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C | Citibank fined 70 million for anti money laundering compliance shortcomings | WASHINGTON Reuters A U S bank regulator has fined Citibank N C 70 million for failing to address shortcomings in its anti money laundering policies The Office of the Comptroller of the Currency fined the bank in late December and announced it on Thursday The regulator assessed the civil penalty because the bank had failed to address concerns it had first flagged in 2012 A spokesman for the bank a unit of Citigroup Inc N C said it aimed to satisfy all federal rules that target money laundering
Citi is committed to taking all necessary and appropriate steps to remedy the concerns identified by the OCC said spokesman Mark Costiglio |
C | Newmont Goldcorp Could Have More To Gain | Gold is on the rise as trade tensions continue to weigh on the global economy Earlier this week China has announced it will suspend all meat imports coming from Canada This is after Canada detained the CFO of Chinese company Huawei at the request of the United States China has revealed that the official veterinary health certificates attached to the batch of pork exported to China were counterfeit and the number of certificates was up 188 This latest move comes as Canadian Prime Minister visits Japan for the G20 leaders summit It s not clear whether or not diplomatic issues can be addressed or not between the United States and China But president Donald Trump said he expects a productive meeting with China s leader Xi Jinping without making any specific predictions
But many investors have not been convinced and new interest in precious metals has developed this year The price of gold increased by 10 this year partly due to geopolitical uncertainty It s now at a six year high What s more interesting though is that gold is selling at all time highs in 72 different national currencies including the Canadian dollar and Australian dollar Excluding the pegged fixed exchange rate currencies there are only 130 currencies in circulation that s recognized by the United Nations
Many experts believe the price of gold will continue to climb this year According to MarketWatch Citigroup NYSE C analysts believe this bullish gold fever is justified and estimates the metal could reach between 1 500 to 1 600 an ounce in the next 12 months and 1 500 by end 2019 in the most optimistic of their new predictions for the metal One way for investors to gain exposure to the gold market is through mining companies
Earlier this year gold mining giant Newmont Goldcorp NYSE NEM formed as the result of a 10 billion merger between Newmont and Goldcorp Last year the pre merger Newmont produced 5 1 million ounces of gold with a cost of 909 per ounce Meanwhile Goldcorp produced 2 3 million ounces of gold in 2018 with the costs at around 800 an ounce and is expected to maintain these levels of production and costs in this year In addition to great production volume Newmont Goldcorp has a large portfolio of reserves and resources for future development making it less likely that its production will taper off as its current mines are exhausted The combined production of these two companies exceeded the 2018 production of Barrick which was the largest gold producer of 2018 though the average costs were higher During a gold bull market like in recent months the increase in the share price of gold miners often exceeds the increase in the price of physical gold itself NEM s share price has grown from 31 to 38 in the last month alone a 22 gain
The 12 month analysts consensus on Newmond Goldcorp s stock is 42 which would be a 10 increase from today s price However this is assuming gold prices stay at current levels If the price of gold continues to gain ground in the world market then NEM shares could easily reach 45 or higher There is certainly more risk involved when investing in gold companies than physical gold itself Management could make mistakes and costs of doing business could go up But Newmont Goldcorp currently claims to have the largest collection of reserves and resources The difference is that reserves are economically legally and technically feasible to extract while resources are potentially valuable and are reasonably likely to be extracted This simply means that the company has properties that can replace its current operations when the existing mines have been exhausted So if one wants to invest in a gold company NEM can be considered relatively safe to put money in right now
Original Post |
MS | Emerging markets focused hedge fund ESG to separate from Carlyle | By Greg Roumeliotis and Lawrence Delevingne Reuters The partners of Emerging Sovereign Group LLC ESG have agreed to buy back the majority stake in the emerging markets focused hedge fund manager that was acquired by Carlyle Group NASDAQ CG LP in 2011 Carlyle said on Wednesday The move comes as Carlyle has chosen to focus more on credit oriented investment strategies such as direct lending distressed debt and collateralized loan obligations while ESG has remained an equities focused hedge fund firm ESG was founded in 2002 by former Morgan Stanley NYSE MS colleagues Kevin Kenny Mete Tuncel and Jason Kirschner with seed capital from Tiger Management founder Julian Robertson It has 3 5 billion is assets up from 1 25 billion when Carlyle acquired a controlling stake in it in 2011 ESG is a strong organization has been a terrific partner to Carlyle and will thrive as an independent business We wish Kevin Kenny and his team continued success in the future Carlyle co founder and co chief executive William Conway said in a statement Many hedge funds targeting emerging markets have struggled to produce stellar returns in recent years as bets on economic growth in some countries such as Brazil and Russia have gone sour The split with ESG will further reduce Carlyle s hedge fund offerings after it shut down its hedge fund of funds manager Diversified Global Asset Management Corp DGAM earlier this year citing a challenging market environment that made it difficult to gain scale Its remaining hedge fund units Claren Road Asset Management and Vermillion have continued to generate losses amid poor financial performance and investor redemptions even as Carlyle has continued to invest in new products and strategies Carlyle Chief Financial Officer Curt Buser said on the firm s latest quarterly earnings call last month Carlyle also said last month that it anticipated greater operating losses from some of the hedge funds and associated commodities products than it previously expected Hedge funds as well as distressed debt mezzanine credit and direct lending offerings are part of Carlyle s Global Market Strategies GMS business which had 34 7 billion in assets under management as of the end of June down 5 percent year on year Buser said last month Carlyle had expected GMS to be a larger contributor to distributable earnings and fee related earnings at this point than it actually is
Carlyle had total assets under management of 175 6 billion at the end of June of which 57 6 billion were in private equity 37 5 billion were in real estate and 45 7 billion were in so called investment solutions such as fund of funds |
MS | Japan housing market rare bright spot amid stalling growth | By Stanley White TOKYO Reuters Japan s housing market is likely to moderate after investment grew at its fastest in five years in April June but the benefits to consumer spending and employment could continue into next year due to the Bank of Japan s negative interest rates While the BOJ courted controversy by pushing rates below zero this year putting banks offside in particular the policy has proven a hit with first time home buyers and homeowners looking to refinance mortgages And rises in long depressed property prices are causing some people to buy sooner rather than later which should lift demand for durable goods such as appliances and furniture just the recipe to break Japan s deflationary mentality Our furniture sales have been doing well said Mariko Ooguri a spokeswoman at retailer Ryohin Keikaku Co T 7453 which includes the Muji chain of stores and is expecting a 10 percent rise in operating profit in the year to February The housing market is one of the reasons why but we have spent many years improving training for our furniture sales staff We feel there is more room for growth in furniture Private residential investment jumped 5 percent in April June Cabinet Office data showed last week It was some rare good news in a gross domestic product report showing the economy ground to a halt due to weak exports and capital expenditure The housing market can continue to grow for a while as long as the current low interest rate environment remains said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities This is a bright sign that Japan is moving away from deflation LOW RATES SPARK INTEREST While Japan cannot rely solely on housing investment for growth related spending on durable goods should lend support to overall consumption Mortgage refinancing at lower rates also leaves households with more disposable income Bank of Tokyo Mitsubishi UFJ a unit of Japan s largest lender has cut its prime lending rate for a 10 year fixed rate mortgage to a record low of 0 5 percent and says refinancing applications are about three times higher this year Mizuho Bank its main rival is charging 0 65 percent and Sumitomo Mitsui Bank has 0 7 percent Both report strong rises in refinancing applications Residential property prices have been rising for the past three years not just in the three major cities but also in some second tier cities which economists expect to lure first time buyers worried about having to pay more later Outstanding mortgage lending by domestic banks rose to 119 trillion yen 1 2 trillion in the January March quarter according to the Japan Housing Finance Agency the highest since the government backed home lender began tracking data in 1989 Negative rates won t change and this is a structural factor that will support the housing market said Takuya Hoshino economist at Dai Ichi Life Research Institute Related industries will benefit such as construction retail and home electronics In the April June quarter household consumption rose just 0 1 percent but would have been flat excluding spending on durable goods But while the sector is a bright spot it is not expected to maintain its recent pace New construction of condominiums in Tokyo Nagoya and Osaka fell 16 3 in June from a year earlier following a 14 8 percent decline in May Rising residential vacancies in some areas and a rising stock of unsold apartments also show momentum is slowing Loans for apartments are rising but vacancy rates are too so I m a little worried said Yusuke Ichikawa senior economist at Mizuho Research Institute
The market cannot continue to expand in July September at the same pace it did in April June |
MS | Advent hires banks to sell control of Brazil port sources | By Guillermo Parra Bernal and Tatiana Bautzer SAO PAULO Reuters Buyout firm Advent International Corp has hired Morgan Stanley Co NYSE MS and Grupo BTG Pactual SA to advise on the sale of a controlling stake in TCP Terminal de Cont ineres de Paranagu SA Brazil s second busiest container port according to two people with direct knowledge of the plans Earlier this year Boston based Advent had announced plans to sell the 50 percent stake it has in TCP which can handle about 1 5 million tonnes of cargo containers annually BTG Pactual SA BBTG11 joined Morgan Stanley as advisor to Advent at the start of July the people said The sources who spoke with Reuters in recent days asked for anonymity because the plan remained confidential According to one of the people Advent wants to fetch a price for the stake that values TCP around at least 3 5 billion reais 1 1 billion The other person said other Advent partners in TCP which include three Brazilian investment firms and Spanish companies Group Maritim TCB SL and Galigrain SA could join the sale The people declined to elaborate further on a timetable for the deal or name potential bidders The second person said three Asian port operators two of which are China based have shown preliminary interest in TCP The transaction could also include a potential fundraising effort by TCP possibly through the sale of notes in the domestic debt markets the second person said Advent paid about 500 million for the TCP stake five years ago The TCP stake sale has failed to gain traction rapidly as potential buyers monitor developments in Brazil which is struggling with the harshest recession in eight decades and political turmoil the people said Steelmaker Cia Sider rgica Nacional SA s SA CSNA3 planned sale of container terminal operator Sepetiba Tecon SA has also been slow even as a number of bidders including Advent have shown interest TCP Advent and the port operator s other shareholders declined to comment as did BTG Pactual and Morgan Stanley 1 3 2433 Brazilian reais |
MS | Asian factories hobble as soft global demand hits sales | SINGAPORE Reuters Asia s factories showed few signs of returning to health in August as torpid activity in the region s biggest economies China and Japan suggested world demand remained fitful at best even as global policymakers scrambled to restore momentum
Coming a week after the United States posted sluggish second quarter growth Asia s uninspiring manufacturing surveys may give Federal Reserve Chair Janet Yellen pause for thought ahead of a Fed meeting on Sept 20 21 to decide whether or not to raise interest rates
Moreover the still unknown impact of Britain s shock decision in June to quit the European Union is seen chilling already soft consumption leaving factories struggling to clear their goods
In China the world s second biggest economy factory activity showed scant growth
The official Purchasing Managers Index PMI ticked up to 50 4 in August compared with the previous month s 49 9 and just above the 50 point mark that separates growth from contraction But the private Caixin version of the PMI which covers a greater share of smaller firms showed activity stagnated last month with the index at 50 0 from an unexpectedly upbeat 50 6 in July
Downward pressure on China s economy remains and government support to stabilize growth must continue Zhengsheng Zhong director of macroeconomic analysis at CEBM Group said in a note accompanying the Caixin PMI report
Indeed with central banks almost exhausting their monetary policy support governments in Asia have increased fiscal stimulus although underlying demand in many of the region s export reliant economies remain weak
A still subdued external demand environment and fading policy pass throughs is weighing on aggregate demand in the region said Chetan Ahya senior economist at Morgan Stanley NYSE MS In the near term the growth trajectory will depend on the trend in external demand and monetary and fiscal policy response
WEAK EXPORTS HIT JAPAN S KOREA
In Japan while manufacturing activity showed signs of steadying the IHS Markit Nikkei PMI was still in contraction at 49 5 in August versus 49 3 in July
Export orders continued to fall even as output increased for the first time in six months backing expectations the Bank of Japan will need to offer more stimulus on top up its already massive easings to revive a sputtering economy
The pressure on Japanese policy makers was underscored by separate data showing Japanese business expenditure fell in April June from the previous quarter
Conditions were even more gloomy in South Korea a bellwether for global demand An extended slide in exports put manufacturers in Asia s fourth largest economy to the sword with the August PMI contracting at its fastest pace in a year
Other data showing Korean exports rebounded last month was seen as an aberration due to two extra working days this year
Given Korea acts as a harbinger for the rest of Asia we believe Asia s cycle is now headed for another down move said Vaninder Singh Asia economist at RBS LON RBS in a note to clients
The situation in Malaysia was no better with manufacturing activity in August contracting at a quicker rate than in July although Taiwan was a surprising outlier with activity there expanding at the fastest pace in 1 1 2 years
Still broad based weakness in external demand called for further policy support including interest rate cuts analysts said
We won t rule out rate cuts in Malaysia or Korea and expect further monetary policy easing in Indonesia Taiwan and Thailand this year said Krystal Tan Asia economist at Capital Economics
There were some encouraging signs in India where August factory activity expanded at its fastest pace in 13 months but investors will have to square that with data released on Wednesday that showed economic growth slipped to over a one year low between April and June
Surveys from Europe and the U S are due later Thursday and while data has indicated pockets of strength the overall picture is one of slow growth especially in the eurozone where worries remain over fallout from Brexit
On Wednesday the Institute for Supply Management Chicago said its business barometer dropped 4 3 points to 51 5 in August falling short of expectations
While the focus will move to the key August U S jobs data due on Friday struggling global manufacturers should give the Fed pause as it considers the next rate hike
Corrects milestone for India PMI to highest in 13 months not 15 months in 18th paragraph |
MS | Disrupting the disruptors Uber ushers in latest foodie upheaval | By Byron Kaye SYDNEY Reuters After three decades running McDonald s Corp restaurants Tony Plunkett thought he knew everything about flipping burgers for a profit and last year went out on his own with a start up franchise in the Australian city of Melbourne But he soon learned his industry was being turned inside out by the Internet and he has since signed on with UberEats the food delivery service of Uber Technologies Inc UBER UL Last month he opened Australia s first restaurant a leased kitchen in a shuttered Sydney night club run entirely on deliveries by the U S ride sharing firm When you re running your own delivery service you need your driver to come back and that s dead time the founder of On It Burgers told Reuters You don t need the Uber guy to come back he just keeps going Plunkett s experience reflects a broader digital upheaval sweeping the food service industry Just as the most established food order taking websites of Just Eat Plc GrubHub Inc and Germany s Delivery Hero Holding GmbH prod restaurants to start in house delivery operations the arrival of UberEats is seeing a new wave of participants dispensing with both tables and drivers completely The shift to outsourcing everything but the kitchen is not just shaking up cost conscious restaurants It s a direct threat to the order website companies themselves which have been on rapid acquisition sprees in a race to dominate markets from Berlin to Manila Some firms are even trying to convince restaurants to dispense with sit down tables and use their centralized kitchens to dispatch food to increasingly mobile consumers In Australia a high minimum wage has restaurants even more anxious to cut overheads and global players are flocking in to find a new growth market In the food delivery industry s biggest buyout of a single entity globally Just Eat bought Australia s top food delivery site Menulog for A 855 million 658 million last year Delivery Hero backed by Rocket Internet has also bought local rivals in Australia And competition is heating up with visits to the UberEats app up nearly 60 percent from April to July its first four months in Australia according to website analysis provider SimilarWeb We re quite immature in a bunch of cities in Australia so obviously we re very much in acquisition mode there Adrian Blair Just Eat s chief operating officer said on a recent earnings call London based Deliveroo which recently raised 275 million and saw improved traffic to its Australia website also plans to scale up its bicycle delivery operations posing an extra challenge to those order taking sites which rely on restaurants having their own drivers People are being more conservative than they were said Deliveroo s Australia manager Levi Aron Given that climate we re able to have a situation where we have investors who are re investing in the business which does show that there s something going on here Toon Gyssels CEO of Delivery Hero s main Australian acquisition Foodora said the market was especially appealing because of the food culture on the supply side but also on the demand side people appreciate good food and will pay money for that and they also want to pay for convenience CASUALTIES All this competition has boosted monthly online food orders in Australia to above one million giving firms the scale to expand and helping the restaurant industry grow at three times the rate of overall retail sales in April June And the online food delivery sub sector is growing faster still up at least 39 percent for each of the first five months of this year according to Morgan Stanley NYSE MS But an island market of 24 million people can quickly become crowded I wonder if in the long term it s sustainable said James Eling founder of Melbourne based restaurant consultancy Marketing4Restaurants The lure of replacing the cost of drivers with Uber s mark up delivery costs will definitely enforce a sanity check he added Just Eat s purchase of Menulog carried a price earnings multiple of 371 more than 12 times the 2015 level of tech buyout valuations across Asia which are themselves the highest in a decade according to Deloitte Many financial analysts describe an investment bubble in food delivery markets globally Such eye popping valuations can only be justified if an eventual dominant player can consolidate creating the necessary scale and pricing power they say Early last year Indian restaurant website aggregator Zomato bought U S rival Urbanspoon marking its entry into North America and Australia It said then it planned to hire 300 people in Australia and extend into online order taking It has since quit North America and shut down the Urbanspoon brand It is taking orders in Australia but has hired just 85 staff A spokesperson said Zomato sees Australia contributing to a larger share of our revenue in the longer term Stock analysts have also softened in their enthusiasm for the market saying it s unpredictable Broker Jeffries said in a recent note it was keeping a finger in the air on Just Eat s earnings outlook in Australia given Menulog s limited operating history It also trimmed its Australia forecasts which may have been a bit too bullish previously Plunkett the burger entrepreneur meanwhile is already planning breakfast and late night menus to keep the orders coming in around the clock Ultimately he said he would like to take his kitchen only business in the opposite direction and if costs permit set up a regular shopfront with tables and chairs
If you ve got a productive kitchen why not he said |
JPM | Ten years after JPMorgan Bear Stearns deal banks may have already seen biggest gains | By Sin ad Carew and Noel Randewich Reuters Ten years after JPMorgan N JPM bought failing investment bank Bear Stearns one of the first big harbingers of the financial crisis investor views on U S banks are significantly brighter although the sector may have already put its biggest gains behind it JPMorgan initially announced its bid of 2 per share for Bear Stearns on March 16 2008 when the Wall Street bank was on the brink of collapse due to its exposure to toxic mortgage bonds and a draining of its cash reserves after customers fled as the subprime mortgage crisis intensified Fast forward ten years and U S bank balance sheets are much healthier as post crisis regulations such as the Dodd Frank Act of 2010 forced banks to be more transparent and led them to shore up reserves and make less risky bets The S P 500 bank stock index shows gains for six of the last 10 years including 20 percent gains in each of the last two years as investors piled in for a piece of the profit expansion they expected from tax reform rising interest rates and deregulation GRAPHIC Yearly Percent Changes S P 500 vs S P 500 Banks But now some analysts and investors are questioning how much further the sector can rise as they watch loan growth rising credit losses and worry about an acceleration in the pace of Federal Reserve interest rate hikes There s a lot priced into the banks at this point said Jeff Morris head of U S equities at Aberdeen Standard Investments in Boston citing bets on tax reform deregulation and up to three U S interest rate hikes in 2018 To propel the bank stocks from here you need more of the same You need additional signs of regulatory reform You d also need to see higher interest rates and more in the way of loan growth said Morris In loan growth we haven t seen much acceleration since the tax plan and the banks themselves aren t talking about seeing a real acceleration in loan growth Bank loans and leases grew 3 2 percent in 2017 compared with a 6 5 percent rise in 2016 and the growth rate had dipped to 2 7 percent by February according to the Federal Reserve data JPMorgan has come the furthest of the S P bank stock index constituents with a price increase of 215 percent since March 14 the last trading day before its Bear deal was announced Its shares are now trading at 12 7 times forward estimates compared with 12 5 for the broader bank sector and 17 for the benchmark U S S P 500 stock index In comparison JPMorgan s price earnings ration was 10 7 around the time of the Bear deal while the sector was valued at 12 3 and the S P 500 had a multiple of 13 GRAPHIC Forward PE S P 500 vs S P 500 Banks Charles Peabody analyst at Compass Point Research Trading expects loan growth to pick up in 2018 but he is less convinced about credit cost trends Credit costs have been low as banks became cautious about underwriting loans after the financial crisis resulting in lower loan losses but as the government eyes looser regulations and banks relax lending standards Morris sees credit losses rising We don t see any particular credit crisis coming up he said but predicted that losses would pick up over the next several years to get back to a more normal level Since consumer credit costs started to rise albeit gradually in 2017 Compass Point s Peabody now expects costs from corporate loans to also reach an inflection point in 2018 People are being overly optimistic in earnings estimates because they ve not factored in higher costs for credit going forward he said I expect loan loss provisions for the big banks to double from current levels between now and at some point in 2019 Wall Street analysts expect S P 500 index banks to report 26 percent earnings growth for 2018 compared with 12 3 percent for 2017 according to Thomson Reuters data but Peabody is skeptical The banks stocks will start to underperform at some point in the second half this year as people s optimism is not realized he said Rising interest rates are also putting bank investors on edge While rate increases tend to boost profits as banks can charge more for loans if the rise is too steep it could dampen demand for mortgages or home refinancing loans
The easy gains are behind us said Rick Meckler president of investment firm LibertyView Capital Management in Jersey City New Jersey In banks rising rates are a positive and a negative Right now it s a positive but at some point the negative aspects will come into play Investors have to realize there s a danger level they have to watch for |
