Trump s inherent policy formulation
In such a scenario an investing case should be worked out in case Trump wins the race to the White House
Short Term Impact
Bullion Bulls
The initial impact will be a safe haven rally Historically Democrats are good for stocks while Republicans are less beneficial And so far what Trump has delivered in speeches is mostly as per ABN Amro As per the research organization Trump s policies may hinder U S growth and cause an upheaval in the U S market pushing the safe resort gold and the ETF SPDR Gold Shares NYSE GLD V GLD higher read
Trump may push for against the key trading partners of the U S as per the source Agreed his mode of war would be via tariffs but a lower greenback route can t be completely ruled out All these will likely keep the greenback s value at check and gold prices might soar as the metal is priced in U S dollar
Bond Yield to Fall
Thanks to a flight to safety yields on long term U S Treasury bonds should come down and bond prices should rise iShares 20 Year Treasury Bond NASDAQ TLT V TLT should thus gain just after the election results if Trump wins though the impact is likely to be short lived
Moreover Trump is a Concerned about the U S economy s 19 trillion debt Trump wants to keep interest rate low so that the country does not have to end up paying much higher interest
U S Stocks Slump
Now these assets are already guilty of overvaluation concerns and Trump s victory would nothing but trigger the sell off The S P 500 and Nasdaq are already on the nine day losing streak ignoring a better Q3 earnings season Things may turn worse if the republican candidate takes charge of White House sees a 13 plunge in the S P 500 on Trump s victory This puts SPDR S P 500 ETF NYSE SPY AX SPY in focus
Japanese Stocks to Slide
If the greenback slips yen would gain strength and Japanese equities may succumb to a further slowdown iShares MSCI Japan may thus be hard hit
Long Term Impact
Infrastructure Gains
Donald Trump is also in favor of beefing up public spending by hundreds of billions of dollars in spite of the fact that republicans intend to check government spending In fact his spending plans are deemed to be much higher than Clinton Utilities ETFs like First Trust Utilities AlphaDEX Fund are likely to benefit from this trend
Encouraging Fossil Fuels
Taking a completely difference stance from president Obama Trump is ready to push for more fossil fuel generation be it from crude oil natural gas or coal This in turn may hit low carbon and clean ETFs like iShares MSCI ACWI Low Carbon Target ETF while VanEck Vectors Coal ETF may gain ahead
Bond Yields to Rise
As per though his win will likely lower bond yields initially his huge tax cuts and infrastructure spending plans should push the yield higher over the longer run These initiatives would eventually boost inflation and boost demand for inflation protected bond ETFs like iShares TIPS Bond ETF BK TIP
Upheaval in Currency Market
Since Trump does not support NAFTA North American Free Trade Agreement which removes a major share of tariff on products traded between the U S Mexico and Canada and eventually terminates it fully currencies of Canada and Mexico have come into question sees one day slides of 8 percent for the peso and 5 percent for the Canadian dollar This puts iShares MSCI Mexico Capped and iShares MSCI Canada AX EWC in focus
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JPM | Major Signal On JPMorgan Chase Screams Short Me | I am shorting JPMorgan Chase Co NYSE JPM stock here at 73 50 The stock is surging into a major trend line of resistance connecting the highs from 2007 and 2015 Everytime this trend line has been hit there has been a major stock market top and a major top on JPMorgan
This is a no brainer short or investors can also purchase puts at least 6 months out JPMorgan Chase Co shares are surging higher after interest rates surged higher following the election of President Donald Trump |
MS | CICC in advanced talks to buy China Investment Securities sources | By Julie Zhu HONG KONG Reuters China International Capital Corp CICC HK 3908 is in advanced talks to acquire China Investment Securities two sources with knowledge of the matter said as China s leading investment bank seeks to bolster its presence in the retail brokerage business Earlier on Friday CICC halted its shares from trading saying in a statement the move was pending an announcement of a very substantial acquisition without elaborating The discussions between CICC and state backed China Investment Securities have been underway for a couple of months the sources told Reuters The transaction could be announced as early as Friday said one of the sources The sources declined to be identified as the discussions are confidential The deal viewed by analysts as complementary for the two firms will provide investment banking focused CICC the means to boost its retail business in a country where frequent trading by mom and pop investors have boosted revenues at brokerages Chinese newspaper 21st Century Business Herald reported late on Thursday a merger between CICC and China Investment Securities has been approved by senior leadership CICC declined to comment further than what it said in its statement while China Investment Securities could not be reached immediately for a comment Beijing based CICC the oldest investment bank in China has played a crucial role in helping many large Chinese state owned enterprises list in Hong Kong That includes the 21 9 billion initial public offering of Industrial and Commercial Bank of China HK 1398 in 2006 and the 22 billion listing of Agricultural Bank of China HK 1288 in 2010 It is also recognized for its strong performance in mega cross border mergers and acquisitions by Chinese companies It was ranked second behind Morgan Stanley N MS for China related M As last year with an 11 percent market share Thomson Reuters data shows But its retail stock broking business is relatively small compared to those of its rivals An acquisition of China Investment Securities which ranked No 17 by operating revenue among China stock brokers last year will help CICC to boost its presence in retail broking CICC was ranked No 23 by operating revenue according to data from the Securities Association of China If the deal takes place it will benefit both CICC and China Investment Securities as the two firms are very complementary said Hong Hao chief strategist of BOCOM International CICC lacks a strong footprint in retail business which is the expertise of China Investment Securities Shenzhen based China Investment Securities runs about 200 retail branches across China compared to 20 by CICC according to the two companies websites DIVERSIFICATION The deal also comes as CICC looks to diversify and broaden its product offering in areas such as fixed income currencies and commodities China s share trading turnover reached 9 8 trillion in the first half of this year 1 7 times the rest of Asia Pacific according to financial services consultancy Quinlan Associates The brokerage business contributed more than a third of 126 Chinese securities firms total revenue of 157 billion yuan 23 24 billion over the same period according to the securities association Founded in 1995 as China s first Sino foreign investment bank by China Construction Bank 601939 SS Singapore sovereign investment fund GIC GIC UL and Morgan Stanley CICC was led for a decade by Levin Zhu the princeling son of former Chinese Premier Zhu Rongji Zhu resigned as CEO in 2014 Morgan Stanley sold its 34 3 percent stake in CICC in 2010 to a consortium that included KKR Co N KKR and TPG Capital TPG UL Central Huijin Investment Ltd a unit of China s sovereign wealth fund China Investment Corp CIC UL owns about 28 45 percent of CICC Unlisted China Investment Securities is 100 percent owned by Central Huijin according to the brokerage s website As of the end of last year it had total assets of 92 2 billion yuan and debt of 78 6 billion It posted 8 5 billion yuan in operating income in 2015
1 6 7568 Chinese yuan renminbi |
MS | Political tremors send global stocks to lowest since July | By Patrick Graham LONDON Reuters Global share prices retreated to their lowest levels since early July on Friday after two weeks of relentless losses dominated by uncertainty about the outcome of the U S presidential election and as of Thursday Britain s path out of the European Union A London High Court ruling on Thursday dealt a big blow to Prime Minister Theresa May s plans to launch formal Brexit talks next March prompting speculation of an early national election and sending sterling spinning higher The pound was up another 0 1 percent in early trade on Friday EURGBP London s FTSE indices were down across the board with the blue chip FTSE100 FTSE Europe s worst performer with a 1 4 percent loss The dollar at the same time has been hammered by a surge for U S Republican presidential candidate Donald Trump in opinion polls in the past week Investors believe this may prevent the U S Federal Reserve from raising interest rates next month Broader jitter about the shape of global trade and growth under a Trump presidency have also helped send shares down across the globe and the major markets in Europe and Asia were all again in retreat on Friday MSCI s global share index MIWD00000PUS slipped just under half a percent to its lowest since July 11 and is down almost 5 percent over the past two weeks With only a few days left until Americans go to the polls many traders are continuing to reduce their risk exposure further said Markus Huber a trader with brokers City of London Markets Stock markets in Germany GDAXI Spain IBEX France FCHI and Italy FTMIB all fell around 1 percent MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS slipped 0 4 percent after brushing its lowest levels since early August It looked set for a loss of 1 7 percent for the week POLLING The latest Reuters Ipsos polling showed Clinton seen as the status quo candidate by markets maintaining a narrow lead over Trump But several swing states that the Republican challenger must win have shifted from favoring Clinton to toss ups offering Trump a possible route to victory Even if opinion polls show that Clinton is maintaining a lead anything can happen at the last minute something the Brexit referendum outcome taught us said Norihiro Fujito senior investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities In his campaign Trump a political novice has vowed to clamp down on immigration rethink trade relations and slap high tariffs on imported goods U S stocks sagged on Thursday with the S P 500 SPX suffering its eighth day of losses its longest streak since the 2008 financial crisis A slump in Facebook shares O FB also sapped investor confidence The dollar clawed back some lost ground against the yen in Europe on Friday rising 0 2 percent to 103 19 but was still on course for a 1 5 percent loss for the week The euro edged down 0 1 percent to 1 1097 up about 1 percent for the week Attention will move at least briefly to the monthly U S nonfarm payrolls report later on Friday the addition of 175 000 jobs by employers in October expected to lay the economic ground for a Fed rate rise next month ECONUS Oil prices were flat after falling more than 1 percent on Thursday as investors reacted to a record weekly surge in U S crude inventories and remained skeptical that OPEC would actually implement its planned curbs on output
U S crude CLc1 and Brent crude LCOc1 traded at 44 66 46 26 per barrel respectively |
MS | OPEC can spook markets Don t fight the Fed equivalent M Stanley | Investing com Amid skepticism over the capability of the Organization of the Petroleum Exporting Countries OPEC Morgan Stanley NYSE MS still pointed out that the cartel has the power to talk up prices and warned about taking bearish positions in oil ahead of the November 30 official meeting
OPEC reached an agreement to cap output to a range of 32 5 million to 33 0 million barrels per day in talks held in Algeria in late September with details on individual quotas to be finalized at the next official meeting in Vienna on November 30
These analysts insisted in a note to clients that poor fundamentals don t prevent headline related price reversals
They noted that OPEC can still spook markets and has been adept at talking up declining markets
The group has repeatedly made bullish announcements about OPEC intervention during periods of low liquidity e g US holidays and whenever short positions become large they explained
Though Morgan Stanley admitted that skepticism of OPEC s capability to follow through is warranted the broker warned that prices still move on these headlines
Investors have proven that they are not willing to press short positions against OPEC even if the odds of intervention are low these analysts suggested
In essence this is similar to the old adage of Don t Fight the Fed they said
These experts feel that if prices continue to slip the chances for bullish OPEC headlines grow and could move prices despite the lack of follow through
They pointed to the 40 mark as a price point at which the cartel normally begins to talk
Thus the cartel may choose to announce a headline deal to lift prices even if there is no plan to execute it these experts warned
In other words plenty of uncertainty and event risk remains they concluded |
JPM | Barclays CEO to Stay in Job After Whistle Blowing Probe | Bloomberg Barclays LON BARC Plc Chief Executive Officer Jes Staley will keep his job after U K regulators said they had concluded their investigation into his attempts to unmask a whistle blower
While the Financial Conduct Authority and Prudential LON PRU Regulation Authority proposed that the CEO pay a financial penalty they are not alleging that he acted with a lack of integrity or that he lacks fitness and propriety to continue to perform his role as group chief executive officer the bank said in a statement on Friday
Barclays s board has unanimous confidence in Staley and continues to recommend that he be re elected at the annual general meeting on May 1 the company said On top of the regulatory fine the bank has already said it may claw back his entire 1 3 million pound 1 6 million bonus for 2016