JPM | Russia bondholders happy to hug sovereign as sanctions talk swirls | By Claire Milhench LONDON Reuters Global investors are unlikely to start shunning Russia s sovereign debt even though Russian entities and individuals are seen at risk of further sanctions over a nerve agent attack on a former Russian double agent and his daughter in Britain Britain has pinned the attack on Russia and expelled 23 Russian diplomats while the United States announced more sanctions on Thursday for election meddling But asset managers said Russia was unlikely to be shut out of international capital markets In the worst case you might have a sanctions spiral from the UK U S and EU but this will remain a very negative tail risk and not be my base case scenario said Sergey Dergachev functional head of EM corporate debt at Germany based Union Investment The premium investors demand to hold Russian sovereign dollar debt over safe haven U S Treasuries has risen by 13 basis points this week to 175 bps That is the widest this year but still well below the highs of 2014 when Russia annexed Crimea and sanctions were imposed on a swathe of Russian companies and individuals Russia opened order books on Thursday for a new 11 year Eurobond providing a test of market appetite SAFER OPTION Many emerging debt managers say they cannot ignore Russia as its inclusion in key benchmarks mean they risk underperforming if they have no exposure And holding sovereign debt has been seen as the safer option for managers wanting to avoid the minefield in Russian corporates where different rules in different jurisdictions can create a compliance headache It Russian sovereign debt will be the last to be hit by sanctions if there is a strong escalation said Raphael Marechal head portfolio manager emerging markets at Nikko Asset Management A lot of people want to be on the safe side they don t want to become forced sellers of Russian assets If you buy a corporate now you don t know if there is a second round of sanctions and then you have to sell your position Most currently sanctioned names have not tapped international markets since 2014 switching mostly to the rouble bond market or domestic banks This has led to a scarcity premium for some names although some managers said the valuation effect was negligible For many Russia remains a positive story despite sanctions on big state owned firms such as Sberbank and VTB Russia has proven it has extreme resilience regarding the corporate sanctions said Viktor Szabo senior investment manager at Aberdeen Standard Investments On the margin it increases the cost of capital but it is not something Russia cannot live with Sanctions did not prevent S P Global lifting Russia to investment grade in February its second such rating widening its access to capital as Russian debt is now eligible for benchmarks tracked by trillions of dollars worldwide CORPORATE UPGRADES Some Russian corporates have also been upgraded presenting a problem for passive managers who are trying to avoid exposure to sanctioned names The wide reaching sanctions from a number of different countries is likely to be an issue for international managers said Abhishek Kumar lead investment manager for emerging markets fixed income beta at State Street Global Advisors SSGA The addition of Gazprom MCX GAZP VEB and Russian Railways to the Bloomberg Barclays LON BARC Global Aggregate index which is tracked by an estimated 2 3 trillion has helped lift Russia s weighting to 0 33 percent from 0 17 percent at the start of the year From March 29 Russia will also rejoin JPMorgan s investment grade EMBI indexes along with Russian Railways and VEB with a combined weight of 6 8 8 6 percent An estimated 54 billion in assets is benchmarked to these JPMorgan NYSE JPM indexes which are important for conservative investors such as European insurance companies who may be reluctant to hold junk rated securities S P Global also upgraded Gazprom Neft VTB and Transneft to BBB Along with Gazprom and VEB these are all subject to sanctions in some form The ratings agency said most Russian companies and banks had managed to retain adequate liquidity despite the sanctions implying no immediate rating impact Gazprom for example is a regular issuer in international markets and sold a 750 million euro Eurobond on Wednesday despite being under various sanctions from the United States and Canada There have also been U S imposed restrictions on the provision of financing to Gazprom Neft Gazprombank Sberbank VEB and VTB since September 2014 That s where the problem is said Kumar Most managers would take a very cautious approach to be on the safe side investing in bonds issued before September 2014 Russian investments go through a much stricter vetting process at SSGA than other bonds he added It s reputational damage if you end up buying the wrong bond so a lot of scrutiny goes into the purchase |
C | Citigroup to pay 11 5 million fines compensation over errant stock ratings | By Jonathan Stempel NEW YORK Reuters Citigroup Inc N C will pay at least 11 5 million in fines and restitution to settle charges it displayed the wrong research ratings on more than 1 800 stocks causing many customers to own shares they never would have bought a U S regulator said on Thursday The Financial Industry Regulatory Authority fined Citigroup 5 5 million and ordered it to pay at least 6 million to retail customers over errors that occurred between February 2011 and December 2015 and involved more than 38 percent of the equity securities that the New York based bank covered Citigroup did not admit or deny wrongdoing but the sanctions reflected its cooperation including its decisions to report the rating issues and compensate customers FINRA said The regulator said Citigroup would sometimes display to customers brokers and supervisors the wrong ratings such as buy instead of sell while in other cases it would display ratings for companies it did not cover or no ratings at all As a result brokers solicited thousands of transactions and negligently made inaccurate statements premised on wrong ratings and many customers ended up owning stocks with sell ratings despite a prohibition on such ownership FINRA said FINRA said the errors stemmed from problems with an electronic data feed and Citigroup failed to timely fix the wrongly displayed ratings despite numerous red flags The bank s actual research reports and ratings were not affected The display and use of incomplete and inaccurate research ratings can have widespread adverse consequences to customers FINRA enforcement chief Susan Schroeder said in a statement Firms should react quickly to address those errors
Citigroup spokeswoman Danielle Romero Apsilos said the bank was pleased to resolve the matter |
C | Citigroup fined over false stock ratings | Citigroup NYSE C has been fined 11 5M by FINRA over a flawed data feed that showed retail customers false stock ratings over a five year period Despite numerous red flags Citi failed to fix the wrongly displayed ratings that were tagged Buy rather than Sell and vice versa and affected more than 1 800 stocks or about 38 of the brokerage s covered securities Now read |
C | Why Citigroup C Is A Top Dividend Stock For Your Portfolio | Whether it s through stocks bonds ETFs or other types of securities all investors love seeing their portfolios score big returns However when you re an income investor your primary focus is generating consistent cash flow from each of your liquid investments
While cash flow can come from bond interest or interest from other types of investments income investors hone in on dividends A dividend is the distribution of a company s earnings paid out to shareholders it s often viewed by its dividend yield a metric that measures a dividend as a percent of the current stock price Many academic studies show that dividends account for significant portions of long term returns with dividend contributions exceeding one third of total returns in many cases
Citigroup in Focus
Citigroup C is headquartered in New York and is in the Finance sector The stock has seen a price change of 30 58 since the start of the year Currently paying a dividend of 0 45 per share the company has a dividend yield of 2 65 In comparison the Banks Major Regional industry s yield is 2 86 while the S P 500 s yield is 1 94
Taking a look at the company s dividend growth its current annualized dividend of 1 80 is up 16 9 from last year In the past five year period Citigroup has increased its dividend 4 times on a year over year basis for an average annual increase of 145 49 Any future dividend growth will depend on both earnings growth and the company s payout ratio a payout ratio is the proportion of a firm s annual earnings per share that it pays out as a dividend Citigroup s current payout ratio is 26 This means it paid out 26 of its trailing 12 month EPS as dividend
Looking at this fiscal year C expects solid earnings growth The Zacks Consensus Estimate for 2019 is 7 60 per share with earnings expected to increase 14 29 from the year ago period
Bottom Line
Investors like dividends for a variety of different reasons from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits However not all companies offer a quarterly payout
For instance it s a rare occurrence when a tech start up or big growth business offers their shareholders a dividend It s more common to see larger companies with more established profits give out dividends During periods of rising interest rates income investors must be mindful that high yielding stocks tend to struggle With that in mind C presents a compelling investment opportunity it s not only an attractive dividend play but the stock also boasts a strong Zacks Rank of 2 Buy |
C | Is Citigroup C Stock Outpacing Its Finance Peers This Year | Investors interested in Finance stocks should always be looking to find the best performing companies in the group Is Citigroup C one of those stocks right now By taking a look at the stock s year to date performance in comparison to its Finance peers we might be able to answer that question
Citigroup is one of 854 companies in the Finance group The Finance group currently sits at 8 within the Zacks Sector Rank The Zacks Sector Rank considers 16 different groups measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group
The Zacks Rank is a proven model that highlights a variety of stocks with the right characteristics to outperform the market over the next one to three months The system emphasizes earnings estimate revisions and favors companies with improving earnings outlooks C is currently sporting a Zacks Rank of 2 Buy
The Zacks Consensus Estimate for C s full year earnings has moved 2 higher within the past quarter This signals that analyst sentiment is improving and the stock s earnings outlook is more positive
Based on the most recent data C has returned 30 56 so far this year Meanwhile the Finance sector has returned an average of 11 61 on a year to date basis This shows that Citigroup is outperforming its peers so far this year
Breaking things down more C is a member of the Banks Major Regional industry which includes 16 individual companies and currently sits at 166 in the Zacks Industry Rank Stocks in this group have gained about 13 33 so far this year so C is performing better this group in terms of year to date returns
Going forward investors interested in Finance stocks should continue to pay close attention to C as it looks to continue its solid performance |
C | Gold Is Now The Hottest Trade ETFs To Add More Shine | Gold price skyrocketed near six year high topping the key level of 1 400 per ounce for the first time since 2013 Notably Comex gold has gained almost 90 so far in June With this the gold futures market is on track for after 1 6 rise in May This would represent the best back to back monthly gains after the January February 2017 period when it rose more than 8 in total read The rally was primarily driven by the Federal Reserve which has signaled interest rate cuts as soon as next month Lower rates will continue to weigh on the dollar against the basket of currencies raising the yellow metal s attractiveness as it does not pay interest like fixed income assets Additionally the prospect of easing money policies from other major central banks also boosted the yellow metal The combination of falling yields global growth concerns and geopolitical tensions spurred demand for safe haven assets pushing up the price of gold This is because gold is considered a great store of value and hedge against market turmoil Gold has also been boosted by rising Middle East tensions after a U S drone was shot down by Iran s Revolutionary Guard this week read
Given the bullish backdrop Citigroup NYSE C expects the metal to reach 1 500 1 600 per ounce in the next 12 months and 1 500 by end 2019 Further the ultra popular SPDR Gold Trust P GLD ETF TSXV GLD with an asset base of around 35 9 billion and an average daily volume of around 7 8 million shares has pulled in around 886 million in capital so far this month In such a positive scenario the appeal of gold ETFs is increasing As a result investors who are bullish on gold right now may want to consider a near term long on the precious metal Fortunately with the advent of ETFs this is quite easy as there are many options for accomplishing this task Below we highlight them and some of the key differences between each ProShares Ultra Gold ETF This fund seeks to deliver twice 2x or 200 the return of the daily performance of gold bullion in U S dollars the gold price is fixed for delivery in London The product makes a profit when the gold market moves upward and is suitable for hedging purposes against rising gold prices The product charges 95 bps in fees a year and has amassed 83 7 million in its asset base Volume is light at around 70 000 shares per day read DB Gold Double Long ETN BS DGP This ETN seeks to deliver twice the return of the daily performance of the Deutsche Bank DE DBKGn Liquid Commodity Index Optimum Yield Gold DGP initiates a long position in the gold futures market charging 75 bps in fees per year from investors It has accumulated over 96 8 million in its asset base so far and trades in average daily volume of 26 000 shares VelocityShares 3x Long Gold ETN This product provides three times 3x or 300 exposure to the daily performance of the S P GSCI Gold Index Excess Return plus returns from U S T bills net of fees and expenses The ETN has been able to manage an asset base of 125 9 million while charging investors a higher fee of 1 35 annually The note trades in lower volume of around 85 000 shares a day on average Bottom LineIt is clear that buying pressure has been intense for gold and that the recent trend is extremely favorable for the commodity given negative global sentiments and a dovish Fed Additional buying could be in the cards if the United States and China fail to strike a deal later this week and send the stock market into a tailspin This situation will compel investors to remain focused on precious metals as a store of wealth and hedge against market turmoil However investors should note that since the above mentioned products are extremely volatile these are suitable only for traders and those with high risk tolerance Additionally the daily rebalancing when combined with leverage may make these products deviate significantly from the expected long term performance figures see Still for ETF investors who are bullish on gold for the near term either of the above products could make an interesting choice Clearly a near term long could be intriguing for those with high risk tolerance and a belief that the trend is the friend in this corner of the investing world Want key ETF info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing ETFs each week |
JPM | Profit From Wall Street Sell Off With These Inverse ETFs | Wall Street suffered its worst day in two months on September 9 following the Fed Bank of Eric Rosengren s comments that a gradual tightening is possible expressed confidence in labor market strength and expects U S GDP growth to score above 2 over the coming two quarters He is normally known for and this sudden change to hawkishness bulldozed stocks on Friday This heightened volatility and drove iPath S P 500 VIX ST Futures ETN 16 1 higher read
In any case the investing world was abuzz with Fed hike speculation at August end with the U S economy gaining steam But the lackluster job manufacturing and service sector data for the month of August turned the talks off for a short while read
Many market watchers almost ruled out the possibility of a rate hike at the FOMC meeting that is barely a week away and pushed the timeline to December However the latest comment from Rosengren triggered rate hike talks all over again Fearing a sooner than expected rate hike and the gradual ceases in cheap dollar inflows key U S equity indices which were already guilty of overvaluation concerns slumped
The S P 500 lost about 2 5 Dow Jones Industrial Average shed over 2 1 and the Nasdaq composite plunged over 2 5 on September 9 The ripple effect of the Wall Street sell off spread to the global market with Asia ETF iShares Asia 50 AX AIA losing about 2 6 iShares MSCI Emerging Markets ETF NYSE EEM slumping about 3 4 Vanguard FTSE Europe ETF falling 2 1 iShares MSCI Japan ETF shedding about 1 7 and all world ETF iShares MSCI ACWI retreating over 2 3 on September 9
Other Reasons Driving Markets Lower
The U S bond market gives a clearer indication with the U S 10 year Treasury yield rising 13 bps in just two days to 1 67 on September 9 while yield on the six month U S Treasury yield growing 2 bps to 0 51 during the same timeframe This steepening of the yield curve indicates that investors still have faith in economic growth despite the dreary job manufacturing and service sector data for the month of August
Apart from the Fed official s comments a in oil prices following increased drilling by U S producers flared up supply glut fears in the oil patch Oil ETFs United States Oil NYSE USO V USO and United States Brent Oil AX BNO plummeted about 3 3 and 3 5 on September 9 respectively giving another reason to the global market to slide read
Investors also turned anxious over risky assets after a nuclear test by North Korea which may lead to geo political risks Talks that the Bank of Japan is mulling over means to steepen the yield curve of the Japanese bonds along with the hearsay that the central banks do have not more ways to offer further stimuli also hit global securities as
More Downside Risks Ahead
Analysts expect further sell offs as rate hike speculation may be rife through the week and the S P 500 fell A few Fed speakers are about to comment on September 12 and along with many analysts we too believe that a slight sign of hawkishness from them would stretch the market crash read
As per analysts like a steep pullback is impending as presently an overvalued broader market is not ready to digest a Fed hike In fact the presidential election in November and a lukewarm U S economy can also be an overhang even if the Fed does not announce a hike in September JPMorgan NYSE JPM s Global Head of Derivatives and Quantitative Research also cautioned about imminent volatility in the market
Short U S Stocks
Given this U S stocks may undergo a strong selling pressure and investors could easily tap this opportune moment by going short on various U S equity indices There are a number of inverse or leveraged inverse products in the market that offer inverse opposite exposure to such indices Below we highlight those and some of the key differences between each
ProShares Short S P500 ETF Up Over 2 4 on September 9This fund provides unleveraged inverse exposure to the daily performance of the S P 500 index
ProShares UltraShort S P500 ETF Up 4 8 on September 9
This fund seeks two times 2x leveraged inverse exposure to the S P 500 index ProShares UltraPro Short S P500 Up Over 7 1 on September 9
Investors having a more bearish view and higher risk appetite could find SPXU interesting as the fund provides three times 3x inverse exposure to the S P 500 index
ProShares Short QQQ Up Over 2 5 on September 9
It offers inverse unleveraged exposure to the daily performance of the NASDAQ 100 Index
ProShares Short Dow30 Up 2 1 on September 9
It offers inverse unleveraged exposure to the Dow Jones Industrial Average Index
Bottom LineAs a caveat investors should note that such products are suitable only for short term traders as these are rebalanced on a daily basis Still for ETF investors who are bearish on the equity market for now a near term short could be intriguing for those with high risk tolerance see
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JPM | How To Make 125 Million Dollars In Stocks And Options | Hey everybody Dave Bartosiak with Trending Stocks at How can you make 125 million You can win the lottery You can launch a very successful business You can be a world class athlete Or you can retire from Wells Fargo NYSE WFC after heading a unit that cost the bank 185 million in fines Wait what
Last week the story broke that employees of the bank had secretly created millions of unauthorized bank and credit card accounts for customers Over the last five years the phony accounts made the banks fees and helped employees boost their sales figures to hit targets and make themselves a few extra bucks
Well the Consumer Financial Protection Bureau caught wind of this and opened an investigation Wells Fargo went out and fired 5 300 rank and file employees who practiced the fraud and was hit with a hefty fine 100 million to the CFPB s Civil Penalty Fund 35 million to the Office of the Comptroller of the Currency and 50 million to the City and County of Los Angeles And what about the one heading this department Was she fired too Nope
Head honcho Carrie Tolstedt not only gets to keep a yearly incentive of 5 5 million in stock each of those 5 years in question but she also leaves her post with nearly 125 million in stock and options She gets to keep it all because she voluntarily retired rather than being fired If she were fired like 5 300 other people under her supervision she would have had to give back 45 million leaving her with only 80 million in stock and options
That s gotta make shareholders like Warren Buffet and Berkshire Hathaway NYSE BRKa very happy Oh you didn t know 5 300 people working for you were lying for 5 years Here s an eighth of a billion dollars
Which brings us to today s phrase that pays Golden Parachute When a C Level Exec gets paid big bucks to leave and never come back This is a direct contrast to what most people get a security escort out of the building and a rejection of their unemployment benefits
Analysts have yet to weigh in on the news here staying pat with their earnings estimates and keeping Wells Fargo as a Zacks Rank 3 Hold But the bank has officially given up the title of largest US Bank to JPMorgan Chase NYSE JPM JPMorgan is now worth 240 billion while Wells Fargo is an anemic 236 billion
Every time you share this video somebody with a golden parachute gets kicked out of a window Comment in the section below Tell me what you d do with 125 million Subscribe to the YouTube channel Twitter bartosiastics and come back for all the Trending Stocks with I m Dave Bartosiak |
MS | India s July retail inflation likely stayed above central bank target | NEW DELHI Reuters Soaring food prices in July probably kept India s headline inflation above the Reserve Bank of India s RBI near term target underscoring the challenge facing the next central bank governor Consumer prices are expected to have risen 5 90 percent last month from a year ago faster than a 5 77 percent provisional gain in June according to a Reuters poll of economists If Friday s government data lines up with the forecast July will be the fourth straight reading that tops the RBI s target of 5 percent by March 2017 At his last monetary policy review on Tuesday central bank chief Raghuram Rajan left key interest rates unchanged flagging upside risks to the inflation target The former International Monetary Fund chief economist is due to step down as RBI governor on Sept 4 after a three year term to return to academia While Prime Minister Narendra Modi s government has yet to pick a successor it has bound the next governor with Rajan s retail inflation target of 4 percent with a plus or minus 2 percent band for next five years Above average monsoon rains this summer have raised hopes of a boost to farm output and an ensuing drop in food inflation Already there are early signs that prices for vegetables are edging down However the outlook for core inflation remains uncertain due to a shrinking output gap and an expected pickup in demand driven price pressures following full implementation of a major hike in government salaries and pensions The central bank faces a difficult task in meeting its inflation targets said Shilan Shah India economist at Capital Economics SALES TAX IMPACT SEEN The roll out of a sales tax planned for next April is also expected to push up inflation A government appointed panel has suggested a standard goods and services tax rate of 17 18 percent but India s states want a higher level Morgan Stanley NYSE MS reckons a higher rate could push up retail inflation by as much as 0 70 percentage points Economists don t see much steam left in the RBI s current easing cycle in which the policy repo rate has come down by 150 basis points since January 2015 to its lowest in more than five years Most expect another cut of 25 basis points by December before the central bank hits the pause button But much will depend on who replaces Rajan The appointment of a more dovish candidate as the next governor would raise the chances of further monetary loosening Shah said India s statistics office will release retail inflation data and industrial production data at 8 p m ET on Friday Analysts surveyed by Reuters expect output at factories mines and utilities to expand 1 5 percent in June from a year earlier In May contrary to a predicted contraction output rose 1 2 percent
The industrial output data are based on an old series not reflected in India s current gross domestic product figures As a result analysts set little store by those numbers as a guide to the economy s broader health |
MS | Morgan Stanley sees inflation target key in Fed hike decision | Investing com Morgan Stanley NYSE MS sees inflation key factor in any Fed hike decision
We think inflation holds the key to further Fed rate hikes Morgan Stanley experts said
Core PCE 1 6 in June well below the Fed s 2 target forecast to drop to 1 5 in July Morgan Stanley says market should take a September hike off the table
Sees market reducing current 50 chance of December hike to 30 over coming weeks |
MS | Oil posts strong weekly gains analysts say rally unjustified | By Barani Krishnan NEW YORK Reuters Oil prices settled steady to higher on Friday with U S crude posting its biggest weekly gain since March after surging nearly 25 percent in a little over two weeks a rally analysts cautioned was not justified by fundamentals Crude futures have risen almost 10 a barrel since early August on speculation that Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries will agree next month to a production freeze deal with non OPEC producers led by Russia The rally has propelled oil into bull market territory after technicals had it in a bear market early this month We would argue that improved fundamentals are not a key reason for the recent price bounce analysts at Morgan Stanley NYSE MS said in a note Crude oil demand is anemic gasoline demand has decelerated globally and China crude oil imports are likely to decelerate U S West Texas Intermediate WTI crude settled up 30 cents or 0 6 percent at 48 22 a barrel after reaching 48 75 its highest since July 5 For the week WTI rose 9 percent up for a second straight week and rising its most for a week since early March Brent crude closed just a penny lower at 50 88 a barrel after scaling a two month high at 51 22 Brent rose 8 percent on the week rising for a third week in a row OPEC will hold an informal meeting in Algeria next month with outside producers led by Russia Some have speculated about a production sharing deal with Saudi Arabia helping stoke much of that perception despite scuttling a similar plan in April Others including OPEC member Nigeria do not think there will be a deal Many analysts and traders also argue the current rally will not last We feel that this month s approximate 9 crude advance could easily be followed by an equivalent sized price decline next month said Jim Ritterbusch of Chicago based oil markets consultancy Ritterbusch Associates The U S production factor has taken on a more bearish appearance as the oil rig counts have increased appreciably Ritterbusch said U S drillers this week added oil rigs for an eighth consecutive week the longest recovery streak in the rig count in more than two years data from oil services firm Baker Hughes showed Elsewhere Iraq resumed pumping oil from fields operated by the state run North Oil Company to Turkey at around 70 000 barrels per day with plans to double the volume next week
In Libya the National Oil Corporation began to load a tanker with crude at the country s eastern Zueitina port which has been shut since November |
JPM | JPMorgan invests in fixed income data startup | By Anna Irrera Reuters JPMorgan Chase Co NYSE JPM has made a strategic investment in Mosaic Smart Data a company that has developed technology to help banks make their fixed income sales and trading businesses more profitable The bank whose fixed income revenue slumped last year has taken a minority stake in the London based startup the companies said in London on Wednesday The financial terms of the deal were not disclosed Mosaic will use the funding to double its headcount and expand its platform to cover additional asset classes for new and existing clients according to a person familiar with the deal The investment comes after JPMorgan revealed in October that it had signed a multiyear deal to use Mosaic s technology globally Mosaic sells technology that collects and analyzes data from the fixed income trading divisions of banks to help them make more informed decisions and secure more deals The platform helps visualize data and can be used traders to figure out which clients are more likely to be interested in a given deal It can also be used by bank bosses to determine which trading desk or trader has been performing better The investment comes as financial institutions look to adopt more technology that can help them take advantage of the vast amounts of data they store
Banks have also been looking for ways to deal with a liquidity crunch in fixed income markets Tougher post financial crisis capital requirements have made it more expensive for them to act as market makers in some fixed income assets leading their fixed income divisions to slump |
JPM | Barclays investors give CEO Staley year to fix investment bank | By Sinead Cruise
LONDON Reuters From BZW to BarCap Barclays L BARC bosses have spent more than three decades trying to make the British bank a profitable investment banking force often frustrating its investors
Now Barclays Chief Executive Jes Staley is being given one more year to deliver on a promise to turn its investment bank into a profit engine able to weather downturns or face demands for a review of the business shareholders told Reuters
Staley feted for his achievements at U S powerhouse JPMorgan N JPM pledged to revive Barclays tired investment banking franchise as soon as he joined the bank in 2015 ending years of under investment in the wake of the financial crisis
A slew of ex JPMorgan high fliers including rainmaker Tim Throsby and 40 newly recruited managing directors have since joined to help revitalize a business that in 2007 delivered 2 3 billion pounds almost a third of the group s pre tax profits
But returns from investment banking continue to underwhelm despite a recent turnaround in market conditions leading some shareholders to set Staley a deadline for an improvement
Assuming market conditions remain favorable then we would really be looking to see high single digit returns on equity for this business by the next year end or questions will need to be answered Steve Davies manager of the Jupiter UK Growth Fund and a top 40 Barclays investor told Reuters
EARN A RETURN
Barclays which declined to comment on its investment bank cheered investors last month by restoring its dividend wrapping up a restructuring program involving the disposal of billions of pounds in unwanted assets
However investors now want to see if Barclays beefed up investment bank can make a sustainable cost effective and growing contribution to future dividends
Barclays International which comprises the Consumer Cards and Payments business and the corporate and investment CIB bank delivered a return on tangible equity ROTE of 3 4 percent in 2017 or 6 6 percent excluding the impact of U S tax reforms
But a fourth quarter ROTE of minus 20 2 percent at the CIB highlights the scale of Staley s challenge with two key factors regulation and market conditions largely out of his control
Regulations aimed at protecting retail banks from riskier investment banking activities have forced Barclays to tie its high earning payments and credit cards business to its investment bank on a separate balance sheet
A former senior Barclays executive who still holds its stock told Reuters he worried about capital allocation between the businesses and questioned whether the bank should own an investment bank at all
The whole unit is neither fish nor fowl and the reality is they are no longer the best owner of that investment banking business the source said
A third investor who declined to be named also flagged concerns about how regulation could undermine efforts by Barclays management to win market share
Regulatory reform in the U S could make life even tougher as U S peers are able to deploy more balance sheet into the IB business as leverage restrictions are eased somewhat
CHEAP BUT RISKY
Although CIB s pre tax profit in 2017 fell 22 percent to 2 06 billion pounds Barclays says a bounce in trading revenues and market share in its Banking and M A franchises so far this year are cause for optimism
It also said it would redeploy capital from its corporate loans book to higher returning opportunities within its investment bank in a bid to improve its overall profitability
Does investment banking perform a useful function I think in the round it does It acts as the intermediary between providers and consumers of capital If that assertion is correct then it should be able to earn a return said Rob James of Old Mutual Global Investors another top 40 Barclays shareholder
Barclays also cut an additional 2 4 billion pounds of risk weighted assets from the CIB in the final quarter of 2017 as part of a plan to relieve the drag on its share price which is trading around 8 percent down on last year
But investors have been dismayed at the unit s stubbornly high costs which jumped 4 percent to 2 4 billion pounds over the final quarter compounding an 11 percent fall in income
Fundamentally the CIB remains a lower return on equity business relative to Barclays UK and the Consumer Cards Payments piece a fifth shareholder said
Barclays can get the right people and systems in place but if clients aren t trading there is little management can do
Others are even less optimistic pointing to a large outstanding settlement for the misselling of mortgage backed securities before the 2007 crisis and regulatory scrutiny of Staley s role in the attempted exposure of a whistleblower
Barclays shares are cheap but that reflects the risk carried by the investment bank and the past misconduct and litigation issues that refuse to go away said Paul Mumford fund manager at Cavendish Asset Management |
JPM | JPMorgan to launch umbrella bond index covering all sectors | By Abhinav Ramnarayan LONDON Reuters JPMorgan NYSE JPM will launch a new overall bond index on Thursday that will unify all of the bank s flagship bond indexes that cater to specific areas such as government bonds and emerging markets according to a document seen by Reuters on Thursday The JPMorgan Global Aggregate Bond Index GABI will integrate indexes such as the Emerging Markets Bonds Index EMBI the Government Bond Index GBI and the Collateralized Loan Obligation CLOI index The new GABI index will comprise over 22 000 securities from 122 countries across 31 currencies with a combined market capitalization of 44 5 trillion Investors will be able to break this down further by credit ratings market classification such as developed or emerging markets geographical region country maturity currency and if applicable corporate sector The bank will become one of only a handful of providers to offer an umbrella index of this nature it said
Many investment banks have divested their index business and sold to data firms or exchanges but this demonstrates that JPMorgan is fully committed to strengthening its index franchise a spokesman for the bank told Reuters |
C | Short Sellers Are Targeting Asia s Booming Dollar Bond Market | Bloomberg Asian companies are turning to the dollar bond market like never before selling record amounts of securities that leveraged investors desperate for yield are scooping up But there s a flip side to all that growth it s getting easier for funds to sell them short
With unprecedented numbers of first time borrowers and concerns about the financial transparency of some issuers the market is increasingly vulnerable to higher volatility Traders are already reeling from high profile meltdowns this year after prices collapsed on bonds from Noble Group Ltd and Reliance Communications Ltd
You will see movements that you won t have seen before even as short selling can help improve market efficiency said Owen Gallimore head of credit strategy at Australia New Zealand Banking Group Ltd
Booming issuance and more buying by banks is increasing the supply of securities available for lending and therefore shorting Sales of dollar bonds in Asia excluding Japan have soared to 310 billion this year
We have found it easier and less expensive to short bonds said Darryl Flint chief investment officer at Double Haven Capital Hong Kong Ltd There is more liquidity in the repo market
Repos or repurchases are agreements by a bondholder to lend out the security retaking possession after a set time Funds on the other side of the trade can sell the borrowed bond in hope of profiting from a slide in its price during the repo period
Greater Leverage
Because the deals occur off organized exchanges volume numbers are hard to estimate But market participants say a rising stockpile of Asian dollar bonds at banks along with the increased use of leverage to buy such securities has fueled repos
Banks took 30 percent of new note issuance this year up from 17 percent in 2014 JPMorgan Chase Co NYSE JPM estimated in a note this month That bump has come at the expense of institutions including pension funds
As you have more Chinese banks and securities firms buying Asia dollar bonds in large amounts such investors are more able to lend out bonds for repo which improves liquidity said Richard Cohen head of credit for Asia Pacific at BNP Paribas PA BNPP SA
That all threatens to shake up what s been a notably stable market aside from some company meltdowns like Noble In some cases Asian dollar bonds have shown less volatility than U S counterparts during times of stress
Investors in Asia have up to now also had less opportunity to bet against dollar bonds in the region due to a relative lack of credit default swaps which have been slow to catch on compared with developed markets
The market is more able to fulfill demand from investors to short Asia dollar bonds now because there are more bonds being lent out on repo by counterparties that are new to the market and taking a bit more leverage said Edward Gildar Asia regional head for global finance products at Citigroup Inc NYSE C |
C | European shares dip as U S tax bill gets muted reception | By Julien Ponthus LONDON Reuters European stocks followed Wall Street and Asian bourses lower on Thursday in a muted response to the U S Congress s approval of a long anticipated tax overhaul The pan European STOXX 600 index STOXX was down 0 2 percent with major European bourses trading sideways Spain s IBEX IBEX was down 0 4 percent slightly worse than Germany s DAX GDAXI and Paris CAC 40 FCHI which were both down 0 2 percent The Spanish government hopes a regional election will strip pro independence parties of their control of the Catalan parliament Describing the muted market reaction to the U S 1 5 trillion dollar tax bill Henry Croft of Accendo Markets described a widely touted buy the rumor sell the fact event and said investors were now focused on whether the tax reform would boost equities in 2018 Other analysts believe investors will need time to crunch the data and figure out which companies will benefit the most As people sharpen their pencils and figure out which companies will benefit from the tax bill and companies start talking about that themselves I think we ll see larger moves in share prices said John Carey portfolio manager at Amundi Pioneer Asset Management in Boston Nokia HE NOKIA posted the best performance of the STOXX 600 rising 2 6 percent after announcing a patent agreement with China s Huawei SZ 002502 Britain s Balfour Beatty added a 2 4 percent rise after it said on Thursday it had agreed to sell a 12 5 percent stake in M25 motorway operator Connect Plus for 103 million pounds 137 6 million helping push up 2017 profit and generating funds to pay down debt Scandal hit Steinhoff DE SNHG posted the worst fall down 12 6 percent and hitting a low 0 26 euro In the banking sectors Commerzbank DE CBKG was down 1 percent after the CEO of Italy s biggest bank UniCredit MI CRDI said he was not considering taking over the German bank Still in banking Deutsche Bank DE DBKGn lost 1 5 percent It said on Wednesday it would aim to cut up to 1 000 jobs as part of the planned integration of retail arm Postbank Energy was the only sector trading in the black with Norway s Statoil OL STL rising 0 6 percent after presenting plans to extend output from the North Sea Snorre oilfield
Heavily indebted telecoms and cable group Altice AS ATCA also made it to the top risers of the session Citigroup NYSE C analysts lowered their price target but kept an overall buy rating on the stock which has slumped nearly 60 percent so far in 2017 due to concerns over its 50 billion euros debt pile |
C | Inflation Breakout Would Be Worse for Markets Than a Depression | Bloomberg Lowflation drove global markets to dizzying highs this year Inflation could drive them off a cliff
The risk for 2018 is that consumer price growth stages a comeback roiling investor portfolios and corporate profits according to investors and strategists The consequent return of higher real interest rates would imperil bullish market psychology more than you might think
A significant inflation shock would be just about the worst thing that could happen to today s investment portfolios Ben Inker head of asset allocation at Boston based Grantham Mayo Van Otterloo Co wrote in a Dec 15 letter to clients Unlike most of history it seems plausible that a meaningful inflation increase from here would impose worse losses on portfolios than a depression
A tighter labor market easy financial conditions and a strong global backdrop are giving U S monetary policy makers confidence that core consumer prices will return to target next year The market implied annual inflation rate for the next decade rose to 1 95 percent this week the highest since April while global bonds slumped spooked in part by hawkish monetary messages and the U S tax plan
With 8 5 trillion of bonds already yielding less than zero percent higher inflation would inflict big losses on the real value of bond portfolios and undercut stock valuations according to Inker
A moderate inflation problem spurring real cash rates to 2 percent would impose higher losses on traditional 60 40 equity bond portfolios than a depression he calculated after analyzing corporate cash flows and bond yields over similar stretches in the past
Higher inflation in the absence of productivity gains would therefore be a market game changer in 2018
While there has been some growth in price levels this year it has been more evident in the business sector Corporate pricing power has grown faster than consumer price inflation and this has sparked a disinflationary boom for America Inc according to Jefferies Group LLC
Companies capital holders continue to be the major beneficiaries of disinflation with labor stakeholders still unable to capture their share of profits its strategists led by Sean Darby wrote in a report this month In addition muted wage gains and limited investment outlays have propelled U S corporate profits to GDP close to record highs
In a world of improving labor markets a lack of wage pressure allows the business cycle to run longer than expected without overheating
If you are extending the horizon of business cycle like this via low inflation and muted units costs then in investors minds they are thinking that a recession will happen maybe once every 10 years as opposed to seven according to Steven Englander head of Rafiki Capital Management LLC and former chief currency strategist at Citigroup Inc NYSE C That reduces the prospect of market volatility
The likelihood therefore that the old economic rules still hold with a normal business cycle coming to an end as the Federal Reserve materially tightens policy would be a death sentence for asset valuations across stocks bonds and credit that on one measure are at the highest since 1900
This makes inflation key to determining the market outlook in 2018 according to Englander
The best precursor to signal the business cycle is ending is increased input prices he said |
C | India s record share sales bring banks little cheer in the way of fees | By Devidutta Tripathy and Umesh Desai MUMBAI HONG KONG Reuters Funds raised in India through share sales reached the most in a decade this year thanks to booming stock markets but the rush to raise capital while investor sentiment remained bullish pushed dealmakers fee ratio to multi year lows India s main stock indexes surged almost 30 percent in 2017 as investors bet on economic reform and corporate earnings recovery That spurred almost 30 billion worth of share sales including a record 11 5 billion in initial public offerings IPO But for banks which arrange the sales fees earned as a percentage of funds raised hit the lowest in four years Thomson Reuters data showed That made arranging work in Asia s third largest economy the worst paid out of 11 Asian markets To be sure the structure of Indian deal making means fees are often comparatively small But this year was particularly low because a high proportion of deals involved state run firms which typically pay paltry fees Competition was also higher with dealmakers such as IDFC Bank Ltd and IIFL Holdings Ltd gaining market share while entrants such as China s Haitong Securities Co Ltd made headway industry participants said In a buoyant market there is no cause for anxiety for issuers so low fees are no surprise In a weak market issuers may be willing to pay higher fees but the number of issues are fewer said Prithvi Haldea chairman of data provider Prime Database That said India has been a low paying market for years and that s unlikely to change anytime soon he said UNATTRACTIVE Bankers are optimistic about 2018 s deal pipeline which they expect to include IPOs real estate investment trusts and state backed share sales But some fear a continued market boom will keep fees low Fees this year averaged 0 8 percent of deal proceeds from 1 3 percent last year Thomson Reuters data showed The average was 2 percent in Hong Kong 2 6 percent in Shanghai and Shenzhen and 2 8 percent in Tokyo New York averaged 3 2 percent While fees in India usually are attractive in the Indian context they are not probably as attractive in an Asian or a global context said V Jayasankar head of equity capital markets ECM at Kotak Mahindra Bank Ltd s investment banking arm which Thomson Reuters data showed arranged the most deals this year by total value Kotak and four other banks split a 0 1 percent fee for arranging the 1 7 billion IPO of state run General Insurance Corp of India the year s biggest IPO Six banks arranging a 2 3 billion follow on share offering by State Bank of India 2017 s largest ECM deal received a token fee of 1 rupee 0 016 according to bankers It is not uncommon for dealmakers to agree to such terms for the opportunity to take part in blockbuster deals UNDERWRITING The low fees can be partially attributed to the structure of deal making in India where unlike elsewhere banks do not risk underwriting share sales We don t see a material change in the fees paid and we are at least five to 10 years away from an underwriting fee model said Jibi Jacob head of ECM at Edelweiss Financial Services Ltd 2017 s sixth ranked IPO arranger in India this year Thomson Reuters data showed An increasing number of banks involved in each deal also means fees are being split between more dealmakers said the ECM head at a multinational bank who was not authorized to publicly comment on fees and so declined to be identified There is also a new cycle of people willing to go down the fee curve the banker said UNDERSTAFFED Looking at 2018 bankers including Citigroup NYSE C Inc s India ECM head Arvind Vashistha said they expected average IPO sizes to be larger with fundraising picking up in sectors such as infrastructure real estate metals and mining The big risk continues to be that of the global geopolitical environment and of valuations which in some cases have run up significantly But the fundamental appetite for India paper in 2018 should continue to be very robust said Vashistha at Citi ranked second among share sale arrangers But low fees mean regardless of higher deal volumes many banks especially foreign banks with high cost structures are not aggressively expanding ECM teams bankers said When you have limited resources and deal volumes pick up I think the only thing we can do is be disciplined about which clients what transactions rather than trying to do everything said a senior banker at a foreign bank s India arm |
C | World Wrestling 5 as CEO McMahon sells 3 34M shares to fund venture | World Wrestling Entertainment NYSE WWE 5 1 premarket after WWE Chairman and CEO Vince McMahon discloses the sale of 3 34M common shares in a block trade yesterday The filing says McMahon executed the sale primarily to fund a separate entity from the company Alpha Entertainment LLC which Mr McMahon established to explore investment opportunities across the sports and entertainment landscapes including professional football McMahon says he has no current plan to sell additional shares and that he will remain as WWE s Chairman and CEO for the foreseeable future McMahon s sale represents 4 3 of the company s total outstanding Class A and Class B common stock Citigroup NYSE C downgrades WWE to Neutral from Buy with a 33 price target following the news Now read |
C | Gold Close To Touching Six Year High Leveraged ETFs To Play | Gold is finally gathering the steam needed to lift prices to a level not seen since 2013 Bullion may hit 1 400 an ounce this year as investors hedge risk according to Rhona O Connell head of market analysis for EMEA and Asia regions at INTL FCStone Inc while Citigroup NYSE C believes gold price The metal is currently trading around 1 332 SPDR Gold Shares NYSE GLD TSXV GLD is up 4 2 past month as of Jun 7 2019
What Could Trigger the Rally
The likelihood of deepening U S China trade crisis is likely to boost gold U S Treasury Secretary Steven Mnuchin indicated President Donald Trump will decide on additional tariffs on China after meeting Chinese leader Xi Jinping later this month If China doesn t want to move forward then President Trump is perfectly happy to move forward with tariffs to re balance the relationship per Mnuchin
Notably the Trump administration lifted tariffs on 200 billion worth of Chinese goods from 10 to 25 from May 10 and then banned Chinese firm Huawei Technologies and 26 of its affiliates from doing business with American companies Trump is now considering additional tariffs on an incremental 325 billion of Chinese imports read
So the chance of continued dispute is pretty high as is the level of uncertainty in the market Since gold is viewed as a safe haven asset further run is well expected in the current condition
Fed s dovishness for 2019 is yet another tailwind The Fed has not enacted any rate hike so far this year and remains patient for the future course too There are high chances that the Fed could cut rates ahead given downbeat jobs data for the month of May and trade tensions Several central banks like the ECB and BoJ are still practicing negative interest rate policies
Central banks gold buying is yet another strength Some of these contributed to a 7 rise in global gold demand in the first quarter from a year earlier according to the World Gold Council Russia was the biggest buyer during the period followed by China
During the last four quarters central banks gold buying of 715 7 tons The momentum carried on in the second quarter too Central banks in April according to a report by the World Gold Council marking an 8 increase month on month China increased its gold reserves by 1 88 last month according to the central bank
The IMF also cautioned about global growth tensions The IMF expects the global economy to grow 3 3 in 2019 down from 3 6 in 2018 This marks the slowest expansion since 2016 Overall 70 of the global economy is forecast to slow down this year Trade tensions between the world s two biggest economies the United States and China have increasingly weighed on business confidence This is another reason to be bullish on gold prices
Any Wall of Worry
The U S Mexico trade deal could trigger a market rally in the near term which can fade the dazzle of gold investing for a short spell However the metal s long term lure rests on the U S China trade relations and the Fed s activity
ETFs in Focus
Against this backdrop investors can keep track of gold ETFs like VelocityShares 3x Long Gold ETN DB Gold Double Long ETN BS DGP ProShares Ultra Gold DB Gold Double Short ETN and VelocityShares 3x Inverse Gold ETN TSXV GLD see here
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C | Citigroup C Gains As Market Dips What You Should Know | Citigroup C closed at 67 88 in the latest trading session marking a 1 13 move from the prior day This move outpaced the S P 500 s daily loss of 0 04 Meanwhile the Dow lost 0 05 and the Nasdaq a tech heavy index lost 0 01
Heading into today shares of the U S bank had gained 4 26 over the past month outpacing the Finance sector s loss of 0 25 and the S P 500 s gain of 0 34 in that time
Investors will be hoping for strength from C as it approaches its next earnings release On that day C is projected to report earnings of 1 86 per share which would represent year over year growth of 14 81 Meanwhile our latest consensus estimate is calling for revenue of 18 70 billion up 1 24 from the prior year quarter
C s full year Zacks Consensus Estimates are calling for earnings of 7 60 per share and revenue of 74 08 billion These results would represent year over year changes of 14 29 and 1 69 respectively
Investors might also notice recent changes to analyst estimates for C These recent revisions tend to reflect the evolving nature of short term business trends With this in mind we can consider positive estimate revisions a sign of optimism about the company s business outlook
Our research shows that these estimate changes are directly correlated with near term stock prices Investors can capitalize on this by using the Zacks Rank This model considers these estimate changes and provides a simple actionable rating system
The Zacks Rank system ranges from 1 Strong Buy to 5 Strong Sell It has a remarkable outside audited track record of success with 1 stocks delivering an average annual return of 25 since 1988 Within the past 30 days our consensus EPS projection remained stagnant C is currently sporting a Zacks Rank of 2 Buy
Digging into valuation C currently has a Forward P E ratio of 8 83 Its industry sports an average Forward P E of 11 01 so we one might conclude that C is trading at a discount comparatively
Meanwhile C s PEG ratio is currently 0 73 The PEG ratio is similar to the widely used P E ratio but this metric also takes the company s expected earnings growth rate into account Banks Major Regional stocks are on average holding a PEG ratio of 1 34 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 75 putting it in the top 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
You can find more information on all of these metrics and much more on Zacks com |
JPM | Buy 3 Top Rated JP Morgan Mutual Funds Now | J P Morgan Asset Management is one of the world s largest investment management companies with around 1 7 trillion of assets under management The eighth largest mutual fund firm of the U S seeks to provide the best investment solutions to its clients As one of the leaders of the U S equity fund flows JP Morgan offers financial services all over the world through offices in 38 countries including the U S China and India It takes pride in introducing innovative inflation protected municipal products JPMorgan NYSE JPM Intrepid Value A invests the majority of its assets in equity securities of large and mid cap companies Large cap companies are those with a market capitalization of over 10 billion at the time of purchase while mid cap companies are those having market capitalization between 1 billion and 10 billion at the time of purchase JPMorgan Intrepid Value A has a three year annualized return of 7 5 JIVAX has an expense ratio of 0 86 compared to the category average of 1 11 JPMorgan Large Cap Value A seeks capital appreciation OLVAX invests a major portion of its assets in securities of large cap companies that include common stocks debt and preferred stocks that can be converted to common stocks Large cap companies are those that have market capitalization equivalent to those listed on the Russell 1000 Value Index at the time of purchase OLVAX offers dividends quarterly and capital gains annually JPMorgan Large Cap Value A has a three year annualized return of 10 Scott Blasdell is the fund manager since 2013 JPMorgan Disciplined Equity A invests a large portion of its assets in equity securities JDEAX invests in common stocks of domestic companies having market capitalization similar to those listed on the S P 500 Index JDEAX distributes dividends and capital gains if any quarterly JPMorgan Disciplined Equity A seeks high total return and has a three year annualized return of 10 To view the Zacks Rank and past performance of all J P Morgan 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 | Bank Stock Roundup JPMorgan Wells Fargo Settle Lawsuits | Over the last five trading days performance of major bank stocks has been relatively stable Whispers of another rate hike happening soon dominated the headlines as the key economic data points toward steady domestic growth All eyes will now be on Fed Chairwoman Janet Yellen s speech in Jackson Hole WY Coming to the bank specific headlines resolution of litigations and probes related to legacy matters and business misconducts dominated the banking space While the settlement amounts were not significant the stringent actions by the regulators are commendable Read BANKS MAJOR REGIONAL Industry Price Index
Major Developments of the Week1 Closing the doors on yet another matter pertaining to its acquisition of Washington Mutual Inc s WaMu banking business during the 2008 financial crisis JPMorgan Chase Co NYSE JPM announced ending the dispute with the Federal Deposit Insurance Corporation FDIC and Deutsche Bank AG NYSE DB Per a regulatory filing following the court approval the company will receive 645 million as part of the deal read more 2 Wells Fargo Co NYSE WFC was ordered to pay 4 million to settle accusations regarding its involvement in illegal student loan practices like charging illegal fees misrepresenting payments and not updating inaccurate credit report data The Consumer Financial Protection Bureau CFPB said that Wells Fargo would illegally charge consumers late fees if they made payments on the last day of their grace periods read more 3 In yet other news related to Wells Fargo its mortgage unit Wells Fargo Bank NA has been ordered to pay 3 45 million to some clients as a result of a processing failure that delayed the mailing of letters to approximately 8 000 homeowners in bankruptcy This shortened their notice period about changes to monthly mortgage payment amounts As per the letter from Wells Fargo filed in U S Bankruptcy Court in Greenbelt Maryland the mortgage unit agreed to pay the amount in a settlement deal with the Department of Justice s U S Trustee Program Additionally the company consented to resolve the mailing error and provide credits and refunds to affected homeowners This problem was discovered last year driven by enquires by an independent compliance monitor who was hired by the bank as part of an 81 6 million settlement with the Justice Department 4 Citigroup Inc NYSE C and AT T Inc NYSE T have put an end to the legal tussle over a trademark infringement Per a filing with a Manhattan federal court the companies have dropped allegations against each other with prejudice which means that the charges cannot be brought again read more Price PerformanceOverall the performance of banking stocks indicated optimistic stance Here is how the seven major stocks performed In the last five trading sessions Wells Fargo edged down 0 6 On the other hand Bank of America Corp NYSE C shares increased 2 Over the last six months BofA and Citigroup were the best performers with their shares surging 26 1 and 21 respectively Also JPMorgan s shares climbed 15 9 What s Next in the Banking Space Banking stocks are expected to continue performing in a similar way unless any unforeseen incident occurs |