The lender reprimanded its CEO in April last year after discovering he had twice tried to identify a whistle blower Staley has also come under increasing pressure in his third year in charge of the British lender In March activist investor Edward Bramson bought a stake in Barclays with the aim of pushing for strategic change to lift the shares adding to growing discontent among investors about the lack of progress in turning around the investment bank
Staley a former JPMorgan Chase NYSE JPM Co executive bet his reputation on boosting returns at the securities unit which has long been Barclays s worst performing division
The whistle blowing controversy dates back to June 2016 when Barclays s board received an anonymous letter raising concerns about the recruitment of one of Staley s former JPMorgan colleagues Tim Main The letters flagged issues of a personal nature about him and Staley s role in dealing with those concerns at JPMorgan
After learning about the letters Staley made two attempts to discover who wrote them despite being informed that it was inappropriate for him to do so after his first try Barclays s own investigation had found Staley honestly but mistakenly believed his actions were permitted which was why they didn t fire him
When Staley started in December 2015 he promised he d lead a cultural transformation of the lender and reset strained relations with regulators after a series of misconduct fines and settlements wiped out more than 20 billion pounds of earnings over six years
Regulators have placed whistle blowing and the protection of those raising the alarm at the heart of efforts to avoid financial misconduct and scandals since the financial crisis The Barclays issue is also seen by commentators as a critical test of the FCA s Senior Managers and Certification Regime which requires officials to be directly accountable for misconduct on their watch
As part of the investigation the FCA interviewed officials including Mike Ashley the board member who supervises whistle blowing complaints Chief Operating Officer Paul Compton former company secretary Lawrence Dickinson and Staley s chief of staff Timothy Karpoff Former head of compliance Mike Roemer and Troels Oerting ex head of the group information security team Staley tasked with identifying the author of the complaints were also questioned Bloomberg News reported last year |
JPM | Bitcoin Rises EU Passes Verification Rules for Crypto Exchanges | Investing com Bitcoin and other virtual coins were higher on Friday as the European Union Parliament supported a move to require cryptocurrency exchanges to apply customer verification rules to their platforms
The move was passed with 574 votes yes and 15 votes no with 60 abstentions Under the measure exchanges platforms and wallet providers will have to apply due diligence procedures that are designed to combat money laundering Customer verification is one of those procedures The rules would also reduce the amount for identifying holders of prepaid cards from 250 to 150
The measures were introduced in response to the terrorist attacks of 2015 and 2016 in Paris and Brussels officials said
Criminals use anonymity to launder their illicit proceeds or finance terrorism said Member of the European Parliament Krisjanis Karins This legislation helps address the threats to our citizens and the financial sector by allowing greater access to the information about the people behind firms and by tightening rules regulating virtual currencies and anonymous prepaid cards
Bitcoin was trading at 8 529 40 rising 3 27 as of 9 10 AM ET 13 10 GMT on the Bitfinex exchange
Other virtual currencies were higher with rival Ethereum the world s second largest cryptocurrency by market cap rising 8 00 to 590 29 on the Bitfinex exchange Ripple the third largest virtual currency increased 16 43 to 0 86387 while Litecoin was at 151 08 an increase of 6 53
In other news JPMorgan NYSE JPM is testing a blockchain platform for issuing financial instruments with the National Bank of Canada The platform was built using Quorum an open source blockchain developed by JPMorgan Banks are hoping to use the technology behind cryptocurrencies to streamline banking processes such as cross border payments and securities settlements |
C | Deutsche Bank to pay 240 million to end Libor rigging lawsuit in U S | By Jonathan Stempel NEW YORK Reuters Deutsche Bank AG DE DBKGn has agreed to pay 240 million to settle private U S antitrust litigation accusing it of conspiring with other banks to manipulate the Libor benchmark interest rate The preliminary settlement with the German bank was disclosed in filings on Tuesday with the U S District Court in Manhattan and requires a judge s approval Deutsche Bank is the third bank to resolve claims by so called over the counter investors that transacted directly with banks on a panel to determine Libor Citigroup Inc N C reached a similar 130 million settlement last July while the British bank Barclays Plc L BARC settled for 120 million in November 2015 nL1N1KT1LU Deutsche Bank denied wrongdoing but settled to avoid the risks costs and distraction of litigation court papers show A spokesman Troy Gravitt said the bank was pleased to settle Libor or the London Interbank Offered Rate is used by banks to set rates on hundreds of trillions of dollars of credit card mortgage student loan and other transactions and to determine the cost of borrowing from each other Investors including the city of Baltimore and Yale University in New Haven Connecticut had accused 16 banks of conspiring to manipulate Libor in the private litigation that began in 2011 Michael Hausfeld a lawyer for the investors in a statement called the Deutsche Bank settlement an excellent achievement for the class Banks have paid roughly 9 billion to settle Libor rigging probes worldwide Last July the head of the U K Financial Conduct Authority said that regulator will phase out Libor by the end of 2021 citing a lack of data to underpin it
The case is In re Libor Based Financial Instruments Antitrust Litigation U S District Court Southern District of New York No 11 md 02262 |
C | Deutsche Bank ends Libor suit for 240M | Deutsche Bank NYSE DB has agreed to pay 240M to settle private U S antitrust litigation accusing it of conspiring with other banks to manipulate Libor It s the third bank to resolve claims by so called over the counter investors that transacted directly with banks to determine the benchmark Citigroup NYSE C reached a similar 130M settlement last July while Barclays LON BARC settled for 120M in November 2015 Now read |
C | Crown Castle launches 7 77M share public offering | Crown Castle International NYSE CCI is launching a public offering of 7 765M of its shares The stock s down 1 after hours and closed at 110 06 suggesting a raise of more than 850M Net proceeds will go to general purposes which may include debt reduction Citigroup NYSE C and J P Morgan are underwriters Now read |
C | New York regulator asks Deutsche other banks about Kushner loans source | By Karen Freifeld Reuters New York s state banking regulator asked Deutsche Bank AG DE DBKGn and two other lenders for information on their relationships with U S President Donald Trump s son in law and White House senior adviser Jared Kushner and his family s real estate company a person familiar with the matter told Reuters The New York State Department of Financial Services DFS made the requests to Deutsche Bank Signature Bank and New York Community Bank for information on loans and other financial arrangements including lines of credit and loan guarantees a week ago the person said The regulator also asked for information related to other family members the person said Christine Taylor a spokeswoman for Kushner Cos said the company had not received a copy of any letter from the regulator She described Kushner Cos as a multibillion enterprise that is extremely financially strong Prior to our CEO voluntarily resigning to serve our country we never had any type of inquiries Taylor said in an email These types of inquiries appear to be harassment solely for political reasons Jared Kushner s representatives did not respond to a request for comment According to government financial disclosures from last year he has lines of credit at the three banks among others The New York regulator declined comment as did Deutsche Bank Signature a New York state chartered bank said in an email that with the permission of its client it could state that the Kushner Family and Kushner Co have been clients since 2010 Signature said that by law it cannot disclose regulatory or legal inquiries New York Community Bank another New York state chartered bank had no immediate comment The New York Times reported on Wednesday that the private equity firm Apollo Global Management and Citigroup Inc N C extended loans totaling more than half a billion dollars to Kushner Cos last year after their officials held separate meetings with Kushner It said Joshua Harris a founder of Apollo was advising Trump administration officials on infrastructure policy and held several meetings with Kushner They discussed a possible White House job for Harris which did not materialize but Apollo lent 184 million to Kushner Cos in November the paper said Citigroup lent Kushner Cos and one of its partners 325 million in the spring of 2017 shortly after Citigroup s chief executive Michael Corbat met with Kushner in the White House the Times said Taylor of Kushner Cos told the Times stories like these attempt to make insinuating connections that do not exist to disparage the financial institutions and companies involved Peter Mirijanian a spokesman for Kushner s lawyer Abbe Lowell said Kushner has had no role in Kushner Cos since joining the government He has followed the ethics advice he has received for all of his work which include the separation from his business and recusals when appropriate the spokesman added Citigroup spokeswoman Danielle Romero Apsilos told the Times Kushner Cos had been a bank client since before the election and that the relationship had no connection to Kushner s White House role She said Citigroup negotiated the 2017 loan with Kushner Cos business partner a real estate developer She declined to comment further to Reuters Apollo spokesman Charles Zehren told the paper Harris was not involved in the decision to loan money to Kushner Cos Apollo did not immediately respond to a Reuters request for comment As New York s bank regulator DFS supervises the New York branch of Deutsche Bank Germany s flagship lender along with the two state chartered lenders If DFS finds the loans somehow violate banking law it could fine the banks or take other corrective action with regard to their business practices said New York attorney Daniel Alter former general counsel at DFS If the regulator finds potential criminal activity by either the borrowers or the banks it could also refer the matter to prosecutors for further investigation Alter said Last year Kushner who is married to Trump s daughter Ivanka Trump resigned from Kushner Cos and sold his stake to a family trust as part of an effort to avoid conflicts of interests in his White House role The private real estate company owns or partially owns buildings in New York and New Jersey
Kushner who had a broad portfolio in the White House including leading Middle East peace negotiations and an effort to modernize and reduce the size of some government programs lost his interim top secret security clearance two U S officials familiar with the matter said on Tuesday |
C | As Western banks leave China adds Brunei to new silk road | By Praveen Menon BANDAR SERI BEGAWAN Reuters On a tiny island off Brunei s northern tip on the South China Sea thousands of Chinese workers are building a refinery and petrochemical complex along with a bridge connecting it to the capital Bandar Seri Begawan When completed the first phase of the 3 4 billion complex on Muara Besar island run by China s Hengyi Group will be Brunei s largest ever foreign investment project and comes at a time when the oil dependent country needs it the most Brunei s oil and gas reserves are expected to run out within two decades As production falls oil firms won t be investing much into existing facilities further hampering output oil analysts say As a result the country s oil revenues which provide virtually all of Brunei s government spending are in steady decline With youth unemployment rising Brunei s ruler Sultan Hassanal Bolkiah is trying to quickly reform the economy and diversify its sources of income while fighting graft and cracking down on dissent Brunei s changing fortunes have been reflected in its financial industry HSBC L HSBC pulled out of Brunei last year while Citibank N C exited in 2014 after 41 years Bank of China SS 601988 meanwhile opened its first branch in the sultanate in December 2016 The Muara Besar project is promising over 10 000 jobs at least half of which would go to fresh graduates media reports in Brunei said But claims that thousands of Chinese workers have been shipped in to build the complex has angered some local residents There are no jobs for us so why create some for the Chinese asked one shopkeeper in the capital city MARITIME SILK ROAD Hengyi Industries the local company building the refinery did not respond to requests for comment The company founded in 2011 and based in Bandar Seri Begawan expects to complete the first phase of the refinery and petrochemical complex on Muara Besar by the end of the year according to its website A 12 billion second phase will expand the refinery capacity to 281 150 barrels per day and build units to produce 1 5 million tonnes per year tpy of ethylene and 2 million tpy of paraxylene the company said last month Total Chinese investment in Brunei is now estimated at 4 1 billion according to the American Enterprise Institute s China Global investment tracker That will almost certainly rise as China ramps its Belt and Road initiative Sometimes called the 21st Century Maritime Silk Road it envisages linking China with Southeast Asia Africa and Eurasia through a complex network of ports roads railways and industrial parks Brunei is an important country along the 21st century Maritime Silk Road China s Ambassador to Brunei Yang Jian said at the opening ceremony in February 2017 for a joint venture running Brunei s largest container terminal Accumulated U S foreign investment in Brunei by contrast was just 116 million in 2012 the latest figures available