JPM | The Zacks Analyst Blog Highlights JPMorgan Chase Deutsche Bank And Wells Fargo | For Immediate Release
Chicago IL August 29 2016 Zacks com announces the list of stocks featured in the Analyst Blog Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets Stocks recently featured in the blog include JPMorgan Chase Co NYSE JPM Deutsche Bank AG DE DBKGn and Wells Fargo NYSE WFC Co
Today Zacks is promoting its Buy stock recommendations
Here are highlights from Friday s Analyst Blog
Bank Stock Roundup JPMorgan Wells Fargo Settle Lawsuits
Over the last five trading days performance of major bank stocks has been relatively stable Whispers of another rate hike happening soon dominated the headlines as the key economic data points toward steady domestic growth All eyes will now be on Fed Chairwoman Janet Yellen s speech in Jackson Hole WY
Coming to the bank specific headlines resolution of litigations and probes related to legacy matters and business misconducts dominated the banking space While the settlement amounts were not significant the stringent actions by the regulators are commendable
Read
Major Developments of the Week
1 Closing the doors on yet another matter pertaining to its acquisition of Washington Mutual Inc s WaMu banking business during the 2008 financial crisis JPMorgan Chase Co announced ending the dispute with the Federal Deposit Insurance Corporation FDIC and Deutsche Bank AG Per a regulatory filing following the court approval the company will receive 645 million as part of the deal read more
2 Wells Fargo Co was ordered to pay 4 million to settle accusations regarding its involvement in illegal student loan practices like charging illegal fees misrepresenting payments and not updating inaccurate credit report data The Consumer Financial Protection Bureau CFPB said that Wells Fargo would illegally charge consumers late fees if they made payments on the last day of their grace periods read more
3 In yet other news related to Wells Fargo its mortgage unit Wells Fargo Bank NA has been ordered to pay 3 45 million to some clients as a result of a processing failure that delayed the mailing of letters to approximately 8 000 homeowners in bankruptcy This shortened their notice period about changes to monthly mortgage payment amounts
As per the letter from Wells Fargo filed in U S Bankruptcy Court in Greenbelt Maryland the mortgage unit agreed to pay the amount in a settlement deal with the Department of Justice s U S Trustee Program Additionally the company consented to resolve the mailing error and provide credits and refunds to affected homeowners
This problem was discovered last year driven by enquires by an independent compliance monitor who was hired by the bank as part of an 81 6 million settlement with the Justice Department
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MS | U S factory activity slips construction spending hits one year low | By Lucia Mutikani WASHINGTON Reuters U S manufacturing activity eased in July amid shrinking order backlogs and declining employment while an unexpected drop in construction spending in June suggested second quarter economic was probably even weaker than reported last week The Institute for Supply Management s ISM report on Monday also showed manufacturers ramping up production to an 18 month high even as factories continued to draw down inventories which some economists said pointed to moderate growth in the sector Tim Quinlan a senior economist at Wells Fargo NYSE WFC Securities in Charlotte North Carolina said it was counterintuitive for manufacturers to step up production while cutting payrolls and running down inventories given that production is a coincident indicator for the economy Perhaps the inventory drawdown has left stockrooms too spare resulting in production increases as orders pick up Quinlan said These crosscurrents are explained somewhat by the fact that we are late in the economic cycle and businesses are understandably cautious with all the various risk factors ISM said its index of national factory activity slipped 0 6 percentage point to a reading of 52 6 last month A reading above 50 indicates an expansion in manufacturing which accounts for about 12 percent of the U S economy The index has now increased for five straight months Manufacturers reported a moderate slowdown in new orders as well as export order growth Order backlogs contracted as did factory employment and inventories though the pace of destocking slowed Manufacturers also reported that their customers continued to view inventories as too high An outright drop in business inventories weighed on economic growth in the second quarter with gross domestic product rising at a tepid 1 2 percent annualized rate after increasing at a 0 8 percent pace in the first quarter Manufacturing remains constrained by the lagging effects of the dollar s rally and an oil price plunge between June 2014 and December 2015 which have hurt exports and undercut business spending With the dollar rising in recent months and oil prices slumping again economists see little upside for manufacturing HAND TO MOUTH GROWTH Any growth in manufacturing is of the hand to mouth variety rather than a vibrant expansion said Michael Montgomery U S economist at IHS Global Insight in Lexington Massachusetts With the recent strength in the dollar still not fully reflected in imports and exports yet we will need the data to be more convincing to call this anything more than almost stalled U S financial markets largely ignored the data The S P 500 index SPX hit an intraday record high before falling into negative territory Prices for U S government bonds fell while the dollar DXY rose against a basket of currencies In a separate report the Commerce Department said construction spending declined 0 6 percent to its lowest level since June 2015 after dipping 0 1 percent May June marked the third straight month of declines in outlays Economists polled by Reuters had forecast construction spending rising 0 5 percent in June after a previously reported0 8 percent drop in May Their June estimates were largely based on the government s assumptions for private residential and nonresidential construction spending in the advance GDP report The assumptions for June construction spending plugged into the advance GDP estimate were optimistic said Ted Wieseman an economist at Morgan Stanley NYSE MS in New York The government hasn t released all of their assumptions yet but these figures look consistent with second quarter GDP growth being revised down to 1 1 percent or 1 0 percent Weak spending on home building and nonresidential structures including gas and oil well drilling contributed to anemic growth in the last quarter In June construction spending was held down by a 0 6percent drop in private construction Outlays on private residential construction were unchanged as spending on both single family and multi family projects fell Private residential construction spending edged up 0 1 percent in May Spending on private nonresidential structures fell 1 3 percent in June the biggest decline since December 2015 after rising 0 4 percent in May Public construction spending slipped 0 6 percent in June dropping for a fourth straight month
Outlays on state and local government construction projects the largest portion of the public sector segment fell 0 5 percent the fourth consecutive monthly decline Federal government construction spending dropped 2 3 percent in June |
MS | Georgia man pleads guilty in insider trading hacking case | By Nate Raymond NEW YORK Reuters A Georgia man pleaded guilty on Tuesday to trading on inside information that authorities say was obtained by hackers through a worldwide scheme to steal information from services that distribute corporate news releases Leonid Momotok 48 pleaded guilty in federal court in Brooklyn to one count of conspiracy to commit wire fraud for his role in an alleged scheme that involved the theft of more than 150 000 unpublished press releases from Business Wire Marketwired and PR Newswire Momotok a Russian born naturalized U S citizen who according to court records lives in Suwanee Georgia and works in construction admitted to having executed trades based on information about certain stocks passed by Ukrainian hackers I profited from these trades Momotok told U S Magistrate Judge Ramon Reyes It was a bad judgment I am very sorry Under a plea agreement Momotok agreed to not appeal any prison sentence of nine years or fewer He is scheduled to be sentenced on Dec 9 Momotok is among 10 defendants including traders and Ukrainian hackers who have been criminally charged since August 2015 when he and four other individuals were arrested Using non public press releases stolen by overseas hackers Momotok and his group of traders engaged in a brazen scheme that was unprecedented in its scope impact and sophistication U S Attorney Robert Capers in Brooklyn said in a statement The U S Securities and Exchange Commission has separately civilly charged more than 40 people and entities for their roles in the scheme which it said resulted in more than 100 million of illegal profit from 2010 to 2015 Authorities said that traders including many with ties to Russia gave hackers shopping lists of releases they wanted to see in advance including quarterly results of public companies Prosecutors have said Momotok made at least 1 2 million in illegal profits executing trades in advance of news involving Panera Bread NASDAQ PNRA Co and DealerTrack Technologies Inc Four other people have pleaded guilty to charges pending in Brooklyn and New Jersey including three traders who like Momotok were arrested in August 2015 Charges remain pending against a fifth trader also arrested in August Vitaly Korchevsky a Morgan Stanley NYSE MS alumnus and hedge fund manager who is now a pastor in Pennsylvania He has pleaded not guilty Business Wire is a unit of Warren Buffett s Berkshire Hathaway Inc NYSE BRKa PR Newswire is a unit of Chicago based Cision Marketwired is owned by Nasdaq Inc
The case is U S v Korchevsky et al U S District Court Eastern District of New York No 15 cr 00381 |
MS | European money market reforms to have global impact Morgan Stanley | NEW YORK Reuters Proposed money market reforms in Europe could raise short term borrowing costs for banks around the world if some funds shun bank debt in favor of owning only government securities according to Morgan Stanley NYSE MS analysts This move has already occurred in the United States where a number of U S prime money funds have been converting to government only portfolios since late last year ahead of new regulations on the 2 7 trillion industry which go into effect on Oct 14 Government only funds are exempt from some provisions including floating per share price and fees imposed during times of market volatility which some corporate treasurers and institutional investors dislike Reduced demand from U S prime funds for commercial paper and certificates of deposit issued by banks has raised a benchmark on interbank borrowing costs to its highest in over seven years Morgan Stanley analysts Mikhail Levin and Jesper Rooth said in a report late Thursday that European money funds may respond similarly to their U S counterparts as European Union regulators seek to finalize rules to safeguard a sector that was roiled following the collapse of Lehman Brothers during the global financial crisis in September 2008 EU reform effort is likely to impact money markets globally as it is implemented over the next few years Levin and Rooth wrote The European money fund market is roughly a third smaller than that of the U S It is worth about 1 trillion euros with a majority of assets denominated in dollars and sterling they said Any move could be further exacerbated by the continued shrinking buyer base for short term financial paper the Morgan Stanley analysts said about possible conversion of some European prime money funds to government only funds
They noted there were differences between the final phase of U S money market reform and the proposed changes considered in Europe over the issues of floating share prices and certain fees which may not spur the level of fund conversion currently seen in the U S |
MS | Japan core machinery orders point to capex recovery ahead | By Stanley White
TOKYO Reuters Japanese machinery orders rose more than expected in June in a sign that companies are gradually becoming more willing to increase capital expenditure
Companies also expect core machinery orders a leading indicator of capital expenditure to rise in July September suggesting that business investment is starting to stabilize after a rocky performance in the previous quarter
Prime Minister Shinzo Abe has compiled a stimulus package that focuses on infrastructure which should support capital spending heading into next year but risks remain that overseas economic turmoil could curb business investment
There have been some concerns about overseas economies and a strong yen hurting earnings but capital expenditure seems to be holding up said Shuji Tonouchi senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS
Companies are certainly not becoming more cautious but we need to keep a close eye on the trend from here on
Core machinery orders rose 8 3 percent well ahead of the median estimate for a 3 1 percent increase Cabinet Office data showed on Wednesday
Manufacturers orders rose 17 7 percent while orders from the services sector rose 2 1 percent the data showed
Manufacturers surveyed by the Cabinet Office forecast that core orders will rise 5 2 percent in July September which compares with a 9 2 percent decrease in April June
Abe s cabinet last week approved an economic stimulus package with 13 5 trillion yen in fiscal measures as a precaution in case Britain s exit from the European Union undermines global economic conditions
Many policymakers and economists have said capital expenditure is crucial because it creates jobs and increases productivity both of which Japan s economy needs to be more vibrant
Forecasts for gains in machinery orders in July September suggests the economy could pick up from what is expected to be a subdued quarterly performance in April June
Data due on Monday is expected to show Japan s economic growth slowed in the second quarter weighed down by weak domestic demand and stagnant exports according to a Reuters poll
Gross domestic product GDP is forecast to expand at an annualized rate of 0 7 percent in April June the poll of 21 analysts showed following 1 9 percent annualized growth in the first quarter
This would be a quarterly expansion of 0 2 percent after a 0 5 percent rise in January March |
MS | Dollar drops as Fed rate rise prospects reassessed | By Anirban Nag LONDON Reuters The dollar fell against a basket of currencies on Wednesday as investors re evaluated whether the Federal Reserve will raise interest rates this year which also sent the higher yielding Australian dollar to its loftiest level since late April The U S dollar sagged against the euro and the yen after downbeat productivity data sapped some of the momentum it had gained from last week s robust jobs report U S Treasury yields US10YT RR fell after the productivity report suggested the economy may not be growing as quickly as anticipated prompting investors to cut long term inflation expectations According to CME s Fedwatch investors have trimmed chances of a rate rise in December 2016 L1N1AQ0EN The dollar was down 0 6 percent at 101 28 yen having gone as high as 102 66 on Monday on the strong non farm payrolls data The euro rose 0 5 percent to 1 1173 touching a 5 day high of 1 1184 The dollar index DXY dropped 0 6 percent to 95 577 The release of the third consecutive decline in quarterly U S productivity the worst run since at least 1980 does not bode well for the prospects for the dollar Morgan Stanley NYSE MS head of currency strategy Hans Redeker said The Australian dollar advanced to a more than three month peak of 0 7729 buoyed this week by Australia s relatively high yields and stronger investor appetite for risk Part of the Australian dollar s resilience is the lack of follow through in pricing for a Fed hike in September limiting the U S dollar s gains analysts at Westpac said in a note They recommended investors to buy the Australian dollar The U S dollar s weakness also gave struggling sterling a lift The pound was up 0 5 percent at 1 3061 recovering from 1 2956 struck on Tuesday its lowest since July 11 The pound took a knock on Tuesday after Bank of England policymaker Ian McCafferty said more monetary easing was likely to be needed if the UK s economic decline worsened In European trade attention briefly turned to the Norwegian crown The crown scaled its highest against the euro in more than a month after inflation rose more than expected in July sapping expectations of interest rate cuts in the near term from the Norges Bank Data showed July core inflation rose to 3 7 percent from a year ago beating expectations of a 3 1 percent rise For the month core inflation rose 0 7 percent The euro fell 0 8 percent to 9 2575 crowns EURNOK D4 its lowest since July 5 and down from around 9 33 beforehand
Earlier Nordea Markets said the Norwegian policy rate had bottomed out at 0 50 percent and the central bank was no longer expected to cut rates in September |
JPM | Blown Earnings Calls Started Bull Market And One Day Will End It | Bloomberg As the U S equity bull market heads into its 10th year with earnings underpinning the case for buying consider this at the most important turning points for stocks in the past decade profit projections have been laughably wrong
Take the start of this bull market nine years ago today Banks were failing the economy was shrinking and stocks had just suffered their worst year in seven decades Equity forecasters were appropriately grim predicting a double digit decline in corporate income that would ve ranked among the worst ever seen Instead earnings rose
Step back a bit further to October 2007 when shares had gained for five straight years Analysts were projecting a solid increase in S P 500 Index profits for the fateful year of 2008 They were off by 41 percentage points
Of course estimates aren t always that wrong But assuming they re reliable isn t a safe bet either It s a point worth heeding now because Donald Trump s tax cuts and an uptick in global growth have analysts boosting earnings estimates at the fastest pace on record And that profit backdrop has been repeatedly cited by strategists from JPMorgan Chase Co NYSE JPM s Dubravko Lakos Bujas to Jonathan Golub at Credit Suisse SIX CSGN Group AG as reason to buy the dip
People continue to draw a straight line on the path that we re on and we know the world works in cycles and is not necessarily linear said Jerry Braakman chief investment officer of First American Trust in Santa Ana California where he helps oversee about 1 3 billion Analyst expectations are fine if the trend continues but when you have a significant change growth is overvalued
Volatility Returns
Last month s correction the biggest in two years occurred side by side with the unprecedented stretch of analyst upgrades Volatility is returning after a torpid 2017 as Trump whose 1 5 trillion tax overhaul was greeted with record equity inflows in January turns toward a protectionist stance on trade The Federal Reserve cheerleader of gains that have added 22 trillion to American equity values since 2009 is becoming a less reliable ally too
Those shifts are forcing investors to reassess the durability of the bull market according to Joseph Tanious a senior investment strategist at Bessemer Trust in Los Angeles which oversees more than 100 billion
Whether it s fears of a trade war whether it s inflation starting to pick up all these things add to anxiety which ultimately leads to greater levels of volatility said Tanious We had a pretty amazing ride over the last nine years Statistically it s a very long cycle Understandably investors get nervous
The S P 500 climbed 0 9 percent to 2 764 47 as of 10 35 a m Friday after labor department data showed inflation fears stirred by last month s jobs report may have been overdone While the U S added more workers than expected in February average hourly earnings increased 2 6 percent from a year earlier missing expectations for a 2 8 percent gain
Read more about Trump and the Fed s recent impact on stocks
The bull market is just five months away from becoming the longest ever and at 21 percent the consensus forecast for 2018 profit growth would top all other years during the rally except for one But Wall Street s record of predictive success doesn t exactly instill confidence From 2007 through 2017 the actual pace of S P 500 earnings per share growth was on average 6 percentage points lower than what analysts had expected at the end of the previous year according to data compiled by Bloomberg
Moreover history shows that earnings matter less to stock prices when multiples are already high and inflation is rising Ie in situations like now
Jim Paulsen chief investment strategist at Leuthold Group has found eight instances since 1950 where profits surged and stock prices didn t A common theme among them stretched valuations and a low unemployment rate One explanation is that earnings lose the power to drive up share prices when stocks are expensive and the risk of an overheating economy as evidenced by a tight labor market is rising
Both concerns are relevant today with the S P 500 s price earnings ratio hovering around the highest level since the dot com era and the country s jobless rate holding at just 4 1 percent
Eras of robust earnings growth do not always ensure a good stock market Paulsen wrote in a note in late February With most over the moon about what appears to be a tremendous earnings year perhaps it may make sense to curb your enthusiasm about the stock market
Another hidden risk lies in the slope of the S P 500 earnings trajectory While finding fault with bumper growth may seem like looking a gift horse in the mouth the phenomenon is not necessarily good news
Ned Davis Research grouped S P 500 earnings growth since 1927 into five brackets and found that unless it s too bad to ignore down an annual 25 percent or more income growth tends to have an inverse relationship with market returns That is the faster profits grow the worse stocks perform
While it sounds counter intuitive it makes sense in that markets always look ahead Once the good news on profits is priced in that doesn t leave much room for stocks to keep going
It seems too good you can t model long term 20 percent growth Lamar Villere portfolio manager of the Villere Balanced Fund who manages 2 1 billion said in an interview at Bloomberg s New York headquarters People freak out and can t believe that can go on indefinitely |
JPM | Inmarsat slips after substantial dividend cutback | Inmarsat IMASY 9 5 has tumbled today after slashing its dividend despite an earnings report that saw revenues arrive on the high side of expectations The company set a final dividend of 0 12 share reducing its annual dividend to 0 20 vs a recent 0 50 in order to make sure it had enough resources to support delivery of a leading position in IFC through the current infrastructure investment period That s rebased meaningfully JPMorgan NYSE JPM says turning its focus to 2018 guidance that reassuringly backs consensus The firm is Neutral on Inmarsat Now read |
JPM | Survival of the fittest in the payments business | Zelle a payments startup has been integrated into 60 of its participating banks mobile apps providing rapid transfers of payments between users who have accounts at any of those institutions The other better known payments startup Venmo has been on its own growth path ever since being acquired by Paypal in 2014 JPMorgan NYSE JPM CFO Marianne Lake recently said that the bank processed 41B of Zelle transactions in 2017 which is more than Venmo in total Venmo and Zelle are two very different animals responded PayPal PYPL 0 2 CEO Dan Schulman at a separate event that same day Venmo is used more frequently for smaller transactions averaging around 60 while Zelle s average transaction size is 300 he added The other major difference is that Venmo makes money from merchants accepting it as a form of payment vs Zelle is provided by banks as a free service to their customers Banks look set to remain the driving force in payments as Venmo takes over small transfers Zelle swallows slightly larger ones but credit and debit cards keep the lions share of the payments business |
JPM | Shell Eni preempt any U S probe over Nigeria with filings | By Libby George LONDON Reuters Oil giants Royal Dutch Shell LON RDSa and Eni have voluntarily filed to U S authorities internal probes into how they acquired a giant field in Nigeria as the companies seek to fight corruption allegations in Europe and Africa The filings to the U S Department of Justice DOJ and the Securities and Exchange Commission SEC do not mean U S authorities are investigating Shell or Eni But the move shows the companies are trying to preempt questions from the United States as they face one of the oil industry s biggest ever graft trials in Italy to begin in May in Milan a pending trial in Nigeria and an investigation in the Netherlands The case revolves around the purchase of a huge block off oil rich Nigeria known as OPL 245 which holds an estimated 9 billion barrels in reserves Italian prosecutors allege that bribes were paid in an effort to secure rights to the block in 2011 A number of top executives from both companies including Eni Chief Executive Claudio Descalzi and former Shell Foundation Chairman Malcolm Brinded will face trial Under Italian law a company can be held responsible if it is deemed to have failed to prevent or attempt to prevent a crime by an employee that benefited the company Both companies shares are traded on U S stock exchanges putting their foreign dealings in the scope of U S authorities Shell and Eni on behalf of subsidiaries in 2010 entered deferred prosecution agreements with the DOJ over separate Nigerian corruption allegations Those pacts dismissed charges after a certain period in exchange for fines and an agreement to fulfill a number of requirements They concluded in 2013 and 2012 respectively A company s disclosure of alleged foreign corruption to both the SEC and the DOJ in the U S typically means the company believed U S authorities needed to be made aware of this and both agencies have the authority to prosecute under the Foreign Corrupt Practices Act or FCPA said Pablo Qui ones executive director of the New York University School of Law program on corporate compliance and enforcement Qui ones previously worked as chief of strategy policy and training at the DOJ s criminal fraud section a role that included helping to develop FCPA enforcement policy The SEC and the DOJ declined to comment on the company disclosures or whether they were looking into any allegations surrounding the block Eni noted its disclosure in an SEC filing in which it said no evidence of wrongdoing on Eni side were detected Shell has said publicly that it submitted the investigation to U S authorities and to Britain s Serious Fraud Office Shell and Eni deny any wrongdoing They say their payments for the block a total of 1 3 billion were transparent legal and went directly into an escrow account controlled by the Nigerian government The companies and legal experts say the trial will last more than a year with potential appeals stretching several years beyond that The risk for companies is of a prolonged period of exposure to open court allegations from a state prosecutor of impropriety Anthony Goldman of Nigeria focused PM Consulting said That will be painful and damaging The Milan prosecutor charges that roughly 1 billion of the payments were funneled to a Nigerian company called Malabu Oil and Gas which had a disputed claim on the block and former oil minister Dan Etete who British and U S courts have said controlled Malabu Reuters has been unable to reach Etete or Malabu for comment Shell has since said it knew some of the money would go to Malabu to settle its claim though its own due diligence could not confirm who controlled the company Eni said it never dealt with Etete or knew he controlled the company but that the government promised to settle all other claims on the block as part of their deal If the evidence ultimately proves that improper payments were made by Malabu or others to then current government officials in exchange for improper conduct relating to the 2011 settlement of the long standing legal disputes it is Shell s position that none of those payments were made with its knowledge authorisation or on its behalf Shell said in a statement CONTROL AT RISK The proceedings have also brought together investigators in several countries with authorities in Nigeria and the Netherlands sending information to Milan A Dutch anti fraud team in 2016 raided Shell offices as part of the investigation and a Dutch law firm has asked prosecutors to consider launching a criminal case in the Netherlands I m not aware of many cases where this many jurisdictions have been at work for so long helping each other out The amount of cooperation is very unusual said Aaron Sayne of the Natural Resource Governance Institute a non profit group that advises countries on how to manage oil gas and mineral resources A case by Nigeria s financial watchdog the Economic and Financial Crimes Commission against defendants including the former attorney general ex ministers of justice and oil and various senior managers current and former from Shell and Eni will continue in June There has also been at least one effort to take away the asset Experts say it is worth billions and Shell has spent millions developing it Eni intends to make a final investment decision this year on developing the block and said in corporate filings that the asset has a book value of 1 2 billion euros 1 5 billion The Italian court does not have the ability to rescind rights to the block and Nigerian oil minister Emmanuel Ibe Kachikwu has said the companies should continue to develop it But in a lawsuit filed by the Nigerian government against JPMorgan NYSE JPM in London for the U S bank s role in transferring money from the deal it called the agreement that facilitated Shell and Eni s purchase unlawful and void A JPMorgan spokeswoman previously said the firm considers the allegations made in the claim to be unsubstantiated and without merit Additionally a Nigerian court last year briefly ordered the seizure of the block That decision was later overturned and Shell and Eni say they are not worried about losing the asset But the ruling and the language in the government s suit against JPMorgan underscore the risk It s a nice stable asset that could produce a lot of oil for a long time Sayne said
1 0 8127 euros |
JPM | Activist investor sees Diebold Nixdorf shares doubling with new CEO | By Svea Herbst Bayliss BOSTON Reuters Activist investor Alexander Roepers recently boosted his firm s stake in Diebold Nixdorf Inc and said the share price could double within 18 months now that there is a new chief executive at the helm of the automatic teller machine maker Roepers 1 2 billion Atlantic Investment Management owns 6 1 million shares or 8 percent of the North Canton Ohio based company after buying more stock in February when Diebold traded near 15 a share a recent regulatory filing shows Atlantic first invested in Diebold Nixdorf in late 2016 after the U S company acquired Germany s Wincor Nixdorf It bought a 5 1 percent stake when the stock was trading closer to 23 an earlier filing shows After watching his investment dip last year Roepers whose taste runs to old economy companies and working with management behind the scenes instead of making splashy public demands now expects to see gains The newly combined company is now set up for success said the Dutch born investor who launched Atlantic in 1988 almost 20 years after the first ATM was installed He said the share price could increase by 50 percent to 100 percent within 18 months from its current level of around 17 The stock closed at 17 45 on Tuesday One reason for optimism may be Gerrard Schmid who was named chief executive in February He replaced Andreas Mattes who exited late last year after running the company since 2013 There is a new CEO and we are supportive of him Roepers said Mattes oversaw the 1 8 billion takeover of Wincor Nixdorf in 2016 but Diebold Nixdorf reported a loss in the third quarter last year Its stock price fell from 34 64 in December 2014 to 16 35 in December 2017 New U S tax cuts turning into windfalls for banks and some of the funds are being earmarked for capital investments which could help Diebold JPMorgan Chase Co NYSE JPM for example said in January that it plans to open 400 new U S branches citing both tax breaks and an improved business climate for the expansion When they open the new branches they won t be putting in old ATMs Roepers said Also older ATMs are being upgraded to appeal to customers including millennials who like the new machines sleeker look and their ability to dispense more cash at one time Atlantic s Cambrian Fund Ltd returned 14 12 percent last year and the Cambrian Global Fund gained 17 percent The funds have returned an average 16 percent and 12 percent a year over their lifetimes and the Cambrian Global Fund is up 5 percent this year |
C | Big U S banks engage universities to fill unglamorous banking jobs | By Olivia Oran Reuters Banks are grappling with how to recruit young people into businesses like trade finance and cash management which are increasingly important drivers of revenue but perceived to be un sexy compared with investment banking and trading At Citigroup Inc N C the treasury and trade solutions group is seen as a jewel with stable revenue and high return on equity The business which helps manage the way large companies make payments generated double the revenue that investment banking did in 2016 Citi Chief Executive Mike Corbat at a July investor day called the business the backbone of Citi s institutional business noting it had grown year over year for three years despite lower rates and slower economic activity Yet attracting new hires to the unit is not easy because students do not know what exactly the business does said Bill Fisse who runs Citi s global campus recruiting Everyone knows what investment banking is because there is a traditional path and a skill set but very few people know about this he said But the truth is our ability to move cash and finance trade is as important as an advisory situation which may happen once or twice a year So should the business appeal to more people Yes The bank last year launched a partnership with Rutgers University in New Jersey that aims to teach students about the ins and outs of cash management through a case study a field trip to Citi s downtown New York offices and mentorships with bank employees It s not the sexy area of banking but students walked away from the class saying I didn t know it would be so interesting said Ron Richter a Rutgers professor who teaches a class on working capital management He helped establish the Citi tie up alongside Michael Fossaceca Citi s head of treasury and trade solutions in North America Citi is not the only bank taking this tack JPMorgan Chase Co N JPM is also working with professors to develop classes around certain business lines but a spokeswoman did not give specifics The need for talent in treasury services is growing In 2016 banks globally generated 209 billion in revenue from transaction banking which encompasses both cash management and trade finance compared with the 172 billion brought in by their trading units according to industry tracker Coalition Halim Amezquita a junior at Rutgers said she is considering a career in treasury after taking Richter s class although working in wealth management is her ultimate goal I didn t know much about treasury before but now I ve been introduced to a side of finance I hadn t considered she said It just wasn t mentioned before in any course I had taken Citi executives say they are in talks with other universities for similar partnerships did not give specifics Jim Kaitz the president of the Association for Financial Professionals which represents the treasury and finance industry said his organization is also holding discussions with universities at the undergraduate and MBA level about teaching students the skills they need for a career in trade finance
There s definitely a skills gap issue when students come out of traditional finance programs and they aren t prepared for treasury jobs Kaitz said But everyone can t go to Wall Street or Silicon Valley they need to look at alternatives |
C | Premarket analyst action healthcare | Sucampo Pharmaceuticals NASDAQ SCMP initiated with Buy rating and 43 157 upside price target by Nomura Securities Shares up 4 premarket on light volume Akebia Therapeutics NASDAQ AKBA initiated with Overweight rating and 26 70 upside price target by Piper Jaffray Novavax NASDAQ NVAX downgraded to Neutral by Citigroup NYSE C Now read |
C | This Is Why Citigroup C Is A Great Dividend Stock | Getting big returns from financial portfolios whether through stocks bonds ETFs other securities or a combination of all is an investor s dream However when you re an income investor your primary focus is generating consistent cash flow from each of your liquid investments
While cash flow can come from bond interest or interest from other types of investments income investors hone in on dividends A dividend is that coveted distribution of a company s earnings paid out to shareholders and investors often view it by its dividend yield a metric that measures the dividend as a percent of the current stock price Many academic studies show that dividends account for significant portions of long term returns with dividend contributions exceeding one third of total returns in many cases
Citigroup in Focus
Headquartered in New York Citigroup C is a Finance stock that has seen a price change of 22 19 so far this year The U S bank is currently shelling out a dividend of 0 45 per share with a dividend yield of 2 83 This compares to the Banks Major Regional industry s yield of 2 9 and the S P 500 s yield of 2 03
Taking a look at the company s dividend growth its current annualized dividend of 1 80 is up 16 9 from last year Over the last 5 years Citigroup has increased its dividend 4 times on a year over year basis for an average annual increase of 145 49 Any future dividend growth will depend on both earnings growth and the company s payout ratio a payout ratio is the proportion of a firm s annual earnings per share that it pays out as a dividend Citigroup s current payout ratio is 26 This means it paid out 26 of its trailing 12 month EPS as dividend
Looking at this fiscal year C expects solid earnings growth The Zacks Consensus Estimate for 2019 is 7 60 per share representing a year over year earnings growth rate of 14 29
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages investors like dividends for a variety of different reasons However not all companies offer a quarterly payout
Big established firms that have more secure profits are often seen as the best dividend options but it s fairly uncommon to see high growth businesses or tech start ups offer their stockholders a dividend Income investors have to be mindful of the fact that high yielding stocks tend to struggle during periods of rising interest rates With that in mind C presents a compelling investment opportunity it s not only an attractive dividend play but the stock also boasts a strong Zacks Rank of 2 Buy |
JPM | Guide To JPMorgan Investor Growth Income A Fund ONGIX | JPMorgan NYSE JPM Investor Growth Income A a Zacks Rank 2 Buy seeks long term capital appreciation and growth of income by investing primarily in a diversified group of One Group mutual funds that invest primarily in equity securities
This Mid Blend fund as of the last filing allocates their fund in three major groups Large Value Large Growth and Intermediate Bond Further as of the last filing JPMORGAN INTREPID AMERICA JPMORGAN US EQUITY FUND and JPMORGAN CORE BOND FUND were the top holdings for ONGIX
The JPMorgan Investor Growth Income A fund managed by carries an expense ratio of 0 41 Moreover ONGIX requires a minimal initial investment of 500
ONGIX has a history of positive total returns for over 10 years Specifically the fund s returns over the 3 5 year benchmarks 3 year 6 06 and 5 year 6 46 To see how this fund performed compared in its category and other 1 and 2 Ranked Mutual Funds
ONGIX s performance as of the last filing when compared to funds in its category was in the top 69 in 1 year
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JPM | Mid America Apartments Is Buying Post Properties For 3 88 Billion Stock Down Almost 6 | On Monday shares of real estate investment trust Mid America Apartment Communities Inc NYSE MAA are falling down almost 6 in morning trading after the company announced it would acquire Post Properties Inc NYSE PPS an apartment complex developer for roughly 3 88 billion
PPS stock was also moving in morning trading but in the opposite direction As of 10 42 AM EST it was up almost 8 5
The Wall Street Journal originally reported the merger which will create the biggest publicly traded multi family apartment real estate investment trust REIT forming an entity with 317 total properties and 105 000 units
Right now Mid America owns just under 80 000 units in 15 states while Post Properties has about 24 000 apartment units in over 60 communities
The newly combined company will have a market cap of about 17 billion with the biggest share of its operating income coming from Charlotte NC Dallas TX and Atlanta GA Under the terms of the deal shareholders of Post Properties will receive 0 71 newly issued Mid America shares for each share that they own
According to which cites the Journal Apartment managers have benefited from a recovery in the housing market as rising home prices have turned many would be buyers into renters At the same time growth in rents has begun to slow creating an incentive for mergers that reduce costs
The merger must still be approved by shareholders of both Mid America and Post Properties but they said the deal is expected to be completed in the fourth quarter
Mid America will continue to trade under the ticker MAA
JPMorgan NYSE JPM is advising Post Properties while Citigroup NYSE C Global Markets is Mid America s financial advisor MID AMER APT CM Price Consensus and EPS Surprise |
MS | NYMEX crude up in Asia as investors eye supply picture API data | Investing com Crude oil prices edged higher in Asia on Tuesday with investors cautious after bearish supply forecasts unsettled the market overnight and ahead of industry data on U S stockpiles
The American Petroleum Institute will release its estimates of U S crude and refined stockpiles late Tuesday with the U S Department of Energy to release its own more closely watched figures on Wednesday
On the New York Mercantile Exchange WTI crude for September delivery rose 0 09 to 43 17 a barrel
Overnight crude futures fell sharply on Monday slumping to a fresh three month low as continuing fears related to global oversupply and a resurgent U S Dollar remained in focus
On the Intercontinental Exchange ICE Brent crude for October delivery wavered between 44 98 and 46 27 a barrel before settling at 45 17 down 0 92 or 1 93 on the day Both the international and U S benchmarks for crude extended losses on Monday after tumbling by approximately 3 last week
In Monday s session crude fell to its lowest level since late April as investors responded to further signs of a supply glut on global energy markets
Over the weekend analysts from Morgan Stanley NYSE NYSE MS issued stark warnings on continued oversupply among refined products as gasoline stocks swelled to a five year high It came after gasoline inventories nationwide rose by 0 91 million barrels last week following a 4 1 million spike in distillate fuel stockpiles over the previous week representing the largest weekly build in more than five months The latest trends have exacerbated fears that refineries will slow their pace of oil purchases in the coming weeks dragging down the cost of crude
Crude oil demand is trending below refined product demand for the first time in three years Morgan Stanley wrote Refineries are the true consumer of crude oil and crude oil demand is ultimately more important than aggregate refined product demand for oil balances Given the oversupply in the refined product markets fading refinery margins and economic run cuts we expect crude oil demand to deteriorate further over the coming months
As a result the analysts predicted global crude demand will rise modestly by 625 000 barrels per day in 2016 far below forecasts from the International Energy Agency IEA of 1 3 million bpd for the year WTI crude has rallied from a 13 year low of 26 05 a barrel in mid February in part due to improved signs that a massive supply demand imbalance had begun to level
Elsewhere investors reacted to developments out of Libya on Monday after Petroleum Guard Commander PFG Ibrahim Jathran announced that the national oil guard is ready to halt a lengthy blockade of three main ports in the Northern African nation
The statement came several days after officials at Libya s National Oil Corporation NOC told the United Nations that sending payments to Jathran could set a terrible precedent in encouraging militia groups to seize control of oil facilities throughout the country in attempts to receive significant bribery payments from the government Attempts from Jathran s forces to close numerous pipelines and oil fields around Libya have reportedly cut crude output to less than a quarter of the level from when former president Muammar Gaddafi was overthrown in 2011 |
MS | Brent NYMEX gain in Asia as investors look ahead to API estimates | Investing com Crude oil prices held gains in Asia on Tuesday with investors cautious after bearish supply forecasts unsettled the market overnight and ahead of industry estimates on U S stockpiles
The American Petroleum Institue will release its estimates of U S crude and refined stockpiles late Tuesday with the U S Department of Energy to release its own more closely watched figures on Wednesday
On the New York Mercantile Exchange WTI crude for September delivery rose 0 23 to 43 23 a barrel On the Intercontinental Exchange ICE Brent crude for October delivery gained 0 33 to 45 28 a barrel
Overnight crude futures fell sharply on Monday slumping to a fresh three month low as continuing fears related to global oversupply and a resurgent U S Dollar remained in focus
In Monday s session crude fell to its lowest level since late April as investors responded to further signs of a supply glut on global energy markets
Over the weekend analysts from Morgan Stanley NYSE NYSE MS issued stark warnings on continued oversupply among refined products as gasoline stocks swelled to a five year high It came after gasoline inventories nationwide rose by 0 91 million barrels last week following a 4 1 million spike in distillate fuel stockpiles over the previous week representing the largest weekly build in more than five months The latest trends have exacerbated fears that refineries will slow their pace of oil purchases in the coming weeks dragging down the cost of crude
Crude oil demand is trending below refined product demand for the first time in three years Morgan Stanley wrote Refineries are the true consumer of crude oil and crude oil demand is ultimately more important than aggregate refined product demand for oil balances Given the oversupply in the refined product markets fading refinery margins and economic run cuts we expect crude oil demand to deteriorate further over the coming months
As a result the analysts predicted global crude demand will rise modestly by 625 000 barrels per day in 2016 far below forecasts from the International Energy Agency IEA of 1 3 million bpd for the year WTI crude has rallied from a 13 year low of 26 05 a barrel in mid February in part due to improved signs that a massive supply demand imbalance had begun to level
Elsewhere investors reacted to developments out of Libya on Monday after Petroleum Guard Commander PFG Ibrahim Jathran announced that the national oil guard is ready to halt a lengthy blockade of three main ports in the Northern African nation
The statement came several days after officials at Libya s National Oil Corporation NOC told the United Nations that sending payments to Jathran could set a terrible precedent in encouraging militia groups to seize control of oil facilities throughout the country in attempts to receive significant bribery payments from the government Attempts from Jathran s forces to close numerous pipelines and oil fields around Libya have reportedly cut crude output to less than a quarter of the level from when former president Muammar Gaddafi was overthrown in 2011 |
MS | Yen at two week high as Japanese stimulus expectations dialed back | By Anirban Nag LONDON Reuters The yen hit a two week high against the euro and rose more than 1 percent against the dollar on Tuesday as traders dialed back expectations of how much new stimulus Japanese authorities will inject into an ailing economy Most economists surveyed by Reuters expect the Bank of Japan to expand its asset purchases and cut rates further into negative territory at its two day meeting that ends on Friday Meanwhile the government is compiling a spending package that some sources have estimated could be worth up to 20 trillion yen Direct fiscal stimulus may be much lower with a Nikkei report on Tuesday citing a figure of around 6 trillion yen over the next few years The total size of the package could be announced as soon as Aug 2 Nikkei said Direct stimulus of 6 trillion yen would be double the amount initially planned but would fall short of market expectations analysts said There is some position unwinding going on with investors toning down expectations of how much fiscal stimulus will be provided said Yujiro Goto currency strategist at Nomura We are also seeing not much pressure from the Japanese government on the BOJ to ease All this is helping the yen The dollar slid 1 7 percent against the yen to 103 995 its lowest since July 14 while the euro skidded 1 5 percent to 114 465 yen EURJPY its lowest since July 12 The yen has weakened in the past few weeks on growing expectations that Japanese authorities would provide both fiscal and monetary stimulus to kick start inflation Some had been hoping for helicopter money where the central bank would underwrite government debt though policymakers have denied this STERLING SLAMMED Sterling shed 2 percent against the yen GBPJPY and hit a two week low against the euro EURGBP D4 after Bank of England policymaker Martin Weale said he had dropped his opposition to policy easing and now favored immediate stimulus The pound also fell 0 5 percent against the dollar to trade at 1 3080 When the previously hawkish BoE MPC member Martin Weale turns dovish market participants better listen said Hans Redeker head of currency strategy at Morgan Stanley NYSE MS Meanwhile the Federal Reserve is expected to stand pat on policy at its meeting that ends on Wednesday Fed fund futures on Monday indicated that the market sees nearly no chance of a rate hike this week But the chances of a December hike rose to 56 percent up from 48 percent on Friday
The dollar index which tracks the currency against a basket of six major rivals was down 0 3 percent to 97 003 DXY off a high of 97 569 its loftiest peak since March |
MS | Yen surges oil dips with eyes on central banks | By Patrick Graham LONDON Reuters A buoyant yen and a fall in oil prices to their lowest since early May put stock markets on the defensive on Tuesday as investors position for central bank meetings in the United States and Japan The rise in the yen traditionally a safe haven for capital when investors are concerned by political and economic risks may be largely due to a recalibrating of expectations for the scale of new economic stimulus from the Bank of Japan on Friday Japanese officials have quelled speculation of it dropping outright helicopter money into the economy but even expectations for the scale of extra buying of financial assets with newly minted yen have cooled this week A Nikkei report said Japan s government was likely to double the amount of direct fiscal outlays into the economy over the next few years to 6 trillion yen 57 billion But that figure was viewed as too modest to engender a return of inflation that would weaken the yen There had been too many test balloons concerning Japan s upcoming monetary and fiscal easing programs over recent weeks analysts from Morgan Stanley NYSE MS said in a morning note While such a 6 trillion yen package would still double the finance ministry s real fiscal spending estimates it was far less than markets were hoping for The yen rose around 1 5 percent to 114 88 yen per euro and 104 35 per dollar Japan s stock market which tends to fall as the yen rises fell 1 4 percent N225 After a mixed start Europe s major markets were all lower FTEU3 hauled down by another half percent fall in oil prices which took Brent crude to its lowest since May 10 MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS edged up 0 7 percent to reach its highest in almost a year aided by gains in China and South Korea WEALE S U TURN Stock markets have recovered well from the shock of Britain s vote last month to leave the European Union largely on the presumption that central banks would wade in with more stimulus to offset any blow to still meager global growth While the doubts over the Bank of Japan may undermine that Bank of England policymaker Martin Weale last week an opponent of cutting interest rates said his view had changed on the back of a poor batch of purchasing managers surveys That strengthened expectations of easing of UK monetary policy next month and sent the pound to a two week low against the euro EURGBP By contrast Wednesday s June rate decision by the Federal Reserve is expected to provide a slightly more optimistic message that will support expectations of a rise in U S rates by the end of the year Such a message from the Fed would be likely to support the dollar already trading close to four month highs against a basket of currencies while cooling appetite for stocks and other higher risk investments There seems to be an expectation that perhaps this week s Federal Reserve rate meeting could well come across as slightly more hawkish than markets were pricing a week ago CMC Markets analyst Michael Hewson said This may help explain the slow rise of the dollar not only against its main counterparts but also against commodity prices
NYMEX crude CLc1 was quoted almost 1 percent lower at 42 72 while Brent LCOc1 fell more than half a percent to 44 44 a barrel |
MS | U S crude touches down to fresh 3 month lows ahead of API report | Investing com U S crude futures fell to fresh 3 month lows ahead of the American Petroleum Institute s latest weekly inventory report on Tuesday evening as a strong dollar and persistent concerns of global oversupply continued to weigh
On the New York Mercantile Exchange WTI crude for September delivery traded between 42 38 and 43 37 a barrel before closing at 42 83 down 0 25 or 0 58 on the session At session lows the front month contract for U S crude fell to its lowest level since April 20 On the Intercontinental Exchange ICE brent crude for October delivery wavered between 44 54 and 45 34 a barrel before settling at 45 19 up 0 06 or 0 13 on the day
Crude futures have tumbled roughly 18 since hitting 10 month highs in early June
Energy analysts continue to express widespread concerns related to the oversupply in crude and refined product even as inventories retreat from near record highs Investors will receive further signals on Tuesday after the bell when the API releases its weekly crude stockpile report for the week ending on July 22 Separately Wednesday s government report could show that crude stockpiles fell by 2 3 million barrels for the week representing the 10th consecutive weekly decline in inventory levels nationwide Nevertheless the current stockpile total still remains above the five year average by approximately 100 million barrels despite the recent drawdown
Analysts also expect gasoline inventories to rise by 675 000 barrels and distillate fuel inventories to tick up by 700 000 on the week Earlier this month distillate fuel inventories which include heating and diesel oil spiked by 4 1 million barrels for the week ending on July 8 representing the largest weekly build in more than five months
While consumers continue to spend at the pump at a steady rate they haven t traveled enough over the key summer driving season to push gasoline inventories dramatically lower In terms of output crude production in the U S ticked up to 8 494 million barrels per day last week as oil rigs nationwide continue to creep back online Globally supply levels remain high as Iraq and Libya ramp up exports in the coming weeks As a result analysts from Morgan Stanley NYSE MS predict that oil could drop as low as 35 a barrel before the end of this year
In February U S crude futures touched down to a 13 year low at 26 05 a barrel Although crude completed a determined recovery in the five months since oil prices are still down substantially from their peak of 115 a barrel in June 2014
The U S Dollar Index which measures the strength of the greenback versus a basket of six other major currencies was relatively flat on Tuesday hovering at 97 16 in U S afternoon trading The index remains near four month highs Over the last few weeks the dollar has risen sharply against the Japanese Yen and British Pound amid signs of potential easing from both the Bank of Japan and Bank of England
Dollar denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates |
MS | NYMEX Brent slightly weaker in Asia after bearish API estimates | Investing com Crude prices eased in Asia on Wednesday as industry data on U S stockpiles was bearish