according to the U S State Department China has invested about 205 billion in East Asia between 2010 and 2017 according to the China Global investment tracker It s been increasing those investments while tussling with four other Southeast Asian nations including Brunei over competing claims to islets and atolls in the South China Sea Building good relations and offering big investments are part of China s strategy to split Southeast Asian nations to ensure there is no consensus on South China Sea matters said Jatswan Singh associate professor at the University of Malaya in Kuala Lumpur who has authored four books on Brunei The Sultanate is hard pressed for investments to diversify its economy and in this sense the Chinese investments are important to Brunei he said Brunei has not commented publicly about its territorial claims in the South China Sea WHITTLING BACK BENEFITS There was a time not so long ago with oil prices over 100 a barrel when Brunei citizens could care less about jobs at a refinery Squeezed between two Malaysian states on the island of Borneo Brunei provided cradle to grave benefits for its 420 000 citizens including zero taxes subsidised housing and free education and health care But the sultan has had to whittle back some of those benefits Brunei has been in recession for three straight years and tighten up the ship of state The 71 year old Bolkiah the world s second longest reigning monarch reshuffled his cabinet again last month replacing six top ministers just over a couple of years after they were appointed No explanation was given Sources close to the government and foreign diplomats say Bolkiah wanted to weed out corruption and address grumbling among the Malay Muslim majority who are unhappy with the pullback in welfare programs budget cuts and unemployment In the last available official report in 2014 the unemployment rate was put at 6 9 percent Unofficial figures suggest youth unemployment could be as high as 15 percent A majority in Brunei expect a job in the government state linked firms or in the oil and gas sector But all three have been hit pretty hard said one Western diplomat Bolkiah who is also the Prime Minister controls the key portfolios of defence finance and foreign affairs The Sultan s office did not respond to a request for comment to this story At the annual parliamentary session on Monday Bolkiah said the government must cut its dependence on oil and gas and explore other avenues of economic growth Although global demand has risen and oil prices are rebounding economic growth remains at a low level he said in a speech to cabinet ministers and parliamentarians Therefore we still need to control the fiscal balance of the country in the short and long term The Sultan is still popular in Brunei and marked 50 years in power last October with a glittering procession through the capital on a gilded chariot cheered by well wishers But in the long run an economy based on dwindling single source of income could erode the relationship between the ruler and his subjects said Maung Zarni democracy advocate and a former research fellow at the London School of Economics That doesn t mean that will translate into street protests But Bruneians know things are not as rosy as they appear in the Sultan s newspapers and TV channels said Zarni who quit the University Brunei Darussalam in 2013 over what he said was a lack of academic freedom 1 1 3224 Brunei dollars
Fixes typos in para 5 28 and 32 |
C | Barclays BCS Cuts Jobs In Tokyo Fixed Income Trading Unit | Barclays LON BARC NYSE C is cutting jobs in its Japanese fixed income trading business due to the unfavorable interest rate environment in Japan This in turn is lowering profits in the company s markets unit The bank has already terminated the services of several sales personals and traders in Tokyo This news was reported by Bloomberg While Barclays remains focused on improving its corporate and investment banking division s performance the same is becoming all the more challenging to be achieved This unit has been witnessing declining profits with net income falling 4 year over year during the first half of 2019 Thus the latest job cuts are in sync with Barclays strategy to trim expenses across the globe amid challenging operating backdrop Notably the bank slashed 3 000 jobs in the June end quarter Further Barclays is in talks to divest its New York based automated options trading business Barclays has been undertaking restructuring and cost saving initiatives for the past several years Remarkably this resulted in a dip in operating expenses during 2017 and 2018 with the trend continuing in the first half of 2019 as well Also the company expects expenses to be lower than 13 6 billion this year The above mentioned initiatives will likely help boost the Barclays profitability Thus management targets to achieve return on tangible equity ROTE of greater than 9 in 2019 Barclays is not the only global bank making moves to sail through the turbulent operating environment Low or negative interest rates and most central banks accommodative monetary policy stance are dampening the financial firms growth prospects In the recent past Deutsche Bank NYSE DB Societe Generale Group NYSE C and Citigroup NYSE C also made job cuts in their trading divisions Shares of Barclays have lost 3 1 on the NYSE compared with the s fall of 0 5 year to date The stock currently carries a Zacks Rank 4 Sell You can see 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 |
C | 5 Reasons To Buy Gold ETFs As Price May Touch 2000 | Gold prices have been on a tear of late with SPDR Gold Shares NYSE GLD TSXV GLD rallying 11 8 as of Sep 10 2019 compared with the S P 500 s 3 2 gain Heightened tensions related to the U S China trade war in recent months have led to this upsurge
Investors should note that both parties hiked tariffs on Sep 1 in the latest round The China government imposed higher tariffs on Sep 1 on the proportion of goods that only make up about listed in the latest announcement Most of the duties will be implemented on Dec 15
China s latest move came on the heels of the U S government s Aug 1 announcement that it will impose a 10 tariff on 300 billion worth of Chinese goods Washington delayed some of the tariffs on Aug 13 stating that those will be enacted in two tranches
However following China s retaliation announcement Trump said that he would raise tariffs on 250 billion worth of Chinese exports to Moreover tariffs planned on another 300 billion worth of Chinese goods have been revised to 15 from 10 read
Will Gold Top 2000 Any Time Soon
an ounce over the next year or two marking a roughly 33 surge from its current price of 1 499 60
Here we have laid out some reasons that could make this price target possible
Trade Tensions Linger
Though China announced that its trade officials with U S counterparts in Washington early next month the atmosphere still remains turbulent Thus markets will undoubtedly remain volatile and prompt more attention for this safe haven asset
Global Bond Yields Likely to Slide
Thanks to renewed worries of a global growth slowdown several global central banks have been banking on easy money policies lately In July the Fed cut interest rates with another anticipated in the coming days This could keep the greenback subdued and boost gold The ECB is also highly anticipated to ease its policy further or even restart QE at 40 billion euros per month
Investors should note that the Euro zone and Japan have already been practicing negative interest rates Apart from these two central banks in New Zealand India Thailand South Korea Indonesia Turkey and South Africa resorted to rate cuts in order to keep signs of a slowdown at bay China too lowered its lending reference rate Such low rates are encouraging for non interest bearing assets like gold read
Upcoming U S Presidential Election
The U S Presidential election due in November 2020 will likely make the market edgy will keep rolling in wherein one contesting party will have an upper hand one moment followed by another in the next moment This in turn will keep boosting gold prices Hence prepare for a gold rush next year
Brexit in the Cards
Britain s prime minister Boris Johnson has been an advertiser of a no deal Brexit and wants to sign a divorce paper with EU on Oct 31 Nevertheless his proposals are not opposition free KPMG projects that a no deal Brexit could push Britain s economy toward This will likely keep investors jittery and lead to rise in gold prices read
Upcoming Festive Season in India
India is one of the largest gold importers in the world Though imports dropped to a three year low in August on high prices and may remain subdued if the prices continue being this high an uptick in near term demand is anticipated owing to the upcoming festive season
With the forthcoming wedding and festive season in India gold prices will find another reason to flare up Dhanteras the first day of the festival Diwali is in October this year The occasion is marked by huge gold purchases All these reasons could lead jewelers to stock the metal
How to Play With ETFs
There are leveraged gold ETFs like VelocityShares 3x Long Gold ETN ProShares Ultra Gold DB Gold Double Long ETN BS DGP VelocityShares 3x Inverse Gold ETN and so on
As far as regular ETFs are concerned investors can play the products like GLD iShares Gold Trust Aberdeen Standard Physical Swiss Gold Shares ETF SPDR Gold MiniShares Trust TSXV GLD and GraniteShares Gold Trust TSX BAR read
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JPM | 5 Insights From The JPMorgan Guide To The Markets 4Q16 | Here are my top insights from the recently released JPMorgan NYSE JPM for the 4th quarter of 2016
Some very interesting observations can be made from the charts in this report
1 The S P 500 is a Little Bit Overvalued Right Now
JPMorgan Guide To The Markets
Check out the chart above Compared to its 25 year long term average the S P 500 looks to be just slightly overvalued in terms of Forward P E and P CF
2 Energy Firms are Almost Out of the Red
It looks like the tide is finally turning for energy stocks with firms rebalancing their budgets and figuring out how to make money with lower oil prices The fact that oil is now hovering around 50 barrel is sure to help as well And after 3 years of overproduction the is projecting stability next year with 96 8 million barrels per day of oil produced and 96 8 million barrels per day consumed in 2017
3 Tech Telecom Stocks Look Relatively Cheap Energy Utilities Look Expensive
Comparing trailing and forward P E ratios to their long term historical averages technology stocks and telecom stocks appear to be the most undervalued and energy and utilities look way overvalued
4 We re in the 4th Longest Bull Market in History But with the Slowest Financial Recovery
At 87 months this is the 4th longest bull market in history And yet the economic recovery has been by far the slowest
5 People Hate Congress But Have Been Warming Up to Obama
Finally with such a slow economic recovery and the brutal bipartisanship we re seeing out of Washington Americans approve of Congress has never been lower And while Obama s approval rating is still below average he s seen a steady increase over the past year or so |
JPM | 3 Best Large Cap Value Mutual Funds To Buy Now | Investors interested in safer returns from stocks available at discounted prices may consider large cap value mutual funds While large cap funds usually provide safer options than small or mid cap funds mutual funds investing in value stocks have the potential to deliver higher returns and exhibit lower volatility than their growth and blend counterparts Large cap funds generally invest in securities of companies with market capitalization of more than 10 billion These funds have exposure to large cap stocks that are expected to provide a long term performance history and assure more stability than mid or small caps Value funds on the other hand generally invest in stocks that tend to trade at a price lower than their fundamentals i e earnings book value and debt equity and pay out dividends Value stocks are expected to outperform the growth ones across all asset classes when considered on a long term investment horizon and are less susceptible to trending markets Below we share with you three top rated large cap value mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can their Zacks Rank and past performance JPMorgan Large Cap Value C invests a large portion of its assets in securities of large cap companies that include common stocks and debt and preferred stocks that can be converted to common stock Large cap companies are those that have market capitalization equivalent to those listed on the Russell 1000 Value Index at the time of purchase OLVCX offers dividends quarterly and capital gains annually JPMorgan Large Cap Value C has a three year annualized return of 7 8 Scott Blasdell is the fund manager since 2013 Commerce Value seeks capital appreciation CFVLX invests a minimum of 65 of its assets in common stocks The fund s investments include companies with an impressive earnings growth track record that are believed to pay out dividends CFVLX may invest a notable portion of its assets in securities of companies from the financial sector Commerce Value has a three year annualized return of 7 3 CFVLX has an expense ratio of 0 70 compared with the category average of 1 15 MFS Value I seeks capital growth over the long run MEIIX generally invests in equity securities including common stocks and other securities that represent an ownership interest Though MEIIX primarily invests in value companies having a large capitalization it may also invest in small and mid cap companies MFS Value I has a three year annualized return of 8 7 As of September 2016 MEIIX held 102 issues with 4 38 of its assets invested in JPMorgan Chase Co NYSE JPM To view the Zacks Rank and past performance of all large cap value mutual funds investors can Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | 3 Top Small Cap Blend Mutual Funds To Buy Now | Investors with a high risk appetite as well as an interest in growth and value investing may choose small cap blend mutual funds to boost their portfolio While blend funds also known as hybrid funds aim for value appreciation by capital gains small cap funds are expected to have higher growth prospects than their large and medium counterparts Blend funds provide significant exposure to both growth and value stocks and owe their origin to a graphical representation of a fund s equity style box Funds investing the majority of their assets in securities of companies with market capitalization lower than 2 billion are generally considered small cap mutual funds Though funds investing in small cap stocks are believed to have more exposure to market volatility than large or medium ones they are also expected to provide diversification across sectors and companies Moreover small cap companies are believed to be less affected by a global downturn thanks to less international exposure Below we will share with you three buy rated small cap blend mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can JPMorgan NYSE JPM US Small Company A invests a large portion of its assets in equity securities of small cap U S companies These small cap companies have market capitalization similar to those companies listed on the Russell 2000 Index during the time of purchase JPMorgan US Small Company A has a three year annualized return of almost 4 As of September 2016 JTUAX held 385 issues with 1 40 of its assets invested in Take Two Interactive Software Inc TIAA CREF Small Cap Equity Retail seeks favorable returns over the long term TCSEX invests heavily in domestic small cap companies having market capitalization identical to those included on the Russell 2000 Index TCSEX primarily invests in small sized companies across different sectors TIAA CREF Small Cap Equity Retail has a three year annualized return of 4 4 TCSEX has an expense ratio of 0 75 compared to a category average of 1 31 SSgA Dynamic Small Cap N invests a large chunk of its assets in equity securities of companies listed in the Russell 2000 Index SVSCX may also invest a maximum of 20 of its assets in securities of companies that are not included on the index SSgA Dynamic Small Cap N has a three year annualized return of 4 5 Anna Lester is one of the fund managers and has managed SVSCX since 2010 To view the Zacks Rank and past performance of all small cap blend mutual funds investors can Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
MS | Deutsche Bank warns of tough times ahead as braces for U S fine | By Arno Schuetze and Anjuli Davies FRANKFURT Reuters Deutsche Bank DE DBKGn chief John Cryan pledged to redouble restructuring efforts on Thursday warning that the bank faces tough times ahead as it finalizes talks with U S justice authorities over a multi billion dollar fine Germany s biggest lender earlier posted an unexpected quarterly profit benefiting from a modest rebound in bond trading but failed to dispel the cloud of uncertainty that drove clients to withdraw billions of euros Cryan said on a conference call that the quarter had been overshadowed by talks over the U S Department of Justice s settlement proposal relating to sales of RMBS residential mortgage backed securities which had caused uncertainty As well as having an impact on investor and client views of the bank this uncertainty had also taken its toll on financial planning and strategy execution Cryan added Cryan warned Deutsche Bank employees in a letter that the situation will stay difficult for a while and said he was working to finalize the settlement as soon as possible Deutsche Bank would also intensify a major restructuring to counter a deteriorating environment for banking in Europe and elsewhere Cryan said However a top ten shareholder called on the bank s management to make deeper cuts in its trading activities Fixed income is still oversized in terms of cost and on group level there are still 10 000 staff too many Despite weeks of negative headlines Deutsche was able to announce an unexpected net profit of 278 million euros 303 million in the third quarter lifted by a surge in bond trading that boosted all Wall Street banks L8N1CW1Z5 This sent its shares to a more than one month high and despite retreating slightly they were still 0 7 percent higher at 13 4 euros at 1305 GMT Deutsche Bank s Chief Financial Officer Marcus Schenck also struck a positive note saying he expects the fourth quarter trading business overall to exceed last year s performance SPREADSHEET MYTH Cryan said he was spending at least an hour a day explaining the bank s position to clients adding To dispel any myths I don t just sit poring over spreadsheets Negotiations over a 14 billion demand from the U S DoJ for misselling toxic mortgage backed securities before the 2007 2009 financial crisis have set a bleak backdrop for Cryan Thursday s results gave some insight into how this demand has rocked confidence in Deutsche Bank which plays a critical role in financing some of Germany s biggest companies In retail and wealth management which had assets of almost 440 billion euros clients withdrew 9 billion euros in the third quarter Deutsche Bank revealed Outflows had since abated it said although its global markets trading business was also hit Cryan said the bank had liquidity reserves of 200 billion euros a fall from the more than 215 billion he had outlined on Sept 30 In June the bank had 223 billion euros Deutsche Bank set aside more money for its legal bill for numerous past missteps Litigation reserves rose to 5 9 billion from 5 5 billion at the end of June However Deutsche Bank has so far not made a specific proposal for what it would be willing to pay to settle the RMBS case and has therefore not upped its provisions for it It had hoped to settle the case for about 3 billion Revenue grew slightly at 7 5 billion euros ahead of analysts expectations mainly driven by Deutsche s trading while business declined in other operating areas Top down revenues were stronger and the bank is delivering on costs with this quarter being a fourth consecutive one of declining operating expenses analysts at Morgan Stanley NYSE MS noted Its bond trading which has volatile earnings and tough capital requirements to meet revenues were up 14 percent But the rebound was less pronounced than at peers because of cuts Deutsche has made to the division Barclays LON BARC on Thursday reported a 40 percent spike in its business In equities trading Deutsche saw revenue fall as low stock market volatility gave investors less reason to trade while revenue from corporate and investment banking fell by 1 percent
1 0 9173 euros |
MS | Warmup begins for the Great U S Rate Hike of 2016 | By Ross Finley LONDON Reuters Several of the world s top central banks will meet in the coming week but only one the U S Federal Reserve is set to start a final countdown on the second most anticipated event of the year after the Presidential Election Fed Chair Janet Yellen and the rest of the Fed s policy setters appear to have left themselves the December meeting to deliver a rate rise in 2016 with hardly anyone expecting a move only a week before the Nov 8 election If the Fed does go ahead the following month as most in financial markets and analysts polled by Reuters now expect it will have been a full year since the last increase and three short of the number of moves the Fed had anticipated back then Apart from a surprise outcome in an election where nearly every poll puts Democratic Party candidate Hillary Clinton several percentage points ahead of Republican Donald Trump the conditions to justify a long awaited rate rise are lining up Growth bounced back to an annualized 2 9 percent in the third quarter at the high end of expectations driven by inventory investment and a rebound in exports Crucially nascent signs of inflation pressure the missing ingredient up until now are rattling sovereign bond markets around the globe suggesting that few people are clinging to hope that the Fed will delay once more The Federal Open Market Committee which already had three members voting for a rate rise at the September meeting is expected to make clear in its statement that it has taken note of these improvements however subtly With market expectations for a December hike running higher this year compared with the same time last year the Fed need not be as explicit in its message of intent at this meeting compared with the October statement in 2015 ahead of lift off economists at Morgan Stanley NYSE MS said Nevertheless we expect that a simple change in the statement will send a clear message to markets that barring any unforeseen hiccups the Fed is a go for a December hike Several important U S data releases should support that view in the coming week with manufacturing growth expected to hold up and already strong expansion in the much larger non manufacturing industries due to accelerate The October employment report at the end of the week is also forecast to show solid if not spectacular hiring normal this far into an economic expansion along with wage growth around 2 5 percent above the rate of inflation EXPECTED INFLATION TO TIE BANK OF ENGLAND S HANDS Across the Atlantic the Bank of England s Monetary Policy Committee will meet to consider a different kind of inflation challenge from a very different angle The coming surge in imported inflation as a result of the pound s collapse since Britons voted on June 23 to leave the European Union has considerably narrowed the central bank s wiggle room for another rate cut below 0 25 percent BoE Governor Mark Carney said on Thursday the MPC can t ignore that fairly substantial drop and there were limits to how willing the MPC would be to look through an inflation overshoot now expected to be well above the 2 percent target Of course it is hard to say exactly how much of an overshoot the MPC will tolerate but the very fact that the Governor made this statement so soon before the Inflation Report does suggest a wariness about the inflationary impact of recent sterling declines economists at Investec said And if the Governor has become skeptical about cutting Bank Rate in such conditions he will probably build a constituency in the MPC to vote down any move to cut The majority of economists polled by Reuters have pushed a rate cut off the table for this year with some traders in financial markets already speculating on the next move up BOE INT The latest British manufacturing and services business surveys are due as well but they aren t likely to change a rate picture dominated by concerns about the pound and what kind of replacement trade agreements Britain will set up and how soon The Bank of Japan is due to meet early in the week but few expect it to make any changes to policy after recently implementing an overhaul of its tools More easing is a way off and is more likely to be a response to an external shock Governor Haruhiko Kuroda s tone of late suggests he has left behind his aggressive stance of the recent past which has done next to nothing to boost inflation in Japan The Reserve Bank of Australia is also forecast to leave rates steady on Tuesday following cuts in May and August according to a Reuters poll of 60 economists |
MS | Morgan Stanley COO Jim Rosenthal to retire at end of year memo | Reuters Morgan Stanley N MS chief operating officer Jim Rosenthal will retire at the end of the year Rosenthal who joined the Wall Street firm in 2008 and helped oversee the integration of Morgan Stanley with Smith Barney will continue to serve as a senior adviser according to an internal memo A Morgan Stanley spokesman confirmed the contents of the memo |
MS | U S dollar likely to drift higher in the year ahead Reuters poll | By Rahul Karunakar and Shrutee Sarkar Reuters The U S dollar is likely to drift higher into next year as the Federal Reserve forges a lone but gradual path toward higher interest rates according to foreign exchange strategists polled by Reuters The run up to and immediate aftermath of the U S presidential election on Nov 8 could still pose some near term risk to the currency but a narrow range of forecasts among the bulk of the more than 60 participants surveyed on Oct 26 31 suggests much of that has already been factored in The dollar unexpectedly rallied more than 3 percent in October hitting a near nine month high against a basket of currencies on the back of solid U S economic data That has bolted down expectations among traders and analysts for the Fed to finally deliver an interest rate rise in December a year since the last one and following much hesitation and many delays throughout 2016 As those expectations have firmed strategists do not expect the currency to rally much further in the year ahead although with no other major central bank about to raise rates the path of least resistance should be upwards While we can t foresee the next global risk flare up we judge that prospective Fed tightening will become a more consistent driver of U S dollar strength wrote Benjamin Reitzes senior economist at BMO But with tightening prospects having dimmed meaningfully from where they stood amid lift off we doubt the greenback will revisit January s peak anytime soon The latest poll predicted the euro would trade at around 1 09 in one three six and 12 months about where it was on Monday and also where the common currency started in 2016 RISKS TO UPSIDE While currencies are rarely that stable it gives an idea of how comfortable many strategists are with the current rate The range of forecasts on the 12 month horizon was 0 95 to 1 20 Still more than one third of the strategists who answered an extra question said the risks to their dollar forecasts were more to the upside over the coming year Currency speculators also increased their bets in favor of the dollar for a fifth straight week and to the highest since late January according to data from the Commodity Futures Trading Commission released on Friday USD gains are likely to continue With the market pricing not even a full hike over the course of 2017 risk reward is skewed toward the central bank sounding more hawkish which would push USD higher wrote Hans Redeker global head of FX Strategy at Morgan Stanley NYSE MS While the Bank of Japan has expanded on its already massive stimulus this year the yen has surged more than 12 percent against the dollar defying a drumbeat of predictions for a weaker yen that has gone on for years now The Japanese yen continues to defy logic It rallies not only when there is a flight from risk but also when the BoJ eases noted BMO s Reitzes The yen is forecast to weaken about 1 3 percent to 106 3 against the dollar in a year from around 105 0 on Monday BMO also expects it to weaken The BoJ began its two day policy review on Monday and was widely expected to stand pat Meanwhile sterling s crash of almost 20 percent against the dollar since Britons voted to leave the European Union is not over yet The pound is predicted to lose another 5 percent after Britain starts its formal process to quit the EU