Estimates from the American Petroleum Institute showed a drop of 800 000 barrels last week short of an expected decline of more than 2 million barrels while the figures showed supplies at the oil storage hub at Cushing Okla rose by a more than expected 1 4 million barrels
Separately Wednesday s government report could show that crude stockpiles fell by 2 3 million barrels for the week representing the 10th consecutive weekly decline in inventory levels nationwide Nevertheless the current stockpile total still remains above the five year average by approximately 100 million barrels despite the recent drawdown
On the New York Mercantile Exchange WTI crude for September delivery eased 0 09 to 42 88 Brent crude eased 0 15 to 45 16 a barrel
Overnight U S crude futures fell to fresh 3 month lows
At session lows the front month contract for U S crude fell to its lowest level since Crude futures have tumbled roughly 18 since hitting 10 month highs in early June Energy analysts continue to express widespread concerns related to the oversupply in crude and refined product even as inventories retreat from near record highs
Analysts also expect gasoline inventories to rise by 675 000 barrels and distillate fuel inventories to tick up by 700 000 on the week Earlier this month distillate fuel inventories which include heating and diesel oil spiked by 4 1 million barrels for the week ending on July 8 representing the largest weekly build in more than five months
While consumers continue to spend at the pump at a steady rate they haven t traveled enough over the key summer driving season to push gasoline inventories dramatically lower In terms of output crude production in the U S ticked up to 8 494 million barrels per day last week as oil rigs nationwide continue to creep back online
Globally supply levels remain high as Iraq and Libya ramp up exports in the coming weeks As a result analysts from Morgan Stanley NYSE NYSE MS predict that oil could drop as low as 35 a barrel before the end of this year |
MS | Post Fed markets turn attention to U S Q2 GDP | Investing com After the Federal Reserve Fed left interest rates unchanged Wednesday in a widely expected move market focus was turning towards the publication of the U S second quarter Q2 gross domestic product GDP out on Friday
With the door now closed on the second quarter the advanced GDP data will measure how the U S economy fared in the April June period Consensus expected an expansion of 2 6 up sharply from the first quarter growth of 1 1
But analysts had begun to ratchet down their expectations in light of the worse than expected durable goods data out on Wednesday
Both Morgan Stanley NYSE MS and JP Morgan cut their outlook to 2 2 from the prior 2 3 after the data was released due to the slightly lower outlooks for fixed investment and inventories
In a similar move based on the same reasoning the Atlanta Fed reduced its Q2 GDP growth estimate to 2 3 from the prior 2 4
The New York Fed s last forecast was for growth of 2 2 but the regional bank had not updated its projection since July 15 because it considered it to be inconsistent with the blackout period in the run up to the Fed s policy meeting Its next update will not occur until after the advance GDP data is released and will most likely focus on projections for the third quarter which had been 2 6
In the meantime Thursday could see another shift in expectations for Q2 GDP with the publication of the June goods trade data at 12 30GMT or 8 30AM GMT
Beyond the second quarter growth numbers on Friday markets will keep a close eye on numbers directly related to the Fed s dual mandate
Next week the Fed s favorite inflation gauge the core PCE price index for June will be released on Tuesday followed by the July employment report with nonfarm payrolls on Friday |
MS | Atlanta Fed slashes Q2 GDP forecast to 1 8 a day ahead of publication | Investing com The Federal Reserve Fed Bank of Atlanta slashed their forecast for second quarter Q2 growth on Thursday just a day ahead of the official advance reading
Specifically the Atlanta Fed cut the projection named nowcast to 1 8 from the prior 2 3 due to the U S Census Bureau s inaugural release of its advance economic indicators report which covers retail and wholesale inventories and foreign trade in goods
The contribution of net exports to second quarter real GDP growth declined from 0 17 percentage points to 0 10 percentage points and the nowcast of the contribution of inventory investment to growth declined from 0 63 percentage points to 0 79 percentage points the report explained
Consensus had still expected the advanced GDP data to show an expansion of 2 6 on Friday up sharply from the first quarter growth of 1 1
However after Wednesday s durable goods orders both Morgan Stanley NYSE MS and JP Morgan had cut their outlook to 2 2 from the prior 2 3 after the data was released due to the slightly lower outlooks for fixed investment and inventories |
JPM | JPM s Pinto sees possible 40 percent correction in equities Bloomberg | Reuters Equity markets could fall as much as 40 percent in the next two to three years JPMorgan Chase Co N JPM executive Daniel Pinto told Bloomberg Television in an interview It could be a deep correction It could be between 20 percent and 40 percent depending on the valuation said Pinto the Wall Street bank s co president He added that markets were nervous and if President Donald Trump goes beyond what he has already announced on steel tariffs investors could react badly
U S stocks have been hit by concerns over the possibility of a global trade war following Trump s remarks last week |
JPM | U S services data suggests upward revision to fourth quarter GDP | WASHINGTON Reuters U S economic growth for the fourth quarter is likely to be revised higher after data on Thursday indicated more spending on services than previously estimated by the government The Commerce Department s quarterly services survey or QSS added to December data on construction spending and manufacturers inventories in suggesting that gross domestic product grew much faster than the 2 5 percent annualized rate reported by the government in its second estimate last month Before the QSS data economists had expected that GDP growth for the October December quarter would be raised to about a 2 6 percent rate Some now expect fourth quarter GDP growth would be revised up to a 2 9 percent rate when the Commerce Department s statistics agency the Bureau of Economic Analysis incorporates the data into its third estimate to be published later this month The QSS points to stronger services spending in the fourth quarter than the BEA had previously estimated said Daniel Silver an economist at JPMorgan NYSE JPM in New York And while the QSS often impacts health care categories within the spending data we think that much of the expected fourth quarter upward revision will be related to spending on motor vehicle maintenance and repair Silver also said the QSS data pointed to a modest downward revision to investment in intellectual property products
Spending on intellectual property products was previously reported to have increased at a 2 4 percent rate in the fourth quarter |
JPM | Trump s tariffs prompting some U S fund managers to look overseas | By David Randall NEW YORK Reuters President Donald Trump s announcement of import tariffs and the prospect of retaliation by other countries is prompting some fund managers to pare their holdings of U S stocks and look for opportunities overseas The high turnover of key staff in the White House including the exit of Gary Cohn the director of the National Economic Council this week is undermining confidence in policy making also President Trump said Thursday that he would begin imposing import tariffs of 25 percent on steel and 10 percent on aluminum in 15 days sparking fears of a global trade war Gary Cohn the chief economic adviser to Trump who argued against trade protectionism resigned late Tuesday after Trump first announced the tariff plan and his successor has yet to be named Fund managers from Oppenheimer Federated and Wells Fargo NYSE WFC are among those that now see international and emerging market equities as more attractive than the U S where the prospect of higher interest rates contributed to a slump in stocks in February leaving the benchmark S P 500 stock index up about 2 0 percent for the year to date after turning in a 7 0 percent gain in January Overseas stocks by comparison are benefiting from synchronized economic growth in both Europe Asia and the Americas but offer lower valuations The gross domestic product of countries in the eurozone for example expanded at a 2 7 percent annual rate in the fourth quarter outpacing the 2 5 percent gain in the U S economy over the same time The Stoxx 600 an index of companies in the eurozone trades at a trailing price to earnings ratio of 14 9 compared with a 22 7 P E ratio for the S P 500 according to Thomson Reuters data You re still seeing an earlier stage of an expansion cycle overseas versus the United States which is likely to bounce between expansion and slowdown in the year ahead said Brian Levitt senior investment strategist at OppenheimerFunds Emerging markets such as China and Russia also look attractive given their prospects for economic growth and low equity valuations he said In the U S meanwhile a Democratic party takeover of at least one branch of Congress in elections in November would bring more stability to Washington by curbing President Trump s ability to expand protectionist policies he said History suggests markets do better with divided government because there is less uncertainty with policy because it becomes harder to get anything enacted he said WHY TARIFFS HURT The prospect of import tariffs could damage the U S economy by raising costs for U S manufacturers and consumers while prompting its trading partners to impose their own levies on U S exporters increasing their costs also and sapping overseas demand Daniel Pinto a co president at JPMorgan Chase Co N JPM said in an interview with Bloomberg on Thursday that the U S equities could fall by between 20 and 40 percent over the next three years if a global trade war breaks out Brian Jacobsen multi asset strategist at Wells Fargo Asset Management said that the risks of retaliatory tariffs is prompting him to add to emerging markets and international stocks but at a slow pace despite the fact that they look more attractive on a fundamental basis Strategically we still really like international and emerging markets but when you have asymmetric risks that makes us a little cautious on non U S assets for now given that markets have not yet priced in the possibility of more protectionist policies he said Overall U S fund managers have been reducing their stake in domestic stocks as interest rates rise making bonds more attractive U S balanced funds which hold both equities and bonds now have an average of 55 percent of their assets in stocks a 4 0 percent decline from 2014 and nearly 41 percent of their assets in bonds according to Lipper data Yet Ashwin Alankar head of global asset allocation at Janus Henderson Investors said that he remains a fan of large capitalization U S stocks despite the likelihood of higher trade costs and inflation The recently passed U S corporate tax cuts provide on going fiscal stimulus that should balance out higher interest rates he said a boost to stock prices that is not found in other markets As a result he is moving more of his portfolio in large cap U S stocks he said
Europe isn t talking about fiscal spending Japan isn t he said The U S is the only market in the world right now that could have the tailwind of fiscal spending |
C | Citigroup C Stock Moves 0 05 What You Should Know | Citigroup C closed at 63 76 in the latest trading session marking a 0 05 move from the prior day This change was narrower than the S P 500 s daily loss of 0 69 Elsewhere the Dow lost 0 87 while the tech heavy Nasdaq lost 0 79
Coming into today shares of the U S bank had lost 9 77 in the past month In that same time the Finance sector lost 3 89 while the S P 500 lost 4 53
Investors will be hoping for strength from C as it approaches its next earnings release In that report analysts expect C to post earnings of 1 86 per share This would mark year over year growth of 14 81 Meanwhile the Zacks Consensus Estimate for revenue is projecting net sales of 18 70 billion up 1 24 from the year ago period
Looking at the full year our Zacks Consensus Estimates suggest analysts are expecting earnings of 7 60 per share and revenue of 74 08 billion These totals would mark changes of 14 29 and 1 69 respectively from last year
Any recent changes to analyst estimates for C should also be noted by investors Recent revisions tend to reflect the latest near term business trends With this in mind we can consider positive estimate revisions a sign of optimism about the company s business outlook
Based on our research we believe these estimate revisions are directly related to near team stock moves To benefit from this we have developed the Zacks Rank a proprietary model which takes these estimate changes into account and provides an actionable rating system
The Zacks Rank system which ranges from 1 Strong Buy to 5 Strong Sell has an impressive outside audited track record of outperformance with 1 stocks generating an average annual return of 25 since 1988 Within the past 30 days our consensus EPS projection remained stagnant C is currently sporting a Zacks Rank of 3 Hold
In terms of valuation C is currently trading at a Forward P E ratio of 8 39 This valuation marks a discount compared to its industry s average Forward P E of 10 69
Also we should mention that C has a PEG ratio of 0 69 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 33 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 99 putting it in the top 39 of all 250 industries
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
To follow C in the coming trading sessions be sure to utilize Zacks com |
JPM | 3 Asia EM Equity ETFs Gaining From Surging Inflows | Emerging market ETFs continued to offer strong returns in recent times on the back of solid inflows into emerging markets over the past few months Out of these emerging Asia markets accounted for the major portion of the inflows This is an ideal time to take a look at emerging Asia market ETFs that are gaining from this encouraging backdrop
Lump Sum Inflows into Emerging Markets
According to Institute of International Finance IFF emerging market securities took in huge inflows of around 25 billion last month significantly higher than 13 3 billion of inflows registered in June This was only the second month in which emerging market securities registered inflows of more than long term average of 22 billion over the past one year period While equity securities posted mammoth inflows of 14 6 billion in July debt securities attracted nearly 10 2 billion read
Also the top three emerging market ETFs iShares MSCI Emerging Markets iShares JPMorgan NYSE JPM USD Emerging Markets Bond AX EMB and iShares Core MSCI Emerging Markets posted total net inflows of 6 2 billion in July The funds EEM EMB and IEMG saw 3 7 billion 1 5 billion and 1 0 billion of inflows during the month respectively Also emerging markets are outperforming major developed markets since start of this year EEM which tracks the performance of broader emerging markets gained 11 5 in the year to date frame while the S P 500 rose 5 5 during the same time period
Among the major emerging market regions securities from Asia clearly saw the best inflows of 19 1 billion Emerging markets in Latin America also registered healthy inflows of 8 7 billion last month However growing demand for emerging market securities failed to boost the emerging Europe and Africa Middle East markets which witnessed outflows in July read
Major Reasons for the EM Surge
In its report IFF mentioned There was a vigorous rebound in risk appetite in the weeks following the Brexit vote reflected in a sharp pick up in investor interest in emerging market and other risk assets as investors digest near record low global yields Relatively higher commodity prices most EM economies are commodity rich a subdued greenback on a dovish Fed and the hunt for yield had a positive impact on emerging markets in recent times
While record low level of yields on developed market government bonds following Brexit boosted demand for emerging market debt securities the possibility of getting less affected by Brexit had a positive impact on emerging market equity securities Also a large exposure to commodities also helped emerging markets to surge recently on the back of rising commodity prices Moreover a favorable growth outlook in these economies is also likely to boost demand for securities from these markets read
3 Surging Asia Emerging Market ETFs
As we have already mentioned emerging markets in Asia are the ones that are attracting the major portion of the emerging market inflows Moreover we have also seen that equities represent the lion s share of these inflows Keeping these facts in mind we have highlighted three equity focused ETFs from this space that have gained significantly from this encouraging scenario
iShares MSCI Indonesia
This ETF has AUM of 713 9 million and solid average daily volume of more than 870 000 shares The fund tracks the MSCI Indonesia Investable Market Index holding 82 securities in its basket while charging 62 bps in annual fees from investors The product is somewhat concentrated on both sectors and securities The top five firms account for nearly 48 of total assets while from a sector point of view financials dominates the fund s assets with 35 7 share
EIDO has a Zacks ETF Rank 3 Hold with a High risk outlook and registered an inflow of 113 49 million in July The ETF also gained 17 5 and 8 2 over the past three month and one month periods respectively read
iShares MSCI Thailand Capped AX THD
This ETF follows the MSCI Thailand IMI LON IMI 25 50 holding a basket of about 125 companies The product puts about 47 8 of total assets in the top 10 holdings suggesting moderate concentration With respect to sector holdings financials again takes the largest share at 27 1 followed by energy 15 5 and consumer staples 10 5 The product has amassed 424 3 million in its asset base while it trades in moderate volumes of around 222 000 shares
It charges 62 bps in fees per year THD has a Zacks ETF Rank 3 with a Medium risk outlook and saw inflows of 56 72 million in July The ETF also gained 10 1 and 5 7 over the past three month and one month periods respectively
iShares MSCI Philippines
The fund has AUM of 374 2 million and average daily volume of about 355 000 shares The fund tracks the MSCI Philippines Investable Market Index while it charges 62 bps in annual fees Holding 45 stocks the product is slightly skewed toward the top 10 firms at nearly 62 It is also a bit concentrated from a sector look as financials takes the top spot at 46 4 while industrials and telecom round off the next two positions at 21 6 and 8 3 respectively
EPHE has a Zacks ETF Rank 3 with a Medium risk outlook and registered inflows of 17 5 million in July The ETF also gained 14 6 and 0 8 over the past three month and one month periods respectively |
JPM | China Political And Economic Developments | This is the period in the monthly cycle that China releases most of its high frequency data The process is well under way Over the weekend China reported its reserve figures that suggested capital outflows have slowed Earlier today China reported its largest trade surplus in dollars and yuan since January
With the help of a lending spree Chinese officials have managed apparently to stabilize the economy Data due out over the coming days is likely to confirm this signal
There are several notable developments outside of the immediate economic data First it appears that the anticipation of the yuan formally joining the SDR has begun increasing the demand for onshore yuan bonds Preliminary data suggest that foreign investors increased their onshore yuan bond holdings in June by the most in two years Foreign investors boosted their holdings by CNY47 7 bln 7 2 bln to CNY764 bln The breakdown of officials and private sector holdings is not clear
In addition to SDR considerations there has been some liberalization in terms of access When China was experiencing strong inflows officials liberalized outflows More recently capital outflows challenged officials and they moved to liberalize inflows Specifically in February officials have allowed medium and long term investors easier access the onshore interbank bond market Registration is required but applying for permission or a quota is no longer necessary June was the fourth consecutive month that foreigners were net buyers of onshore yuan bonds
There are two other considerations First there was the quest for yield The premium China offered over the U S on 10 year money gradually rose in H1 from about 65 bp to start the year to nearly 150 bp by early July It was the most in nearly a year
Second although MSCI decided not to include China s A shares in its global indices China is still pushing for its bonds to be included in global indices that Citigroup NYSE C JPMorgan NYSE JPM and Barclays NYSE BCS have created These indices are important because they serve as the benchmark for many fixed income managers
Political events have become more important for investors and just because China does not a representative form of government does not mean that it does not have politics Over the weekend senior Chinese officials met A key issue was the political changes in a year s time Of the seven member Standing Committee a key decision making executive committee five will hit the mandatory retirement age 68 The new configuration will not only shape President Xi s second term but also indicate the succession process
As we have noted previously President Xi has consolidated power to such an extent that the balance of power in China between the Princelings and the Communist Youth League may be at risk President Xi has been particularly critical of the Communist Youth League and many economic problems including the stock market s performance has been blamed on them Premier Li coming from the Communist Youth League served as a lightning rod Some reports suggest that President Xi anti corruption campaign was aimed primarily at members or sympathizers of the Communist Youth League
Last week before the weekend confab President Xi took what appears to be the most aggressive move to date Under his direction the Communist Party control over the Youth League will be increased Xi is demanding the Youth League are fully committed to his political views The League s ability to reward loyal supporters through promotions in its large bureaucracy and then the government will be undermined
Meanwhile China s tensions with Japan and South Korea have flared up Reports indicate that hundreds of Chinese fishing boats and more than a dozen coastguard vessels have been spotted near disputed islands Japan is formally objected and is protesting what it claims is the installation of military grade radar on a gas platform near its territorial waters
Last month s decision South Korea to install a US missile defense system irks Chinese officials The US and South Korean officials argue that the Terminal High Altitude Area Defense System THAAD is aimed solely at North Korea s missile threat Several South Korean legislators are visiting Beijing this week and it is causing some consternation in local Korean politics |
JPM | NB China Positions The Yuan For Global Reserve Currency Status | Neuberger Berman the asset management business spun off from Lehman in late 2008 has produced a new report on foreign access to China s bond market
China has until now kept its bond market tightly fenced off from the rest of the world which offers a marked contrast with the behavior of rest of the emerging market nations At present foreigners hold only 2 if China s onshore bonds Foreigners hold just below 40 of the equivalent bonds of Indonesia and Poland and 42 of the bonds of Malaysia
It was in February that the People s Bank of China announced its intention to ease foreign participation in the China Interbank Bond Market but it wasn t until the spring in May and June that the PBoC and the State Administration of Foreign Exchange released the detailed implementation rules The NB paper is intended to provide some clarity on what they could mean for the Chinese debt market and global investors
Bullet Points
Key points are these
Before the easing only offshore institutions with qualified foreign investor quotas could now access the CIBM Now that restriction has been lifted and onshore agent banks have been given discretion to determine the eligibility of medium to long term offshore investors
Quota limits have been lifted too so investors can use their discretion as to the amount of money they will put to work in CIBM
There is no significant restriction on cross border remittance
Nor is there a lock up period
Why these changes There is a grant reason and a mundane reason Grandly the PRC wants to turn the yuan into a global reserve currency More mundane Just because policy makers want to attract and retain more foreign investor assets
Those two motives have been operative and this sort of move has been pending for some years We ve written about earlier moves in this line here at AAA But the opening process has picked up steam this year
Bond Index Inclusion
One important consequence of these changes is the likelihood that Chinese government bonds will enter major global bond indexes Even before the implementation rules the February announcement led JPMorgan NYSE JPM to put these CGBs under review for inclusion in its GBI EM GD NB thinks it reasonably likely that the review will result in the inclusion of the CGBs in that index especially as the new rules prove their operational effectiveness in the months to come Citigroup Inc NYSE C and Barclays LON BARC are other index providers likely to make the same move
But let s stick with JPMorgan Their index has a 10 cap on the weight that any one country can constitute within the index as a whole China with its 8 3 trillion onshore bond market will probably come in at that cap
Funds tracking the GBI EM GD will have to act according to their mandates and this will likely mean an inflow of between 18 and 20 billion for the relevant bond markets An analogous back of envelope type calculation indicates that if the other index providers do follow this lead the total inflow could rise to 150 billion
This is a positive for the yuan in NB s view It will provide a substantial buffer against any renewed capital outflow pressure and reduce the risk of a sharp devaluation of the yuan any time soon
Policy makers will probably weaken the yuan regardless but they won t do so sharply They will do for the same reason so many governments and central banks around the world are weakening so many other currencies because they need to stimulate their economy But they will weaken the yuan only in a modest gradual and non disruptive way against a basket of trading partners |
MS | Exxon snaps up InterOil in LNG push as Oil Search bows out | Reuters ExxonMobil Corp N XOM said on Thursday it would buy InterOil Corp N IOC for more than 2 5 billion in stock adding a gas field to expand exports from Papua New Guinea and better positioning it to meet Asian demand for liquified natural gas Oil majors are targeting Papua New Guinea for growth as the quality of its gas low costs and proximity to Asia s big LNG consumers make it one of the most attractive places to develop projects following a collapse in oil and gas prices I think the deal shows that Exxon views LNG as a very strong growth business I believe that LNG demand over time will grow faster than oil said Brian Youngberg oil analyst with Edward Jones in Saint Louis Exxon sealed the deal for InterOil after Australia s Oil Search Ltd AX OSH said earlier on Thursday that it would not pay more than the 2 2 billion it offered in May a proposal that was backed by French giant Total SA PA TOTF InterOil owns a 36 5 percent stake in the Elk Antelope gas field which is operated by Total The acquisition will give Exxon interests in six licenses in Papua New Guinea covering about four million acres Oil Search said it and Total agreed that letting Exxon take over would help speed up development of the Elk Antelope field Exxon said it would pay InterOil shareholders 45 per share in stock and that it would also make an additional cash payment based on the size of the Elk Antelope field That payment is worth 7 07 per share for each trillion cubic feet equivalent tcfe of certified gross resource from the field above 6 2 tcfe and up to a maximum of 10 tcfe Exxon said it would evaluate processing of gas from the Elk Antelope field by expanding its LNG export plant in Papua New Guinea Oil Search also owns a stake in the LNG plant The plant is a 6 9 million ton per annum integrated project operated by Exxon The gas is sourced from seven fields and Elk Antelope gas could be used to feed an expansion It will be interesting to watch how Exxon pursues the development of InterOil s gas resources Will it be by expanding the existing LNG plant already operating in the country or building a brand new project said Pavel Molchanov an energy analyst with Raymond James Credit Suisse SIX CSGN Australia Ltd Morgan Stanley NYSE MS and UBS are InterOil s financial advisers while Wachtell Lipton Rosen Katz and Goodmans provided legal advice
Davis Polk Wardwell LLP and Blake Cassels Graydon LLP are Exxon s legal advisers |