While forecasts were sharply revised lower from last month sterling is not expected to weaken to parity with the euro Analysis by Hari Kishan Polling by Vartika Sahu and Purnita Deb Editing by Gareth Jones |
JPM | JPMorgan mulls moving 200 bankers to Paris post Brexit Les Echos | PARIS Reuters JPMorgan N JPM is considering moving almost 200 banking jobs from London to Paris after Britain leaves the European Union Les Echos newspaper reported on Wednesday citing unidentified sources Boosted by reforms undertaken by President Emmanuel Macron Paris has overtaken Frankfurt as the most popular destination for the number of finance jobs to be shifted out of Britain after Brexit a Reuters survey found last month Paris has become attractive again even from a tax point of view Les Echos cited an anonymous source as saying JPMorgan s Daniel Pinto who holds the shared positions of president and chief operating officer discussed the issue with Bank of France Governor Francois Villeroy de Galhau during a meeting in New York on Wednesday the paper said adding that the bank had yet to make a final decision Macron a former investment banker and his government are pushing through social and economic reforms to re shape the French economy and restore France s image among investors He has already made hiring and firing easier by easing labor regulations slashed a wealth tax introduced a flat 30 percent tax rate on capital income and scrapped the highest bracket of payroll tax for banks
JPMorgan Chief Executive Jamie Dimon was also one of the guests at Macron s pre Davos summit at the palace of Versailles in January where the French president pitched his country to some of the world s most powerful business executives |
C | Ratings Firms Positive About S Africa Budget Treasury Says | Bloomberg Rating companies Moody s Investors Service and S P Global Ratings responded positively to decisions taken in South Africa s budget Treasury Deputy Director General Monale Ratsoma said
They were very positive Ratsoma said in an interview in Cape Town on Wednesday after a team from the Treasury held teleconferences with Moody s and S P They indicated areas of concern after the medium term budget policy statement and I think they must agree we ve addressed all of those
Treasury officials will speak with Fitch Ratings Ltd on Thursday Ratsoma who is in charge of economic policy said
Finance Minister Malusi Gigaba announced tax increases and spending cuts to narrow the fiscal deficit and curb debt in his budget speech Fitch and S P lowered South Africa s foreign and local currency credit ratings to non investment grade last year citing policy uncertainty and concerns about the management and finances at state owned companies Moody s has the country on review for a downgrade to junk and may make an announcement on March 23
Should Moody s reduce the local currency debt to non investment grade South Africa will exit the Citibank World Government Bond Index sparking forced sales by investors who track the gauge and leading to outflows of as much as 100 billion rand 8 5 billion in the nation s bond market according to Citigroup NYSE C estimates
Avoiding a cut by Moody s is the Treasury key focus at the moment Gigaba said in a separate interview |
C | Bond Market Guide to Trading When 10 Year Treasuries Hit 3 | Bloomberg At this point it s more likely a matter of when not if the 10 year Treasury yield hits 3 percent And that apparent inevitability raises a pressing question How to trade when it happens
The 10 year yield was last above 3 percent in January 2014 and since the start of last year bond gurus like Jeffrey Gundlach at DoubleLine Capital and Scott Minerd at Guggenheim Partners have highlighted the level as critical to determining whether the three decade bull market in bonds is at an end It s also seen as the point at which equity markets might crack and the dollar could halt its slump against other major currencies
The yield reached as high as 2 9537 percent on Wednesday after minutes of the Federal Open Market Committee s January meeting helped spur a selloff and it was at 2 93 percent as of 7 45 a m Thursday in New York
Here s what to watch for when the benchmark 10 year Treasury yield reaches the much vaunted 3 percent level
Breakout or Pullback
The most immediate question for traders Do 10 year yields hit 3 percent and retreat or does positioning signal a sharp move higher Anticipating the volatility and its implications could make a big difference
Certainly as we get closer to 3 percent people will get nervous said Michael Cloherty head of U S interest rate strategy at RBC Capital Markets I would expect flows to pick up as we re closer and closer to 3 and to see some choppiness in the market
Volatility may not be as bad as some investors fear So called short gamma strategies which effectively bet that the market will stay quiet have been steadily hedging those wagers according to a New York trader who isn t authorized to speak publicly and asked not to be identified That means an accelerated break through 3 percent may not happen
In fact open interest on 10 year Treasury futures suggests 3 percent may not be the crucial level after all There are a large number of March puts at a 120 strike price equivalent to a 2 95 percent yield That helps explain the resistance to moving much higher than that so far this year
Another large accumulation of puts comes at a 118 strike price in April equivalent to a 3 1 percent yield on the 10 year security Dealers who are on the other side of those options could hedge during a selloff by purchasing 10 year Treasury futures thus creating inherent support
In other words those bond bears ready to watch the Treasury market falter at 3 percent may be in for a slow grind
Testing Technicals
To be precise traders will be watching for the 10 year yield to break through 3 0516 percent the intraday high from Jan 2 2014 You have to go back to July 2011 to find the last time the yield exceeded that level
Technical analysis has its naysayers but it s been a harbinger of things to come since Donald Trump s win in the 2016 presidential election For all of 2017 the key 2 64 percent level on 10 year yields couldn t be broken Strategists warned that a breach left little stopping an ascent to 3 percent
Sure enough yields soared past 2 64 percent in January and now they re knocking on the door of 3 percent
The next stop once 3 percent is convincingly in the rear view mirror is less clear Beyond 3 05 percent the next area of yield resistance would be around 3 14 percent or 3 15 percent which relates to levels from late 2010 and early 2011 said Marty Mitchell a former head government bond trader at Stifel Nicolaus Co and now an independent strategist Further out he points to 3 215 percent to 3 25 percent
In the distance a big key level would be near the highs for 2011 Mitchell said The yield reached as much as 3 77 percent in February of that year Of course that s a ways away and as the positioning data shows it ll be a struggle to take out each successive key level
I think we test 3 05 then we see a more sustained correction downside in yields Mitchell said But I believe we re in an uptrend in yields so any strength in the bond market needs to be sold
Watching Stocks
Treasuries of course don t exist in a vacuum It s easy to forget amid 2018 s rout that the 10 year yield plunged almost 14 basis points on Feb 5 capitalizing on haven demand as equities suffered steep losses When stocks stabilized yields marched higher again
Some strategists say a 3 percent 10 year yield represents the end of the stock market rally with corporate borrowing costs becoming too punitive and fixed income looking too appealing Others like Jonathan Golub chief U S equity strategist at Credit Suisse SIX CSGN Group AG say 3 5 percent is the level to watch
Regardless of the exact level bond traders may find that the best barometer of which way yields are headed after 3 percent will come from stocks A bout of selling in equities probably means the tug of war between the two asset classes is alive and well serving as a cap on yields and perhaps preventing too much tightening from the Federal Reserve If stocks shrug at 3 percent then it s a green light for the selloff to carry on
Hedge funds and other large speculators have a lot riding on the outcome The group has boosted short bets in 10 year Treasury futures to a record according to Commodity Futures Trading Commission data through Feb 13 That positioning could exacerbate the market moves in either direction
Long Run Divergence
Lost in the question of what s next is that 3 percent marks the highest yield on a 10 year Treasury note in more than four years That s a compelling proposition particularly for hold until maturity investors who are relatively insensitive to price swings
It s tempting to wait for an even better entry point But more than half of the 59 analysts surveyed by Bloomberg this month say the 10 year yield will end 2018 at or below 3 percent After all the Fed s own projections call for its target rate to climb just above 3 percent in 2020 before settling at a longer term rate of 2 75 percent
If you think that 3 percent is where the Fed is going to stay you ll see a significant level of demand at those levels said Bruno Braizinha a rates and cross asset strategist at Societe Generale PA SOGN SA
His fellow strategists at Wall Street banks are finally seeing signs that the overwhelmingly bearish momentum is starting to fade Citigroup Inc NYSE C for instance is looking to go long if yields keep climbing Barclays LON BARC Plc isn t waiting for 3 percent instead recommending buying at 2 9 percent
Then there are those in the middle like Cloherty at RBC A 3 percent 10 year yield could serve as a good short term trade he said because Japanese investors are likely to step in and buy after their fiscal year ends on March 31 But it s probably headed higher toward the end of 2018
The pattern will be a sideways slide for the second quarter and then we leak higher in the second half on Fed tightening and an awful lot of Treasury supply Cloherty said We see people trying to protect themselves more against higher rates but I don t think that just because we break 3 we re destined to go to 3 5
Updates to add yields in third paragraph |
C | Citigroup to refund 335 million of credit card interest charges | NEW YORK Reuters Citigroup Inc N C said on Friday that it had failed to properly reduce interest charges on some 1 75 million credit card accounts since 2011 prompting a 335 million refund to customers later this year The refund which will average 190 per account stems from the bank s discovery that it had not used a proper method for reducing interest charges for cardholders who resumed timely payments after having had to pay penalty rates for lapses The errors amounted to about 10 percent of the interest reductions cardholders were due the bank said It estimated that the other 90 percent of rate savings were properly credited to accounts The cost of the reimbursements has already been factored in to Citigroup s 2017 results Under a federal law known as the CARD Act banks have been required since 2011 to cut back on penalty interest rates after cardholders resume timely payments The bank said it found it erred in how it calculated some of those reductions While we believed our methodology was sound a periodic internal review identified potential flaws in the methodology used to reevaluate interest rates on some credit card accounts Citigroup spokeswoman Liz Fogarty said in a statement While we have found no evidence of employee misconduct we should have identified these issues sooner the statement added Citigroup disclosed the problem generally in an annual securities filing early in the day and provided more details later
Citigroup was the third biggest U S card lender in 2016 according to the Nilson Report |
C | Tax overhaul shaves U S bank profits 40 9 percent in fourth quarter FDIC | By Pete Schroeder WASHINGTON Reuters U S bank profits were down 40 9 percent in the fourth quarter of 2017 from a year earlier due primarily to one time accounting changes from the new tax law which is expected to boost profits in the long run the Federal Deposit Insurance Corp FDIC said on Tuesday Absent the changes spurred by the tax law bank profits were estimated to drop just 2 3 percent to 42 2 billion in the fourth quarter according to the regulator Net interest income was up 8 5 percent to 129 5 billion The brunt of the tax spurred decline was borne by larger banks who had already been reporting eye popping losses at the end of 2017 Large institutions took a disproportionate hit on earnings held abroad and the rewriting of the value on deferred tax assets Citigroup NYSE C for example reported an 18 billion loss at the end of 2017 thanks to the updated tax law But banks are expected to be significant beneficiaries of the revamped tax code in the long run thanks to a significant lowering of the corporate tax rate FDIC Chairman Martin Gruenberg said the industry s performance remains positive as the number of problem banks dropped to just 95 the lowest level since the first quarter of 2008 Notwithstanding the one time impact of the new tax law the overall performance of the industry continued to be positive he said However he said low interest rates and a competitive lending environment has led some banks to reach for yield heightening risks
The industry must manage interest rate risk liquidity risk and credit risk carefully to continue to grow on a long run sustainable path said Gruenberg |
C | Top And Flop ETF Areas Of August | The July upsurge in the key U S indexes wavered to start August as stocks slipped mainly on renewed U S China trade tension Also the Fed s less hawkish guidance on monetary policy released at July end triggered a broader market rout to start August read
The month was all about announcement of higher import tariffs between the two superpowers China levied a round of retaliatory tariffs on U S goods worth 75 billion in the range of which is The move by China came after the U S government announced on Aug 1 that it is levying a 10 tariff to 300 billion worth of Chinese goods Though Washington delayed some of those tariffs on Aug 13 saying they will be enacted in two tranches the announcement prompted China to counteract
After markets closed in the United States on Aug 23 Trump said he would raise tariffs on 250 billion in Chinese exports to and that the tariffs kicking in next week will now be 15 rather than 10 The first lot of those tariffs will be introduced in September read
Apart from trade tensions the month saw a host of global stimulus from various central banks and a bond market rally Overall the global stock markets remained edgy SPDR S P 500 ETF NYSE SPY ASX SPY down 4 2 SPDR Dow Jones Industrial Average NYSE DIA ETF TSXV DIA down 4 3 and Invesco QQQ Trust down 4 9 all lost heavily in the past month as of Aug 28 2019
Against this backdrop below we highlight a few winning and losing ETF areas of the month
Toppers
Volatility
Hostility in terms of tariff caused a bloodbath in Wall Street and volatility levels spiked VelocityShares 1x Long VSTOXX Futures ETN NYSE EVI up 32 6 iPath Series B S P 500 VIX Short Term Futures ETN up 32 5 ProShares VIX Short Term Futures ETF up 32 4 and VelocityShares VIX Short Term ETN up 32 3 were the toppers read
U S Treasury
Thanks to the market turmoil and the safe haven rally yields on the 10 year U S treasuries fell drastically in the month As of Aug 28 the benchmark yield was 1 47 down from 1 90 seen at the start of the month This has led to a spike in the long term bond prices and ETFs like PIMCO 25 Year Zero Coupon U S Treasury Index Exchange Traded Fund up 20 2 and Vanguard Extended Duration Treasury Index Fund ETF Shares TSX EDV up 17 9 benefited greatly
Precious Metal Miners
Since tariff related moves and countermoves have shaken the investment world investors sought safety in the safe haven asset gold Also several global central banks cut rates in recent times which favored the non interest bearing assets like precious metals Needless to say the precious metal rally boosted gold and silver mining ETFs like iShares MSCI Global Gold Miners ETF NYSE GDX OL RING up 14 2 and ETFMG Prime Junior Silver ETF up 13 2 read
Losers
Energy
Global growth worries weighed on the demand outlook of oil prices United States Oil Fund NYSE USO LP was down 1 5 in the past month Also U S oil rig count fell to the per Baker Hughes data Market watchers are of the view that shale producers are cutting back in a bid to conserve capital which means less drilling and fracking work for top oilfield services providers SPDR S P Oil Gas Equipment Services NYSE XES ETF and iShares U S Oil Equipment Services ETF lost about 22 3 each in the past month
Steel Producer
VanEck Vectors Steel ETF ASX SLX lost about 19 3 in the past month The underlying NYSE Arca Steel Index tracks the overall performance of companies involved in the steel sector Per a Citigroup NYSE C analyst benefits from the Trump administration s tariffs on foreign steel imports have diminished and demand has been disappointing
Copper Miner
U S China trade tensions have been playing foul on the demand for copper This is because China is a huge consumer of copper Any slowdown in China could disrupt the copper producing industry Global X Copper Miners ETF lost 18 6 in the past month
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C | Citi Boosts Credit Card Unit Despite Weakening U S Economy | Citigroup NYSE C has been strongly promoting zero interest balance transfers between credit cards from different banks to Citi per an article by Reuters The bank offers about 21 interest free months to customers in exchange for a small fee whereas its competitors offer up to 15 months for no fee Per the payments industry publication The Nilson Report Citi is considered the third largest U S card issuer Also of the overall revenues card business makes up about one third share Per the article this facility is considered to be risky by some analysts especially in scenario when the U S economy is showing signs of slowdown Also customers using such features are deemed risky as they use such facilities to accumulate more debt However Citi s executives support their strategy and argue that they have tough underwriting standards in place to safeguard the bank in case of any major loss from adverse situations in the future Citi continues to advertise interest free feature on popular personal finance websites and through mailers All other peers have reduced marketing efforts on this scheme Notably Citi s card business has witnessed delinquency rates much lower than the industry s average per federal data and filings Also according to a credit rating firm Experian 83 of consumers in its U S credit card business excluding its retail partnership cards have good credit scores of 680 Citigroup continues to execute growth strategies such as entering the booming digital consumer payments industry and expanding global market presence thereby aiming to diversify revenue sources Year to date the stock has gained 26 7 outperforming 11 6 growth recorded by the Currently Citi carries a Zacks Rank 3 Hold You can see Stocks to ConsiderFirst Business Financial Services NASDAQ FBIZ has witnessed 3 8 upward estimate revision over the past 30 days The company s shares have risen nearly 14 so far this year At present it has a Zacks Rank 2 Buy Mackinac Financial Corporation s NYSE C shares have rallied 6 8 year to date The company s earnings estimates for the ongoing year have moved 1 5 north in the past 60 days The stock currently carries a Zacks Rank of 2 Farmers National Banc Corp NASDAQ FMNB has witnessed slight upward estimate revision over the past 60 days The company s shares have risen nearly 6 so far this year At present it has a Zacks Rank 2 Today s Best Stocks from ZacksWould you like to see the updated picks from our best market beating strategies From 2017 through 2018 while the S P 500 gained 15 8 five of our screens returned 38 0 61 3 61 6 68 1 and 98 3 This outperformance has not just been a recent phenomenon From 2000 2018 while the S P averaged 4 8 per year our top strategies averaged up to 56 2 per year |
JPM | 3 Large Cap Blend Mutual Funds For Stable Returns | Investors looking for exposure to both value and growth stocks while seeking returns at a lower level of risk may consider large cap blend mutual funds Large cap funds offer more stability than mid or small caps and are thus safer too Generally companies with market capitalization of more than 10 billion are considered large cap firms However due to their significant international exposure large cap companies run the risk of being hit by global woes
Blend funds also called hybrid funds owe their origin to the graphical representation of their equity style box In addition to diversification blend funds offer a great mix of growth and value investment
Below we share with you three top rated large cap blend mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can their Zacks Rank and past performance
Fidelity Contrafund seeks capital appreciation and invests in common stocks of companies that are believed to be underestimated in value FCNTX focuses on acquiring both growth and value stocks of companies all over the world Factors such as financial strength and economic conditions are taken into consideration before investing in a company Fidelity Contrafund has a three year annualized return of 8 6
William Danoff is the fund manager of FCNTX since 1990
Vanguard Growth Income Investor invests in a diversified group of stocks chosen on the basis of quantitative analysis VQNPX seeks stocks that are believed to provide dividend income and have an impressive growth prospect Also as as a group these stocks appear likely to provide higher returns than the Standard Poor s 500 Index while having similar risk characteristics VQNPX invests a minimum of 65 of its assets in companies included on the index The Vanguard Growth Income Investor fund has a three year annualized return of 9 5
VQNPX has an expense ratio of 0 34 as compared to the category average of 1 05
Hartford Disciplined Equity HLS IA maintains a diversified portfolio by investing a major portion of its assets in common stocks of companies across a wide range of sectors Though HBGIX invests in securities irrespective of market capitalization it primarily emphasizes large cap companies with market capitalization within the range of the S P 500 Index HIAGX may invest a maximum of 20 of its assets in securities of foreign firms Hartford Disciplined Equity HLS IA has a three year annualized return of 10 9
As of August 2016 HIAGX held 73 issues with 2 48 of its assets invested in JP Morgan Chase NYSE JPM Co
To view the Zacks Rank and past performance of all large cap blend Mutual Funds investors can
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JPM | Why JPMorgan Chase JPM Stock Might Be A Great Pick | One stock that might be an intriguing choice for investors right now is JPMorgan Chase Co NYSE JPM This is because this security in the Banks Major Regional space is seeing solid earnings estimate revision activity and is in great company from a Zacks Industry Rank perspective This is important because often times a rising tide will lift all boats in an industry as there can be broad trends taking place in a segment that are boosting securities across the board This is arguably taking place in the Banks Major Regional space as it currently has a Zacks Industry Rank of 68 out of more than 250 industries suggesting it is well positioned from this perspective especially when compared to other segments out there Meanwhile JPMorgan is actually looking pretty good on its own too The firm has seen solid earnings estimate revision activity over the past month suggesting analysts are becoming a bit more bullish on the firm s prospects in both the short and long term
JPMORGAN CHASE Price and Consensus In fact over the past month current quarter estimates have risen from 1 34 per share to 1 39 per share while current year estimates have risen from 5 61 per share to 5 80 per share This has helped JPM to earn a Zacks Rank 2 Buy further underscoring the company s solid position You can see So if you are looking for a decent pick in a strong industry consider JPMorgan Not only is its industry currently in the top third but it is seeing solid estimate revisions as of late suggesting it could be a very interesting choice for investors seeking a name in this great industry segment Confidential from ZacksBeyond this Tale of the Tape would you like to see Zacks best recommendations that are not available to the public Our Executive VP Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand |
JPM | Eldorado updates on Tropicana deal | Eldorado s NASDAQ ERI says the purchase price of Tropicana s gaming assets after accounting for net cash on hand and cash flow generated from operations through closing represents an estimated trailing 12 months EBITDA multiple of 6 6X The purchase price multiple is expected to be below 5 0X if the expected 40M in cost synergies are factored in The company intends to fund the transaction consideration of approximately 640M and repay Tropicana debt with cash generated from current operations proceeds from pending asset sales Tropicana s cash on hand cash flow generated from Tropicana operations through closing and 600M of committed debt financing from JPMorgan NYSE JPM Previously Tropicana Entertainment sold off in separate deals April 16 Now read |
JPM | Automobiles power U S retail sales in March | By Lucia Mutikani WASHINGTON Reuters U S retail sales rebounded in March after three straight monthly declines as households boosted purchases of motor vehicles and other big ticket items suggesting consumer spending was heading into the second quarter with some momentum Economists saw a limited impact on retail sales for now from a recent ebb in consumer sentiment citing a robust labor market which is steadily pushing up wage growth Consumer sentiment slipped in early April as households worried about the potential impact of the Trump administration s trade policies on the economy Fears of a trade war between China and the United States have roiled financial markets The trade war and battered stock market may yet cause the consumer to temper their consumption expenditures but for the moment the sun is out and shining said Chris Rupkey chief economist at MUFG in New York Consumers are doing their part to drive the economy forward as they restart their engines from a cold and snowy winter The Commerce Department said on Monday retail sales increased 0 6 percent last month after an unrevised 0 1 percent dip in February January data was revised to show sales falling 0 2 percent instead of the previously reported 0 1 percent drop Economists polled by Reuters had forecast retail sales rising 0 4 percent in March Retail sales in March increased 4 5 percent from a year ago Excluding automobiles gasoline building materials and food services retail sales rose 0 4 percent last month after being unchanged in February These so called core retail sales which correspond most closely with the consumer spending component of gross domestic product were previously reported to have risen 0 1 percent in February U S financial markets were little moved by the data as investors watched geopolitical developments U S stocks rose on waning fears that the weekend s U S led missile attack on Syria would escalate into a broader conflict U S Treasury prices fell and dollar weakened against a basket of currencies SLOW FIRST QUARTER SPENDING Last month s pick up in core retail sales did little to change expectations of a sharp slowdown in consumer spending in the first quarter Economists largely blame the weakness in retail sales at the start of the year on delays in processing tax refunds Some also argue that income tax cuts which came into effect in January only reflected on most workers paychecks in late February The large swing in consumption between February and March is consistent with an important role for household after tax incomes being restrained and then lifted by a unique pattern of tax refunds and withholdings said Michael Feroli an economist at JPMorgan NYSE JPM in New York We believe those forces will remain supportive for consumption in the second quarter and after today s number remain comfortable with prospects for a rebound in household outlays this quarter Consumer spending which accounts for more than two thirds of U S economic activity grew at a robust 4 0 percent annualized rate in the fourth quarter It is expected to have slowed to below a 1 5 percent rate of increase in the first quarter Economic growth estimates for the January March quarter are running below a 2 percent rate The economy expanded at a 2 9 percent pace in the October December quarter The government will publish its advance estimate for first quarter GDP growth later this month In March auto sales jumped 2 0 percent the largest increase since last September after declining 1 3 percent in February Sales at furniture stores climbed 0 7 percent while those at electronics and appliance stores increased 0 5 percent But sales at building material stores fell 0 6 percent last month and receipts at clothing stores dropped 0 8 percent Sales at online retailers increased 0 8 percent Sales at restaurants and bars gained 0 4 percent Receipts at sporting goods and hobby stores dropped 1 8 percent While the stock market volatility has not yet impacted on consumer spending it is chipping away at business confidence In a separate report on Monday the New York Federal Reserve said its Empire State index tumbled seven points to a reading of 15 8 in April The survey s measure of future business conditions dropped to a more than two year low