MS | Japan PM s maglev decision reflects political calculus over economics | By Ami Miyazaki Izumi Nakagawa and Kiyoshi Takenaka TOKYO Reuters Few doubt Japanese Prime Minister Shinzo Abe s decision to invest public funds in a 90 billion dollar high tech maglev railway makes political sense Whether it makes equally good economic sense is less clear Proponents say lending government money to Central Japan Railway Company JR Tokai to speed up the launch of a service linking Tokyo and Osaka with a high speed magnetically levitated train will spark growth in an economy still fragile after three years of an Abenomics mix of hyper easy monetary policy spending and promised structural reforms But critics counter the government is targeting the plan mainly because it has a big price tag and doubt its economic impact and export potential Abe needs to spend a lot of money and it s easy to spend on big projects said Fujitsu Research Institute economist Martin Schulz Abe needs things that are linked to technology the future of infrastructure and getting Japan into the next century On paper maglev ticks most of the boxes said Schulz adding the benefits might not stack up in practice Other private economists share those doubts It is highly questionable whether we need to fast track this said Hiroshi Shiraishi senior economist at BNP Paribas PA BNPP Securities Abe s administration decided to back the project only after the Bank of Japan in January adopted a negative interest rate policy and the government got a Group of 20 go ahead for more fiscal spending interviews with local and national government officials a JR Tokai executive and an Abe adviser showed Abe has pledged a stimulus package by the end of July including using the government s Fiscal Investment and Loan Programme FILP to help JR Tokai bring forward operation of the maglev line from Nagoya to Osaka by up to eight years to 2037 The government is looking to lend 3 trillion yen 28 billion over three years at 0 3 percent interest to be paid back over 20 or 30 years an LDP lawmaker told Reuters JR Tokai s original plan called for finishing a line from Tokyo to Nagoya central Japan by 2027 and after an eight year break to pay back debt opening service to Osaka in 2045 The maglev with speeds of up to 500 km 311 miles per hour and running through tunnels deep under mountainous terrain would cut the trip to Nagoya by one hour to 40 minutes and to Osaka to just 67 minutes from 145 minutes GO IT ALONE Unable to find a powerful political sponsor and with big public works projects out of fashion JR Tokai had abandoned efforts to get government aid about a decade ago In December 2014 began construction for the Tokyo Nagoya line using private funding That same year business leaders governors and LDP lawmakers in western Japan stepped up lobbying for a national project to finish the line to Osaka at the same time as that to Nagoya Originally JR Tokai said it would fund this itself but people in Osaka wanted to speed up the second stage and wondered if FILP could be used said a senior government source FILP loans are financed by government bonds but are not included in the regular budget so issuing them technically doesn t increase Japan s debt already equal to more than twice the size of the economy Such project specific loans must be paid back by the firm that receives them That lobbying effort seemed to be going nowhere until early this year when the government began eyeing a stimulus package I proposed to Prime Minister Abe we make the best use of the negative rate environment to spur private and public investments Abe adviser Satoshi Fujii a Kyoto University professor told Reuters Pushing forward completion by eight years would have an economic spinoff of several tens of trillions of yen Fujii added JR Tokai is considering the offer but some executives worry the government will try to butt into its plans for the maglev line If they put in money politicians will interfere for sure one JR Tokai executive told Reuters I wish the president would say No JR Tokai President Koei Tsuge welcomed the government s suggestion and said the company would consider it based on the premise of maintaining management freedom If they make a proposal acceptable to us as a private firm this is very welcome Tsuge said in a written statement to Reuters A JR Tokai spokesman said fast tracking the project by the full eight years would be tough given the need to assess environmental impacts and other challenges DREAM TECHNOLOGY FOR EXPORT Some economists question how much speeding up the project would stimulate the economy anyway I have to give them credit for vision but I m not sure the numbers add up said Morgan Stanley NYSE MS MUFG chief economist Robert Feldman Abe who is close to JR Tokai Chairman emeritus Yoshiyuki Kasai has touted the maglev as a dream technology that could for example link New York and Washington in under an hour Experts however cast doubt on the extent of overseas demand What is being sought is not super high speed It s safety convenience network and environmental protection said Reijiro Hashiyama a University of Alabama professor emeritus In short the export potential is zero Writing and additional reporting by Linda Sieg Editing by Lincoln Feast |
MS | Eyes on Fed BOJ Europe s bank stress test | By Balazs Koranyi
FRANKFURT Reuters Central banks from Washington to Tokyo take center stage next week although policymakers are likely to remain cautious as they wait for the dust to settle from Britain s shock vote to leave the EU
As they wait for political reassurances and greater clarity over the likely impact of the move central banks have mostly avoided action since Britain s June 23 referendum calming jittery markets with verbal assurances but leaving the burden on governments to chart a path
Indeed the U S Federal Reserve is all but certain to keep interest rates on hold on Wednesday acknowledging improved economic prospects but offering few hints about its next move keen to avoid repeating its past mistake of stoking rate hike expectations
The next move is still seen as an increase in rates But even as concerns over Brexit ease the U S election is drawing closer likely pushing back action towards the end of the year and possibly limiting the Fed to a single hike in 2016 a far cry from its early year estimate for four moves
As the outlook up to mid September will presumably not be clear enough by then the next rate hike is more likely to happen in December in our opinion followed by two further steps in the coming year Commerzbank DE CBKG said in a note Consequently we predict a somewhat stronger dollar and slightly higher yields in the medium term
Analysts polled by Reuters also see the next move in the fourth quarter while futures imply a move closer to mid 2017
Still the U S economy remains on a solid footing with preliminary second quarter figures due on Friday expected to show the annual growth rate accelerating to a healthy 2 6 percent from 1 1 percent three months earlier
Economic data have surprised on the upside and financial conditions have also eased recently suggesting that the U S is entering the third quarter on a strong note with solid growth momentum
BOJ
For the Bank of Japan struggling with low inflation next Friday s rate decision will be a close call with markets simmering with speculation that it will have to ease policy
It is likely to cut its inflation forecasts but only slightly which may allow the bank to justify standing pat for the time being
Prime Minister Shinzo Abe fresh off a big election win is also working on a stimulus package with a headline figure of at least 20 trillion yen 189 billion potentially taking some pressure off the BOJ which was criticized earlier this year for cutting rates into negative territory
Still it is uncertain whether the bank can avoid delaying the time frame for meeting its 2 percent inflation target suggesting that its rate decision will be a close call
Concerns about Brexit fallout on the real economy and financial markets have driven investors to bet on BOJ easing this month Naomi Muguruma senior market economist Mitsubishi UFJ Morgan Stanley NYSE MS Securities said
Therefore if the BOJ stands pat this month that would disappoint the markets prompting a fall in stock prices and a rise in the yen Muguruma added
For now analysts expect the bank to expand its asset purchases and cut its key rate to 0 2 percent from 0 1 percent
In Europe the week s top event will be Friday s release of banking stress test results with all eyes focused on Italian lenders seen as the weakest link due to their low profitability and the 360 billion euros 397 billion worth of non performing loans on their books a legacy of Europe s debt crisis
Though the test is not a pass or fail exercise the data could give fresh impetus to agreeing on a solution with Italy and the European Commission seemingly deadlocked disagreeing over state support
European Central Bank president Mario Draghi hinted on Thursday at the possibility of setting up a public backstop to help Italian banks sell down some of their bad loans that have hampered their ability to lend
Second quarter euro zone and British GDP figures will also make for interesting reading although the number will be seen as less relevant in the wake of the Brexit decision |
MS | China s growth sucks in more debt bucks for less bang | By Elias Glenn BEIJING Reuters As China s economy notches up another quarter of steady growth the pace of credit creation grows ever more frantic for every extra unit of production as inefficient state firms swallow an increasing share of lending The world s second largest economy grew 6 7 percent in the first half of the year unchanged from the first quarter testament to policymakers determination to regulate the pace of slowdown after 25 years of breakneck expansion Analysts say that determination has come at the cost of a damngerous rise in debt which is six times less effective at generating growth than a few years ago The amount of debt that China has taken in the last 5 7 years is unprecedented said Morgan Stanley s head of emerging markets Ruchir Sharma at a book launch in Singapore No developing country in history has taken on as much debt as China has taken on on a marginal basis While Beijing can take comfort that loose money and more deficit spending are averting a more painful slowdown the rapidly diminishing returns from such stimulus policies coupled with rising defaults and non performing loans are creating what Sharma calls fertile ground for some accident to happen From 2003 to 2008 when annual growth averaged more than 11 percent it took just one yuan of extra credit to generate one yuan of GDP growth according to Morgan Stanley NYSE MS calculations It took two for one from 2009 2010 when Beijing embarked on a massive stimulus program to ward off the effects of the global financial crisis The ratio had doubled again to four for one in 2015 and this year it has taken six yuan for every yuan of growth Morgan Stanley said twice even the level in the United States during the debt fueled housing bubble that triggered the global crisis Total bond debt in China is up over 50 percent in the past 18 months to 57 trillion yuan 8 5 trillion equal to around 80 percent of GDP and new total social financing the widest measure of credit provided by China s central bank rose 10 9 percent in the first half of 2016 to 9 75 trillion yuan SHORT TERMISM China s money supply has increased in tandem with new lending and at 149 trillion yuan is now 73 percent higher than in the United States an economy about 60 percent larger China is the largest money printer in the world they have been for some time The balance is really extreme says Kevin Smith CEO of U S based Crescat Capital The reason China gets such poor returns from this pump priming is that state firms are the main beneficiaries of extra credit at the expense of the more efficient private sector Some of the slowdown in private sector growth is weak confidence in the business outlook but a lack of access to affordable financing is also a factor the government and economists say as banks prefer the security of state owned borrowers Private firms had to pay 6 percentage points more in interest for bank loans in the second quarter versus the public sector analysts at investment bank CICC estimate Though Beijing officially wants to rebalance the economy to the private sector and cut surplus capacity in inefficient heavy industry that aspiration clashes with its more immediate ambition to hit its growth targets For now it seems the latter goal is over riding the former Policymakers say that while corporate debt is high the central government has room to increase its debt ratios and raise its fiscal deficit to between 4 and 5 percent to boost the economy And analysts expect more monetary easing in the form of interest rate cuts which will encourage more borrowing and more bad debts We believe that China s short termism will only add to its long standing problems of excess capacity and non performing loans Fathom Consulting analyst Laura Eaton wrote in a note following the release of first half GDP data Smith at Crescat Capital thinks it will lead to a twin currency and banking crisis with a 20 percent crash in the yuan versus the dollar
It s a question of when and it looks like it s coming pretty close he said |
MS | Borrowing costs for Chinese firms is key obstacle to private investment NDRC | BEIJING Reuters Borrowing costs and access to funding are the key obstacles to private investment in China a senior official at the top economic planning agency said on Monday after private investment growth shrank to a record low A government spending spree and housing boom helped China s economy grow 6 7 percent in the second quarter but a sharp slump in private investment is pointing to a loss of momentum and worrying policymakers Growth in investment by private firms which accounts for over 60 percent of total investment in China fell to a new record low in the first half of the year as businesses retrench in the face of a sluggish economic outlook and weak exports Executives at China s private sector are now adopting a wait and see approach on investment Zhang Yong the deputy chair of the National Development Reform Commission NDRC told reporters in Beijing Xu Kunlin the head of the NDRC s investment office said at the same news briefing that difficulty in obtaining financing is the most common and prominent problem that companies face now Loan tenors are relatively long the cost is relatively high and if you want to roll over a loan you run into lots of problems said Xu Some companies aren t able to smoothly roll over loans so they have no choice but to turn to other fundraising avenues where the costs are even higher and that s when many companies run into lots of problems So this really is a serious issue Zhang added that China should increase government investment while adding that government investment should not compete with that of the private sector Chinese banks typically prefer the security of state owned borrowers Private firms had to pay 6 percentage points more in interest for bank loans in the second quarter versus the public sector analysts at investment bank CICC estimate An increasing reliance on state firms to support economic growth is also making investment in China less efficient From 2003 to 2008 when annual growth averaged more than 11 percent it took just one yuan of extra credit to generate one yuan of GDP growth according to Morgan Stanley NYSE MS calculations This year it has taken six yuan to produce one yuan of growth Morgan Stanley said twice even the level in the United States during the debt fueled housing bubble that triggered the global crisis Sheng Songcheng director of the Survey and Statistics Department at the People s Bank of China PBOC said recently that China has already fallen into a liquidity trap where increased money supply is being absorbed by firms that are not in turn investing the cash While monetary policy is effective it is limited and requires coordination with a proactive fiscal policy And Sheng said China has room to increase its fiscal deficit ratio to between 4 and 5 percent to more effectively boost the economy China s cabinet last week unveiled detailed measures including widening financing channels for firms and establishing new equity funds to support investment and economic growth |
MS | Oil prices dip on ongoing oversupply economic headwinds | By Henning Gloystein and Osamu Tsukimori SINGAPORE TOKYO Reuters Oil prices held near two month lows on Monday amid worries that a global crude and refined product glut would weigh on markets for some time to come International Brent crude oil futures were trading at 45 59 per barrel at 0424 GMT down 10 cents from their previous close U S West Texas Intermediate WTI crude was at 44 09 also down 10 cents a barrel Both benchmarks were close to two month lows reached last week Traders said that ongoing oversupply and growing economic headwinds were weighing on oil Headwinds are growing for 2H16 hence our bearish oil bias Morgan Stanley NYSE MS said on Monday in a note to clients pointing to resilient U S supply falling demand for transport fuels and oversupply by refiners particularly in gasoline As a result crude oil demand from refineries is underperforming product demand by a wide margin the U S bank said adding that growing economic risks added to downside risks for oil A strong dollar and a fourth weekly rise in the U S oil rig count also weighed on prices traders said USD RIG U Money managers cut their net long U S crude futures and options positions which would profit from rising prices to a four month low in the week to July 19 the U S Commodity Futures Trading Commission said on Friday
Libya s hopes to boost crude exports have been dealt a blow after the head of the National Oil Corporation NOC objected to a deal between the government and local guards to reopen key ports |
MS | Crude falls to 3 month low as supply concerns resurgent dollar weigh | Investing com Crude futures fell sharply on Monday slumping to a fresh three month low as continuing fears related to global oversupply and a resurgent U S Dollar remained in focus
On the New York Mercantile Exchange WTI crude for September delivery traded between 42 98 and 44 37 a barrel before closing at 43 17 down 1 02 or 2 31 on the session On the Intercontinental Exchange ICE brent crude for October delivery wavered between 44 98 and 46 27 a barrel before settling at 45 17 down 0 92 or 1 93 on the day Both the international and U S benchmarks for crude extended losses on Monday after tumbling by approximately 3 last week
In Monday s session crude fell to its lowest level since late April as investors responded to further signs of a supply glut on global energy markets Over the weekend analysts from Morgan Stanley NYSE MS issued stark warnings on continued oversupply among refined products as gasoline stocks swelled to a five year high It came after gasoline inventories nationwide rose by 0 91 million barrels last week following a 4 1 million spike in distillate fuel stockpiles over the previous week representing the largest weekly build in more than five months The latest trends have exacerbated fears that refineries will slow their pace of oil purchases in the coming weeks dragging down the cost of crude
Crude oil demand is trending below refined product demand for the first time in three years Morgan Stanley wrote Refineries are the true consumer of crude oil and crude oil demand is ultimately more important than aggregate refined product demand for oil balances Given the oversupply in the refined product markets fading refinery margins and economic run cuts we expect crude oil demand to deteriorate further over the coming months
As a result the analysts predicted global crude demand will rise modestly by 625 000 barrels per day in 2016 far below forecasts from the International Energy Agency IEA of 1 3 million bpd for the year WTI crude has rallied from a 13 year low of 26 05 a barrel in mid February in part due to improved signs that a massive supply demand imbalance had begun to level
Elsewhere investors reacted to developments out of Libya on Monday after Petroleum Guard Commander PFG Ibrahim Jathran announced that the national oil guard is ready to halt a lengthy blockade of three main ports in the Northern African nation The statement came several days after officials at Libya s National Oil Corporation NOC told the United Nations that sending payments to Jathran could set a terrible precedent in encouraging militia groups to seize control of oil facilities throughout the country in attempts to receive significant bribery payments from the government Attempts from Jathran s forces to close numerous pipelines and oil fields around Libya have reportedly cut crude output to less than a quarter of the level from when former president Muammar Gaddafi was overthrown in 2011
The U S Dollar Index which measures the strength of the greenback versus a basket of six other major currencies was relatively flat on Monday hovering at 97 30 in U S afternoon trading The index remains near four month highs Over the last few weeks the dollar has risen sharply against the Japanese Yen and British Pound amid signs of potential easing from both the Bank of Japan and Bank of England in the next several weeks
Dollar denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates |
JPM | Australia s central bank holds rates sounds less upbeat on growth | By Swati Pandey SYDNEY Reuters Australia s central bank left interest rates at record lows on Tuesday as expected and sounded less confident that the economy would grow at 3 percent or more this year in another sign rates will likely remain on hold for months to come The Reserve Bank of Australia RBA expects the country s gross domestic product GDP to grow faster in 2018 than it did in 2017 as it entirely removed reference to expectations of above 3 percent growth over the next couple of years The change in rhetoric comes as analysts downgrade forecasts for fourth quarter GDP due Wednesday A Reuters poll of analysts last week showed economists expect GDP to have expanded by 0 6 percent on quarter and 2 5 percent on year in the December quarter However recent soft indicators have prompted analysts to trim these expectations to rises of around 0 5 percent and 2 4 percent respectively The RBA has definitely softened its language around growth said Tom Kennedy Sydney based senior economist at JPMorgan NYSE JPM I think the change means gradually and very slowly they re stepping away from the 3 percent target he added Wage growth has been low consumption has been really weak since mid 2017 net exports have been weaker than RBA s expectations So when you add up all the bits and pieces you get a small figure Analysts are divided evenly on the chance of a rate hike by December while interest rate futures 0 YIB are not fully priced for a 25 basis point rise until early 2019 The RBA is one of the less hawkish central banks in the developed world The U S Federal Reserve is expected to raise rates at least three times this year and the European Central Bank is seen stepping back from its massive asset buying program soon MIXED DATA Tuesday s figures from the Australian Bureau of Statistics ABS showed a drop in rural exports and a jump in consumer and oil imports shaving 0 5 percentage points off gross domestic product GDP in the quarter As a result the country s current account deficit widened to its largest in over a year to A 14 billion 10 89 billion The RBA acknowledged the slowdown in exports in the fourth quarter calling it a temporary blip Adding to the dour mood retail sales for January rose a tepid 0 1 percent when analysts had looked for a 0 4 percent gain due to weakness in clothing and department stores Sales had dipped 0 5 percent in December Consumer spending accounts for around 57 percent of GDP Australia s brick and mortar retailers have been struggling amid cut throat competition and as relentless price discounts fail to entice customers facing paltry wage growth and mountains of debt One bright spot was the surprisingly strong spending by Australia s government which helped offset the drag from weather dampened exports Tuesday s data showed government spending rose 1 7 percent in the fourth quarter to an inflation adjusted A 83 16 billion 64 67 billion lifting potential for growth Also contributing to overall activity in the fourth quarter was remarkable strength in retail and car sales The GDP partials confirm a composition of growth in Q4 that is unlikely to continue in 2018 said RBC economist Sue Lin Ong Firmer domestic demand with a bounce in consumption will be evident while net exports will weigh on growth We expect that to shift in 2018 Ong added citing strong global activity and higher LNG exports A softer housing market and subdued household consumption will likely temper domestic private demand We retain below consensus household consumption forecasts for 2018 and 2019 |
JPM | JPMORGAN The stock market s most trusted strategy is on its last legs | JPMorgan NYSE JPM says a tried and true strategy that has supported the almost nine year bull market is showing signs of fading The firm is particularly troubled about a lack of liquidity which it says is making investors less nimble and exacerbating market moves For most of the almost nine year stock investors have viewed weak stretches as opportunities to increase exposure And can you blame them The has made a habit of snapping back quickly following sell offs which has emboldened traders to buy more on declines thus perpetuating the cycle Well enjoy this buy the dip strategy while you can because it s showing signs of fading says The firm is specifically perturbed by the erratic behavior of retail investors last week when the benchmark dropped 2 Rather than seeing a steady stream of inflows amid the selling the direction of the money trail was inconsistent at best according to JPMorgan This trend casts doubt on the idea that retail investors will serve as the marginal buyer of equities in the current conjuncture Nikolaos Panigirtzoglou a global market strategist at JPMorgan wrote in a client note The potential withdrawal of retail investors as the marginal buyer of equities could create clear downside risk for equity markets for the near term Of particular concern to JPMorgan is the 100 billion that poured into equity in January With traders already so heavily invested in stocks heading into what was a turbulent February the firm fears traders may not have enough dry powder to sustain a buy the dip strategy JPMorgan is also perturbed by what it sees as a lack of investor liquidity which it says stems from a defensive stance being adopted by market makers The firm argues that their hesitance to put money to work worsens liquidity which in turn makes volume thinner thus exacerbating any price moves that do take place But what about which were just by one of Panigirtzoglou s JPMorgan colleagues as potentially underpinning further stock strength Let it be clear that Panigirtzoglou isn t arguing repurchases will be futile he simply thinks they might take some time to materialize depriving the market of a backstop that has proved crucial throughout the bull market With all of this in mind it s important to note stocks could continue exhibiting strength even without the same buy the dip mentality as before But such buying will have to be catalyzed by fundamental drivers rather than by a sentiment driven knee jerk reaction Assuming Panigirtzoglou is correct how will the market handle resting on its laurels That s a question investors will have to answer for themselves as the bull market trudges on |
JPM | Paris to get thousands of jobs due to Brexit French finance minister | LONDON Reuters Several thousands jobs will probably be relocated to Paris as a result of Britain s decision to leave the European Union French Finance Minister Bruno Le Maire said on Tuesday during a visit to London It will be several thousand jobs not hundreds he told journalists without offering the names of banks that could shift jobs to the French capital Le Maire met with banking executives during the trip and was due to meet JPMorgan N JPM Chief Executive Jamie Dimon later Tuesday evening
A source close to the minister said in January that the government hoped about 3 000 jobs would be moved to Paris by 2019 |
JPM | Asia s Biggest Currency Gain in 20 Years May Be About to End | Bloomberg Asian currencies may be on the verge of a correction after completing the best year in at least two decades The warning sign Indonesia s rupiah slumped to a two year low last week
The rupiah is seen as a bellwether of sorts for Asia given the high foreign ownership of Indonesia s bonds and its largely open economy The currency is typically among the first in the region to be sold when sentiment sours and this often heralds a broader decline among its peers
The rupiah has tumbled 1 5 percent in the past month the worst performer in Asia and third worst among 24 emerging market currencies worldwide It fell as overseas investors sold the nation s stocks and bonds and equity volatility jumped due to expectations of higher U S interest rates
Indonesia s rupiah is arguably the high beta version of Asian ex Japan risks said Vishnu Varathan head of economics and strategy at Mizuho Bank Ltd in Singapore The declines are certainly not peculiar to IDR Nor are they conclusively behind us The upshot is that with uncertainty around global trade risks global liquidity is set to start declining albeit gently later this year AXJ air pockets are anticipated