This month s decline in the Empire State six month forward index may reflect trade related uncertainties and the associated volatility of stocks or other factors said Roiana Reid an economist at Berenberg Capital Markets in New York |
JPM | JPMorgan Chase Sees Blockbuster First Quarter Earnings | Investing com JPMorgan Chase NYSE JPM says first quarter earnings will be better than expected driven by more than the benefit of lower corporate taxes In a note to clients the Wall Street firm said it expects earnings to rise by 21 well above the consensus forecast of 17 5 JPMorgan says earnings will be lifted by a host of economic factors including rising disposable income and consumer confidence The firm says strong corporate profits and record share buybacks will drive stock prices higher after a unusually volatile period in which the market suffered two corrections in a little more than a month Earnings rose just under 15 in the fourth quarter and are forecast to grow by 18 5 for all of 2018 |
C | Saudis Says OPEC May Need New Way to Count Oil Stockpiles | Bloomberg OPEC will soon discuss with Russia a new way to measure oil stockpiles with the Saudi Energy Minister saying that finding reliable inventory data has been a challenge to more than a year of oil output cuts meant to curb the global glut
Oil producers involved in the supply reductions which have helped lift crude prices to three year highs will discuss which inventory levels to consider when they meet in April Saudi Arabia Energy Minister Khalid Al Falih told reporters in Riyadh on Wednesday More coordination is needed to assess inventories Russian Energy Minister Alexander Novak said at the same meeting
Russia OPEC and their allies committed to output cuts in November 2016 to reduce global inventories to their five year average Since then the producers haven t disclosed how this benchmark is defined and Al Falih admitted after talks in Oman last month that a technical discussion was required on what the oil market needs in terms of inventory
One possible new measurement would be to assess how long existing inventories would meet demand or forward day cover Al Falih said Finding reliable data for inventories remains a challenge he said
For more on using inventory levels as a metric to base oil policy click here
Citigroup Inc along with a growing number of analysts says the group can probably exit the strategy earlier than planned at some point in the summer as oil inventories are already back to normal levels That contrasts with the view of the 24 nation coalition of oil producers which says the surplus in industrialized countries is still substantial and has pledged to press on with the curbs until the end of this year
Oil has been struggling to recover to levels seen before last week s plunge as investors are wary that OPEC s strategy of curbing output could backfire and lead to a resurgence in U S shale production While oil stockpiles in developed nations have shrunk to the lowest since 2014 supplies still remain about 52 million barrels above the five year average according to the International Energy Agency
Data on oil demand and stockpiles outside developed economies can be patchy which is one reason why OPEC and Russia based their target on more reliable data from the group of industrialized nations known as the Organization for Economic Cooperation and Development But accounting for inventories in other nations including Saudi Arabia Brazil China and crude held on tankers Citigroup NYSE C concluded the oversupply has been eliminated
Al Falih said on Wednesday that he prefers to see producers maintaining the production cuts this year even if that would result in a small supply shortage
If we have to overbalance the market a little bit then so be it he told reporters Rather than quitting too early and finding out we were dealing with less reliable information of inventories he said It s better to stay the course and make sure that inventories are where the industry needs them Al Falih said
Updates with Saudi oil minister comments from sixth paragraph |
C | Boeing to generate 15 profit in Q1 CEO says | Boeing BA 1 CEO Dennis Muilenburg says the company should generate 15 of its earnings per share and 10 of its cash for the full year during Q1 Boeing said last month that it expects to earn adjusted EPS of 13 80 14 00 for FY 2018 and 15B in operating cash flow Muilenburg also says a potential acquisition of Brazilian plane maker Embraer ERJ 0 8 would be a great strategic fit but would not change Boeing s strategy if it does not materialize This is a great complement to our strategy but not a must do The CEO made the remarks at an investor conference in Miami organized by Citigroup NYSE C Now read |
C | HSBC Plans To Bid For Aviva Asia Business Seeks To Diversify | HSBC Holdings LON HSBA plc NYSE C is contemplating whether it should buy the Asia business of Aviva LON AV Plc a multinational insurance company based in London U K The bank which intends to diversify its business in the region is in the early stage of weighing an offer for the Asia operations being sold by Aviva per Bloomberg Per people with knowledge of the matter if a deal is signed between the two companies it will help HSBC in strengthening its insurance business in Singapore and other parts of Southeast Asia In August Aviva confirmed that it is looking for alternatives for its Asia business including the option of selling it In Asia Singapore is Aviva s largest market Its life insurance unit generates nearly 1 6 billion in new businesses there Notably the company has been trying to take advantage of the surging number of middle class consumers in Asia People familiar with the matter said that there are other prospective buyers who are considering bids for Aviva s assets However nothing has been finalized yet HSBC and Aviva have also not made any comments on the matter Notably HSBC generates more than half of its pretax profit in Hong Kong However because of the continuous protests there people have become increasingly worried about the city s growth potential Moreover in Singapore HSBC has a relatively smaller presence as compared to its peers Hence in order to expand its operations in the region the bank is interested in a deal with Aviva While HSBC has been planning to strengthen performance with special focus on building operations in Asia including Hong Kong and China to deliver high single digit revenue growth annually from the region the company has also been announcing several cost cutting initiatives Recently the bank said that in order to enhance operating efficiency amid challenging market conditions it plans to reduce almost 4 000 jobs globally which accounts for nearly 2 of its workforce This news came in after the company s CEO John Flint announced his surprise departure from the firm Concurrent with the second quarter 2019 earnings release it was announced that Flint who joined HSBC in 1989 and has remained CEO for nearly 1 5 years stepped down Apart from HSBC companies like Deutsche Bank NYSE DB Nomura Holdings Inc NYSE NMR Citigroup NYSE C and a few others have also been planning to reduce workforce amid increasing geopolitical tensions Shares of HSBC have lost 11 8 so far this year compared with a 4 7 decline of the Currently the company carries a Zacks Rank 3 Hold You can see It s Illegal in 42 States But Investors Will Make Billions LegallyIn addition to the companies you read about above today you get details on the newly legalized industry that s tapping into a habit that Americans spend an estimated 150 billion on every year That s twice as much as they spend on marijuana legally or otherwise Zacks special report revealing how investors can profit from this new opportunity As more states legalize this activity the industry could expand by as much as 15X Zacks has just released a Special Report revealing 5 top stocks to watch in this space |
C | Worst Sector ETFs Of August | Global stock markets remained edgy in August on re escalation in U S China trade tensions SPDR S P 500 ETF NYSE SPY ASX SPY down 4 2 SPDR Dow Jones Industrial Average NYSE DIA ETF TSXV DIA down 4 3 and Invesco QQQ Trust down 4 9 all lost heavily in the past month as of Aug 28 2019 read
While most sectors got punished a few bore the brunt heavily Below we highlight such sectors in detail
Energy Equipment Services
Global growth worries weighed on the demand outlook of oil prices United States Oil Fund NYSE USO LP was down 1 5 in the past month Also U S oil rig count fell to a per Baker Hughes data Market watchers are of the view that shale producers are cutting back in a bid to conserve capital which means less drilling and fracking work for top oilfield services providers SPDR S P Oil Gas Equipment Services NYSE XES ETF and iShares U S Oil Equipment Services ETF lost about 22 3 each in the past month
Steel Producer
VanEck Vectors Steel ETF ASX SLX lost about 19 3 in the past month The underlying NYSE Arca Steel Index tracks the overall performance of companies involved in the steel sector Per Citigroup NYSE C analyst benefits from the Trump administration s tariffs on foreign steel imports have diminished and demand has been disappointing
Copper Miner
U S China trade tensions have been playing foul to the demand for copper This is because China is a huge consumer of copper Any slowdown in China could disrupt the copper producing industry Prices remained around a on worries over underperformance in the industrial activity In any case industrial activities remained subdued globally in recent times Global X Copper Miners ETF lost 18 6 in the past month
Marijuana
Marijuana stocks are struggling lately and regulatory deadlock weighed on the space lately at CannTrust crushed the space There was also the ETFMG Alternative Harvest ETF and Amplify Seymour Cannabis ETF The Cannabis ETF Cambria Cannabis ETF and AdvisorShares Pure Cannabis ETF Currency in USD retreated about 16 8 15 5 15 1 15 and 13 9 in the past month as of Aug 28 2019
Coal
and declining demand from utilities over the next decade are disturbing the coal industry per Moody s Moody s expects over the next 12 months VanEck Vectors Coal ETF lost about 15 2 in the past month
Metal Mining
Worries over global slowdown probably have hit this space which has strong correlation with industrial activity iShares MSCI Global Metals Mining Producers ETF down 14 8 and SPDR S P Metals and Mining ETF down 13 7 were the losers
Lithium
Global X Lithium Battery Tech ETF ASX LIT tracks the performance of the largest and most liquid listed companies that are active in the exploration and mining of Lithium or the production of Lithium batteries The fund shed about 13 2 as lithium prices have been hurt by per Financial Times
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JPM | Acacia Communications TripAdvisor Citigroup JPMorgan Chase And Wells Fargo Highlighted As Zacks Bull And Bear Of The Day | For Immediate Release
Chicago IL October 17 2016 highlights definitely Acacia Communications NASDAQ as the Bull of the Day and TripAdvisor NASDAQ as the Bear of the Day In addition Zacks Equity Research provides analysis on Citigroup NYSE C NYSE JPMorgan Chase NYSE JPM NYSE and Wells Fargo NYSE WFC NYSE
Here is a synopsis of all three stocks
Acacia Communications NASDAQ provides high speed coherent interconnect products in the Americas Europe the Middle East Africa and the Asia Pacific region The company s mission is to deliver high speed coherent optical interconnect products that transform communications networks relied upon by cloud infrastructure operators and content and communication service providers through improvements in performance and capacity and a reduction in associated costs Acacia was founded in 2009 is based in Maynard Massachusetts and employs 211 employees The stock is Zacks Rank 1 Strong Buy and todays Bull of the Day
Acacia has a market cap of 3 2 billion with a Forward PE of 41 The stock sports Zacks Style Scores of A in Momentum but D in both Value and Growth The company sits in an industry that is ranked 107 out of 265 Top 40 in the Zacks Industry Rank
Recent IPO and Stock Run
Acacia priced at 23 back in May and traded in the 30 40 area until it broke out in early July From there it ran all the way to 128 73 before recently pulling back Undoubtedly a pullback was warranted in one of the hottest stocks of the year after 200 plus move So when you add a secondary offering you bet that investors will get nervous and short sellers will pounce on the stock
TripAdvisor NASDAQ is a popular online travel research company The company features reviews and advice on hotels resorts flights vacation rentals vacation packages and travel guides The sites operate in many countries worldwide including China under The company has two segments Hotel and Other The stock is the Bear of the Day after it recently became a Zacks Rank 5 Strong Sell because of falling estimates after a poor earnings in early in August
TripAdvisor was founded in 2000 and is based in Needham Massachusetts where it employs 3 300 The company has a market cap of 9 billion and a Forward PE of 54 The stock sports Zacks Style Scores of F in Value because of the high PE The stock is down over 20 this year after a series of missed EPS reports and continued revisions lower to estimates
Q2 results
The company reported Q2 EPS on August 3rd where it missed on both the top and bottom line The 10 miss on EPS was the seventh miss in the last nine quarters Over this time period the stock has fallen from 110 a share to 60 Some might view the stock as a bargain but given its high valuation and falling estimates the stock might have further to fall
Estimate Revisions
TripAdvisor will report earnings on November 3rd According to analysts investors should be concerned about the report especially the forward looking guidance Over the last 90 days estimates have been revised lower for all time frames For fiscal year 2016 the numbers have been taken down 31 from 1 27 to 1 14 For next year estimates are now seen at 1 50 down from 1 69 or 11 If this trend continues and the company disappoints again in November expect the stock the head to the 50 area
Additional content
Big Banks Q3 Earnings Roundup JPM C WFC
Q3 earnings season kicked off in a big way this week and several of the world s largest banks released their most recent reports before the market opened on Friday morning Here s a round up of the latest earnings data from Citigroup NYSE JPMorgan Chase NYSE and Wells Fargo NYSE
More Good News Than Bad
While there wasn t any absolutely spectacular news from these big banks this morning we still saw some pretty solid results
JPMorgan posted the biggest positive earnings beat with EPS coming in at 1 58 versus the Zacks Consensus Estimate of 1 40 JPMorgan has now surpassed earnings expectations by an average of nearly 9 in each of the trailing four quarters
The company also posted revenues of 25 51 billion which was well ahead of our consensus estimate of 24 billion Improved fixed income and equity trading revenues higher mortgage banking fees and growth in investment banking income drove the results Further higher net interest income perhaps attributable to the rise in loan supported top line also read
Citigroup also came in ahead of expectations it posted earnings of 1 24 per share on 17 76 billion in revenue which beat our consensus estimates of 1 16 and 17 38 billion respectively Revenues from fixed income markets grew 35 and investment banking gained 15 while adjusted net income fell 8 to 3 84 billion also read
Finally controversy riddled Wells Fargo also reported Friday morning The company posted earnings of 1 02 per share which beat the Zacks Consensus Estimate by a penny Revenues came in at 22 2 billion which was better than our consensus estimate of 22 02 billion also read
Wells Fargo s new CEO Tim Sloan will still face an uphill battle and his company s fraudulent account opening scandal is certainly not going anywhere anytime soon Nevertheless today s positive results will provide some comfort for the company and its investors
All three stocks opened higher with JPM and C gaining more than 2 and WFC up 1 but they ve been slumping back down throughout the day Today s morning gains have basically been wiped out
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About the Bull and Bear of the Day
Every day the analysts at Zacks Equity Research select two stocks that are likely to outperform Bull or underperform Bear the markets over the next 3 6 months
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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long term
Continuous analyst coverage is provided for a universe of 1 150 publicly traded stocks Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance Recommendations and target prices are six month time horizons
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar They re virtually unknown to the general public Yet today s 220 Zacks Rank 1 Strong Buys were generated by the stock picking system that has nearly tripled the market from 1988 through 2015 Its average gain has been a stellar 26 per year
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MS | U S stock index futures flat ahead of debate | Investing com U S stock index futures flat Wednesday ahead of final presidential debate The Dow futures was up 0 01 at 06 00 ET while the S P 500 futures fell 0 05 The tech heavy Nasdaq futures was off 0 15 Oil futures were higher ahead of the release of EIA report after industry data shows draw Housing starts data due as investors look for more clues to U S rate outlook Morgan Stanley NYSE MS eBay earnings on tap as Q3 reporting season gathers pace |
MS | Morgan Stanley to detail plan for fiduciary rule compliance soon CEO | By Olivia Oran Reuters Morgan Stanley NYSE MS plans to announce in the coming weeks how its wealth management business will comply with a new U S rule intended to protect retirement savers Chief Executive James Gorman said on Wednesday Gorman declined to give details but hinted that providing wealth clients with choice about account options and how they pay the firm is a priority Giving clients a choice of how they deal with the firm services they access how they pay for those services is critical to how we operate as a firm Gorman said during a call with analysts to discuss earnings Choice has been a fundamental guiding light for the firm and that is unlikely to change Known as the fiduciary rule the new regulation was announced in April by the Department of Labor It sets a standard for brokers who sell retirement products and requires them to put clients best interests ahead of their own bottom line It starts to take effect in 2018 giving brokerages time to comply Gorman s guidance comes in contrast to rival Bank of America s which said its wealth business would eliminate individual retirement accounts that charge investors for each transaction Investors who want a retirement account will instead need to pay a fee that is a percentage of their assets The move is intended to reduce conflicts that might arise if brokers push clients to more expensive investment products Giving wealth clients a choice won t present compliance problems to Morgan Stanley Gorman said
I don t think that giving clients choice heightens one s legal exposure and in fact that just seems a little counterintuitive he said |
JPM | JP Morgan Stays Higher after Q1 EPS Beat | Investing com Shares in JP Morgan held onto gains in pre market trade on Friday after reporting first quarter earnings
The financial services firm reported earnings per share EPS of 2 37 in the first three months of the year
Analysts forecast pointed to earnings of 2 28 a share
Meanwhile the firm s revenue increased 10 3 from the same quarter a year earlier to 28 52billion beating the forecast for 27 68 billion
2018 is off to a good start with our businesses performing well across the board driving strong top line growth and building on the momentum from last year CEO and chairman Jamie Dimon said in the release
Following the release of the report JPMorgan NYSE JPM rose 0 56 to 114 01 at 7 02AM ET 11 02GMT in pre market trade from the previous closing price of 113 37 Shares had been trading up around 0 6 at 114 00 prior to the publication
Meanwhile U S equity markets pointed to a higher open At 7 04AM ET 11 04GMT the blue chip Dow futures advanced 70 points or 0 29 the S P 500 futures rose 9 points or 0 32 while the tech heavy Nasdaq 100 futures gained 8 points or 0 12 |
JPM | JPMorgan profit just below estimates on weak investment banking | By Sweta Singh and David Henry Reuters JPMorgan Chase Co s N JPM quarterly profit fell short of Wall Street expectations on Friday as lower revenue from investment banking ate into gains from stock trading and higher interest rates Investment banking revenue fell 7 percent as it underwrote fewer debt and equity offerings a dark spot in an otherwise strong quarterly report Shares of the largest U S bank by assets were down nearly 1 percent paring early gains The stock has risen 33 percent in the past 12 months JPMorgan gained from a strengthening economy and higher interest rates that lifted lending revenue more than the its cost of money Its equity markets business had a robust quarter driven by a surge in volatility in global markets Overall profit rose 35 percent to an all time high while revenue was up 10 percent We are pleased with the firm s performance this quarter with all of our businesses showing continued and broad strength and an overall environment that remains supportive Chief Financial Officer Marianne Lake said on a call She expects tax cuts and higher interest rates to provide even more of a tailwind to profits going forward JPMorgan like its rivals had indicated that President Donald Trump s sweeping changes to the U S tax law would kick start economic growth and help lenders boost their revenue as corporations borrow more to expand their businesses Income tax expense was down 8 6 percent at 2 56 billion as the corporate tax rate fell Markets revenue rose 7 percent excluding special items on a 26 percent jump in equity trading Global markets have been in churn since February due to worries over inflation rising bond yields and heightened trade tensions between the United States and China Net interest income rose 9 percent to 13 5 billion as the rates it received for loans rose faster than its costs of funds The bank s net income rose 35 percent to 8 71 billion in the quarter Excluding items it earned 2 26 per share missing average estimate of 2 28 according to Thomson Reuters I B E S Net revenue was 28 52 billion beating the average estimate of 27 68 billion
Return on tangible common equity a performance measure was 19 percent compared with 13 percent a year earlier JPMorgan in February raised its return target for three years out to 17 percent largely because of lower tax rates |
C | Barclays in U S set to join cryptocurrency credit card ban report | LONDON Reuters Barclays L BARC is likely to follow other major lenders in the United States in stopping customers from buying Bitcoin and other cryptocurrencies with its credit cards according to an interview with a senior executive at its credit card unit We are making the decision that we will likely no t allow cryptocurrency purchases on the card Paul Wilmore managing director at Barclaycard told Bank Innovation blog A spokeswoman for Barclays in London said that the bank is reviewing its policy on a country by country basis and that it had not yet changed its policy Barclaycard is one of the biggest credit card providers in both Britain and the U S that is yet to formally announce a ban on card purchases of digital currencies Lloyds Banking Group Plc L LLOY which issues just over a quarter of all credit cards in Britain and Virgin Money L VM announced such a ban last week following the lead of JP Morgan Chase Co N JPM and Citigroup N C The moves are aimed at protecting customers from running up huge debts from buying virtual currencies on credit if their values were to plummet a Lloyds spokeswoman said last week |
C | Citigroup to invest in London hire staff despite Brexit FT | Reuters Wall Street bank Citigroup Inc N C will set up an innovation center in London in one of the first investments by a big U S bank since Brexit the Financial Times reported on Sunday Citi will initially hire 60 technologists for the center James Cowles chief executive Officer for Europe the Middle East and Africa EMEA told the FT The company could not be immediately reached for comment The center in London will also house the EMEA unit of Citi ventures and employees from across the company s businesses in a boost for UK s financial services sector ahead of Brexit the FT reported European Commission officials rejected the City of London s proposal to strike a post Brexit free trade deal on financial services a major blow to Britain s hopes of keeping full access to EU markets for one of the world s top two financial centers Britain is currently home to the world s largest number of banks and hosts the largest commercial insurance market About 6 trillion euros 7 35 trillion or 37 percent of Europe s financial assets are managed in the UK capital almost twice the amount of its nearest rival Paris JPMorgan Chase Co N JPM said earlier this month that it could move more than 4 000 jobs out of Britain if Brexit talks result in a divergence of regulations and trade agreements between Britain and the European Union In the short term the bank will move between 500 and 1 000 jobs after Britain s formal exit from the EU scheduled for March 29 2019 About 10 000 finance jobs will be shifted out of Britain or created overseas in the next few years if it is denied access to Europe s single market a Reuters survey in September found
1 0 8167 euros |
C | Fifth Third hires Pichler as head of credit sales | By Kristen Haunss Reuters Fifth Third has hired David Pichler a former co head of credit fixed income at Cantor Fitzgerald to lead credit sales for institutional fixed income Pichler who joined the bank in New York late last year reports to Mark Brown group head of fixed income sales and trading David has an immense amount of industry expertise and is a great addition to the Fifth Third team Brown said in an e mailed statement The US loan market which provides debt to companies including retailer J Crew Group saw record institutional issuance of US 923 8bn in 2017 driven by refinancing and repricing activity according to Thomson Reuters LPC data Issuance in the US high yield bond market rose 24 in 2017 to US 281bn from the prior year Secondary loan trade volume also skyrocketed to at least a seven year high of US 714 8bn last year according to IHS Markit data Pichler joined Fifth Third from FTN Financial where he worked in credit sales according to FINRA BrokerCheck Before that he worked at Cantor Gleacher Co where he was co head of investment grade fixed income and RBC Capital Markets where he was head of US fixed income and currencies credit trading according to news releases He also worked at Citigroup NYSE C where he served as co head of global credit trading |
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