The Bloomberg JPMorgan NYSE JPM Asia Dollar Index which measures 10 of the region s currencies against the greenback climbed 6 7 percent last year the biggest annual advance in data that started in 1994 If the rupiah proves to be the canary in the coal mine the gauge may give back a lot of those gains this year
Dollar Revival
Regional currencies may suffer due to a resurgent dollar The greenback has rallied since new Federal Reserve Chairman Jerome Powell delivered upbeat testimony to lawmakers last week His acknowledgment of stronger U S economic growth fueled speculation the central bank may raise interest rates as many as four times this year
Global funds pulled 1 02 billion from Indonesian bonds last week the biggest five day outflow since November 2016 according to central bank data They sold 186 million of the nation s equities in the same period
There are signs other Asian currencies are also starting to weaken with the Philippine peso dropping to the weakest since July 2006 last month
Declines in the rupiah have often foreshadowed losses among Asian peers In January 2016 the Asia Dollar Index slumped to a seven year low months after the rupiah sank to the weakest since 1998
Adds outlook for dollar in sixth paragraph foreign sales in seventh peso s decline in eighth |
C | Citi Private Bank appoints Andrew Keating as UK Private Banker | Reuters Citi Private Bank CPB a unit of Citigroup Inc NYSE C that caters to wealthy individuals and families appointed Andrew Keating as UK Private Banker With over 20 years of investment experience Keating joins from LGT Vestra where he managed UK and Irish ultra high net worth clients
Based in London Keating will report to Giles Thompson |
C | Citigroup C Stock Moves 0 2 What You Should Know | In the latest trading session Citigroup C closed at 64 94 marking a 0 2 move from the previous day This move was narrower than the S P 500 s daily loss of 0 68 Meanwhile the Dow lost 0 33 and the Nasdaq a tech heavy index lost 1 46
Heading into today shares of the U S bank had lost 6 6 over the past month lagging the Finance sector s loss of 2 11 and the S P 500 s loss of 1 19 in that time
C will be looking to display strength as it nears its next earnings release The company is expected to report EPS of 1 86 up 14 81 from the prior year quarter Meanwhile our latest consensus estimate is calling for revenue of 18 70 billion up 1 24 from the prior year quarter
For the full year our Zacks Consensus Estimates are projecting earnings of 7 58 per share and revenue of 74 08 billion which would represent changes of 13 98 and 1 69 respectively from the prior year
Investors should also note any recent changes to analyst estimates for C 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
Research indicates that these estimate revisions are directly correlated with near term share price momentum 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
The Zacks Rank system ranges from 1 Strong Buy to 5 Strong Sell It has a remarkable outside audited track record of success with 1 stocks delivering an average annual return of 25 since 1988 Over the past month the Zacks Consensus EPS estimate has moved 0 51 higher C is currently sporting a Zacks Rank of 3 Hold
Looking at its valuation C is holding a Forward P E ratio of 8 59 For comparison its industry has an average Forward P E of 10 9 which means C is trading at a discount to the group
Also we should mention that C has a PEG ratio of 0 71 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 32 based on yesterday s closing prices
The Banks Major Regional industry is part of the Finance sector This industry currently has a Zacks Industry Rank of 152 which puts it in the bottom 41 of all 250 industries
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors 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 |
JPM | Forget Gold Buy Silver ETFs Instead | A rush to seek safety for the most part of 1H16 triggered by global growth issues and a major event like Brexit at the end of the second quarter bolstered demand for safe haven assets As a result safe metal gold saw a glorious rally in the first half of 2016 after quite a long time Gold bullion ETF SPDR Gold Shares NYSE GLD LAGOS GLD is up over 27 so far this year as of August 1 2016 read
Investors should note that not only gold most precious metals are on a tear this year on a subdued greenback as these metals are linked to the U S dollar Dovish central banks across developed economies including the U S to ward off growth issues actually made this asset class a winner
Though equities had had an astounding rally in July optimism over precious metals also remained intact But there are analysts who believe that this mad rush in gold will eventually lose pace and that gold will return to by the end of the year Notably gold is trading at 1 356 40 to start August
Though there are also some analysts who expect gold to hit by the end of Q3 it seems that the time has come for investors to take a break from gold and look at another soaring metal namely silver We ll tell you why
Is Gold Too Teeming Try Silver Then
Like gold silver also serves as a safe haven So with still shaky investor sentiments given lower than expected Q2 U S GDP growth markets may turn edgy ahead and boost safe haven metals like silver read
Investors should note that silver was a bit in joining the precious metal party this year So due to its late entry into the rally the bullishness in silver is likely to last longer than gold according to some After such a stupendous surge in the yellow metal many investors would like to bet on its low priced cousin Also many investors view silver as a of gold as per ETF Securities
So while you can play gold ETFs like GLD or AX IAU with a short termview it might be better to tap silver ETFs The white metal saw solid trading in the last one month and actually breezed past the yellow metal in the last five trading sessions While GLD added about 0 6 in the last one month time frame as of August 1 2016 the silver bullion ETF iShares Silver Trust NYSE SLV added about 3 7
Industrial Demand Turning Steady
Moreover silver has high usage in industrial activities with about 50 of total demand coming from industrial applications With China the biggest industrial fabricator after the U S seeing manufacturing sector growth in July for the 2015 as per a private survey and the U S industrial sector being steady silver had every reason to outdo gold in the month
Slumping Gold Silver Ratio
The gold to silver ratio indicates how much an ounce of gold is worth of silver As per at the start of the year an ounce of gold was worth as much as 77 ounces of silver by the end of February that number would rise above 83 But at the current level the ratio This points to investor inclination for silver
In fact one analyst hinted that about five years ago the ratio was closer to 35 while the historical average is around 15 This means given the favorable trading scenario the gold silver ratio has chances of falling further
If Fed Hikes
Investors should note that if the U S economy comes up with sturdy readings the dollar will strengthen and may put pressure on broad based commodities along with gold But since silver has considerable usage in industrial activities a recovering economy may continue to push silver ETFshigher read
Strong Industry Rank for Silver
Investors should also note that the at least in terms of its Zacks Industry Rank is in a great position The Zacks Industry Rank for the silver mining industry is one while it is eight for the gold mining industry at the time of writing
Play Silver Rally with These ETFs
Needless to say silver ETFs are clearly outperforming gold from both a five day and a one month look as of August 1 2016 So investors can play this bullish trend with the below mentioned silver ETFs read
iShares Silver Trust The fund tracks the price of silver bullion measured in U S dollars and kept in London under the custody of JPMorgan Chase NYSE JPM Bank It is the ultra popular silver ETF with AUM of over 7 billion and heavy volume of nearly 11 4 million shares a day It charges 50 bps in fees per year from investors ETFS Physical Silver Shares This fund has amassed 374 7 million in its asset base while trades in moderate volume of more than 100 000 shares per day on average It tracks the performance of the price of silver bullion less the Trust expenses Expense ratio comes in at 0 30 see PowerShares DB Silver ETF This product provides exposure to the silver futures market rather than spot market and tracks the DBIQ Optimum Yield Silver Index Excess Return index It is unpopular and illiquid with AUM of 96 3 million and average daily volume of about 50 000 shares increasing the total cost for the fund in the form of a wide bid ask spread DBS charges 79 bps in fees per year from investors |
MS | U S stock index futures up as Q2 earnings digested | Investing com U S stock index futures were higher as investors digested earnings reports The Dow Jones futures was up 0 29 at 08 15 ET while the S P 500 futures rose 0 23 The tech heavy Nasdaq 100 futures was up 0 29 The yield on the 10 year Treasury note was a tick higher at 1 566 Morgan Stanley NYSE MS was up 3 in pre market trade as Q2 earnings beat forecasts |
MS | Morgan Stanley CEO Gorman says he has no clue on Brexit impact | By Olivia Oran Reuters Morgan Stanley NYSE MS Chief Executive James Gorman said on Wednesday he has no clue how the bank should allocate employees in Europe following Britain s vote to leave the European Union Speaking on CNBC following Morgan Stanley s second quarter earnings Gorman said there remains a great deal of uncertainty on the impact of Brexit and the bank is not having a knee jerk reaction Gorman said he told employees in London earlier this week everybody cool your jets just settle down nothing precipitous is about to happen Gorman said he expects the aftermath of Brexit to unfold over five to ten years Morgan Stanley and other banks may need to have a European headquarters in a major city outside London Gorman said but the UK will still remain a critical part of our global footprint Having a headquarters in the European Union is important to banks and financial companies as it allows firms in one EU country to provide services to clients elsewhere in the trading bloc under a system known as passporting It is unclear if Britain will keep its passporting rights if it leaves the European Union
Morgan Stanley reported lower second quarter profit on Wednesday but beat analysts expectations through strong bond trading revenue and by cutting expenses |
MS | Fed to hold rates ahead of November election inflation still low Reuters Poll | By Sumanta Dey and Deepti Govind Reuters The U S Federal Reserve will wait until the fourth quarter before raising interest rates likely in December after the presidential election according to a Reuters poll which once again showed subdued inflation expectations That would mark a climb down from the four hikes in 2016 Fed policymakers had estimated at the start of the year and highlights the challenges they face despite a solid economy with global risks rising after Britain s vote to leave the European Union Just over half the 100 economists surveyed over the past week expect the Fed to raise its federal funds rate in the fourth quarter to 0 50 0 75 percent from 0 25 0 50 percent currently The move is most likely to come in December as the November policy meeting is only days ahead of the Nov 8 election forecasters said The rest of the respondents are split between forecasting a rise in the third quarter of this year likely in September as the Fed has given no hint it is about to raise rates at its meeting this month and sometime in 2017 Forecasts for a rate rise this year have already been pushed back three times since January when a Reuters poll predicted one would come no later than March The Fed s peers from Europe to Asia meanwhile are still easing All Fed commentary to date has suggested they will proceed very patiently and very gradually in normalizing policy Our sense is the Fed might be extra cautious moving on rates close to the election since they ll have to be seen as politically neutral said Sal Guatieri economist at BMO Capital Markets Based on our view of how the economy will perform over the next six months and considering the U S is pretty close to full employment now December is probably as good a time as any to move next The poll forecast two more rises next year taking the fed funds rate to 1 00 1 25 percent at the end of 2017 Asked what the top risks to the U S economy were heading into the election a majority of respondents in the Reuters poll picked an unexpected slowdown in hiring and business investment A strong dollar was number three in the list Morgan Stanley NYSE MS which forecasts a 40 percent chance of recession in the coming year along with RBS LON RBS are the only primary dealers surveyed which predicted the Fed won t hike rates again at all between now and the end of next year The range of probabilities for recession in the next 12 months was 5 to 60 percent although the consensus likelihood was just one in five Growth is forecast to remain slightly above an annualized rate of 2 percent in each quarter through end 2017 with slight downgrades compared to the June poll WHERE S THE INFLATION With unemployment at 4 9 percent in June and likely to fall further most say the Fed can probably check off as achieved its objective of full employment But inflation is still short of its 2 percent goal and is not expected to take off The latest poll found the U S core PCE price index the Fed s preferred inflation gauge will average 1 9 percent in the fourth quarter It is currently at 1 6 percent Market gauges such as bond yields and swaps private economists forecasts as well as surveys of U S consumers are all still showing low inflation expectations Benchmark 10 year Treasury yields sank to record lows in the past month after the Brexit vote on June 23 as investors fearing a global financial market sell off fled to safe haven assets The U S dollar rallied over 4 percent in the same period putting an additional downward pressure on imported inflation In normal course inflation and wages tend to pick up as the unemployment rate falls That hasn t happened yet in any serious measure partly due to falling oil prices overcapacity and relatively weak demand at home and abroad With wage growth expected to continue its slow ascent we see no threat to broader price increases from the labor market Morgan Stanley economists wrote adding that 2017 will likely mark the ninth consecutive year below the Fed s 2 percent inflation goal
For other stories from the Reuters global economic polls Polling and analysis by Krishna Eluri and Vartika Sahu Editing by Ross Finley and Jeffrey Hodgson |
JPM | Popular EM bond fund about to set record outflow | The iShares JPMorgan NYSE JPM USD Emerging Market Bond Fund NYSEARCA EMB has seem 1 8B in outflows this month according to Bloomberg Assuming nothing major happens today it would be the largest monthly outflow ever for that ETF The fund is having a rough year down nearly 3 with about all of that decline occurring in February It gained 5 3 in 2017 Emerging market equities had a rough February as well with the iShares MSCI Emerging Markets ETF NYSEARCA EEM lower by 6 7 It s still in the green for the year at 3 7 and up 28 Y Y Now read |
JPM | JPMorgan TiVo has heavy upside in case of leveraged buyout | TiVo NASDAQ TIVO is up 12 and has tagged its highest point since mid December after yesterday s earnings report featured an announcement that it s looking at strategic alternatives TiVo s hired LionTree Advisors suggesting M A activity on the horizon JPMorgan NYSE JPM took the opportunity to reiterate its stance that the company could be worth in the mid 20 range in a leveraged buyout Shares are currently at 15 15 The firm s Sterling Auty updated his price target to 30 which includes 7 share in value from resolving Comcast NASDAQ CMCSA as a customer and implies nearly 100 upside h t Bloomberg Earnings call transcript Now read |
JPM | Illinois Cook County extends tax deadline due to bank glitch | Reuters JPMorgan Chase Co N JPM said on Wednesday that Illinois Cook County which includes the city of Chicago will extend the property tax deadline for online taxpayers due to a computer glitch at the U S bank The deadline will be pushed to 11 59 p m on March 2 for anyone paying the first installment of their 2017 Cook County property tax online the bank said in a statement An issue with the bank s online property tax payment system prevented taxpayers from making payments late on Wednesday morning JPMorgan said It did not provide further details JPMorgan said it was working to restore service as soon as possible |
JPM | Exclusive Pimco economist Clarida seen as front runner for Fed deputy job | By Jonathan Spicer and Jennifer Ablan NEW YORK Reuters Richard Clarida an economist at fund manager Pimco has emerged as a front runner to become the Federal Reserve s next vice chair according to two people familiar with the effort to fill the depleted upper ranks of the U S central bank The White House has interviewed Clarida seen by Republicans as a safe pair of hands and at least three other prospects for the job in the last couple of months Clarida 60 has been mentioned among leading candidates in recent weeks but this is the clearest indication he has emerged as a top contender after the job interviews He is the front runner one of the two people said of Clarida who besides working for the bond giant Pimco also teaches at the Columbia University s economics department and worked as an assistant U S Treasury secretary under George W Bush President Donald Trump s administration has yet to decide who it will ultimately pick to help steer the U S economy through a potential growth burst and an unprecedented leadership transition toward a more Republican leaning Fed under new Chairman Jerome Powell The vice chair job vacant since Stanley Fischer stepped down in October is considered one of the most influential Fed positions alongside the chair and the head of the New York Fed There is also a short list for that job after current New York Fed President William Dudley announced plans to retire by mid year people familiar with that search told Reuters It will be New York Fed directors not the White House who will chose his successor Reuters spoke to candidates and those close to them people in contact with White House officials searching for Fischer s successor and with people in contact with New York Fed directors Most spoke under condition of anonymity due to the sensitivity of the interviews Janet Yellen handed the reins to Powell in early February That left four of seven governor jobs vacant and marked a historic overhaul of Fed leadership that has raised uncertainty over U S interest rate policy in response to tax cuts more government spending and hints of inflation For now Powell says the Fed will continue gradually raising rates despite the risk of an overheating economy But that approach could shift depending on the views of the new Fed vice chair and new president in New York who serves as vice chair of the policy making committee You have that triumvirate and those three really shape policy said a former U S central banker who has been in touch with some of the candidates for both deputy jobs NO RADICAL VIEWS Clarida managing director and monetary policy analyst at Pacific Investment Management Co would likely align ideologically with the centrist Powell He has argued that the Fed will probably not be able to raise rates as much as in past cycles but also warned in December that investors may be a little too relaxed about the threat of higher inflation When Trump nominated Powell in November Clarida welcomed the choice We believe Jerome Powell is a smart choice for Fed chair Clarida wrote in his regular Pimco blog He is likely to provide continuity in the monetary policy framework developed by the Yellen Fed for a gradual normalization of the policy rate and a predictable reduction in the Fed s balance sheet Clarida also said Powell would probably back prudent adjustments in financial regulation Some media reported that Barack Obama considered naming Clarida as a Fed governor in 2011 before eventually going with Powell The two people familiar with the search told Reuters Clarida had the best shot at getting the nod from Trump a Republican One of them said Clarida has benefited from the endorsement of John Taylor a Stanford University professor and favorite of conservatives in Congress who himself was in the running last year for the Fed chair Taylor declined to comment He doesn t have any particularly radical views that would translate to any departure from what policy has been said Jeffrey Frankel a professor at Harvard Kennedy School who worked with Clarida at the National Bureau of Economic Research The White House has also interviewed Cleveland Fed President Loretta Mester a pragmatic hawk on policy with more than three decades of Fed experience Mohamed El Erian chief economic adviser at Allianz SE DE ALVG and a former International Monetary Fund deputy director and John Williams who was Yellen s deputy at the San Francisco Fed before succeeding her in 2011 Reuters and other media previously reported all were under consideration The White House declined to comment on Clarida as did the four candidates via spokespeople for their firms or Fed banks HORSE RACES In New York where formal job interviews began in January people familiar with the search said the short list included former NYU Stern dean Peter Blair Henry former New York Fed markets chief Brian Sack who is now at D E Shaw and JPMorgan NYSE JPM Chase s chief regulatory affairs officer Sandie O Connor Current New York Fed markets chief Simon Potter former Treasury deputy secretary Mary Miller and UBS economist Seth Carpenter also formerly of Treasury were also in the mix those people said The New York Fed s president has a permanent vote on policy and serves as the central bank s eyes and ears on Wall Street Two people said Dudley privately favored Henry though another person close to Dudley said he has not formally endorsed anyone It was not clear whether there were front runners now and when a decision would be made The New York Fed declined to comment Those on the short list either declined to comment or did not respond to requests The Trump administration appeared closer than the New York Fed to a decision in part because of the Fed Board vacancies according to those familiar with both search efforts Powell was playing a larger role than his predecessors in making his views known to the White House and to the New York Fed four people told Reuters with two noting he has stressed monetary policy expertise and has discussed specific names Two sources said he had supported Williams for vice chair but they noted his candidacy may be in doubt after the White House considered others including Mester for the job following his interview in January One person said Gary Cohn Trump s chief economic advisor backed El Erian Powell has no formal role in selecting Fed governors though the White House typically seeks the chair s advice He and the Fed Board must approve the nominee for New York Fed president Clarida would shore up the ranks of professional economists at the Fed where eight of 15 current policymakers have PhDs
However his nomination could stoke criticism over lack of diversity at the central bank Trump s other picks Powell Vice President for Supervision Randal Quarles and governor nominee Marvin Goodfriend who faces a narrow Senate confirmation vote are also white male and Republican |
C | Exclusive Small Puerto Rican bank halts Venezuela correspondent services source | By Corina Pons CARACAS Reuters A small Puerto Rican bank that had been helping Venezuela carry out international trade operations has halted those services because of concerns about the reputational risks of doing so a finance industry source with knowledge of the situation has told Reuters Venezuelan President Nicolas Maduro last year tapped San Juan based Italbank a little known institution to serve as a financial intermediary for food and medicine imports after global bank Citigroup Inc N C halted certain services and closed an account with Venezuela s central bank Italbank will no longer provide the service known as correspondent banking the source said citing several rounds of U S sanctions that have further deepened Venezuela s economic crisis and its struggles to pay its foreign debt Venezuela is in the eye of the storm and the reputational risk is too high said the source who asked not to be identified Italbank s decision will not affect the payment on the country s distressed bonds several of which are already in default because of payment delays since Italbank was not involved in such operations But it may make it more difficult for Venezuela to import basic goods Italbank run by Venezuelan entrepreneur Carlos Dorado declined to comment Venezuela s information ministry did not immediately respond to a request for comment The bank which operates under an offshore banking license in Puerto Rico a U S territory opened in 2008 and says on its website it is focused on the Latin American market It has a single office in San Juan and largely carries out operations online or by telephone U S President Donald Trump this year prohibited U S banks from buying newly issued Venezuelan debt and barred citizens from meeting with a group of top government officials accused of involvement in human rights abuses and drug trafficking Venezuelan Vice President Tareck El Aissami said on Nov 13 during a creditors meeting in Caracas that Venezuela had been unable to make 39 million in foreign purchases because the funds had been returned by banks according to a report by Torino Capital which had representatives in the meeting It was not immediately evident if Italbank had been involved in those operations And it is not clear what other institutions if any are providing correspondent services to Venezuela Venezuela had been relying earlier this year on Florida based Eastern National Bank which is partly owned by Venezuelan bank regulator Sudeban for correspondent banking services Dorado and a Venezuelan government source said in March Eastern National Bank did not respond to questions left via voice mail as to whether it was providing such services Venezuela s relationship with global banks has further been strained by a 15 year old currency control system that requires businesses to acquire dollars through the government rather than private banks Maduro this month said the country would restructure its foreign debt but also vowed to continue paying down its bonds Even though Venezuela and state oil company PDVSA PDVSA UL have this month made numerous late bond payments bondholders have not yet taken action because the securities offer enormous returns and because government officials have promised to continue to pay |
C | Draft bill ups pressure on Australia government to probe banks | By Paulina Duran SYDNEY Reuters A rebel member of Australian Prime Minister Malcolm Turnbull s coalition government is circulating a draft bill to step up pressure for an official inquiry into the country s scandal hit banks Although the prime minister has staked much political capital on defending the banks his government s control of parliament is teetering over a citizenship crisis giving the bill a chance of passing by the end of the year A banking inquiry would turn up the heat on the country s Big Four banks which have been grilled by cross party parliamentary committees over scandals including providing misleading financial advice insurance fraud and rate rigging The draft bill reviewed by Reuters was being circulated late this week by Barry O Sullivan a senator of the junior coalition partner the National Party It calls for a wide ranging inquiry to appeal across the political divide Turnbull has previously rejected public and opposition calls for an inquiry into the banks but the leader of the Liberal National led coalition is languishing in opinion polls and has lost his majority in the lower house Several lawmakers were forced to quit because they had dual citizenship making them ineligible for office under the constitution The bill suggests the probe should have the same powers as a Royal Commission including being able to compel executives to testify under oath to demand documents and to recommend both prosecution and legislation It proposes a wide ranging investigation including whether banks insurers and superannuation funds were engaged in unethical or unlawful behavior and whether a new independent regulatory body should be established The inquiry would report to a group of three commissioners appointed by the senate the draft bill says To fend off an inquiry and calls for a Royal Commission Citigroup NYSE C banking analysts said on Friday in a note to clients that Turnbull s government would propose the banks enter into private mediation However they said the banks might reject the idea They may form the view that they will get a Royal Commission under a Labor Government in any case Citigroup analysts wrote in a note to clients on Friday a reference to the opposition party that is gaining ground as Turnbull s coalition languishes It is still our view the Prime Minister and the Treasurer will oppose a Royal Commission or Parliamentary Commission of Inquiry in the event the banks reject this proposal A Treasurer spokesman said the Citigroup claims are completely false and the report is misinformed We are having individual and direct discussions with the banks Commonwealth Bank of Australia AX CBA the biggest of the Big Four faces claims of systemic breaches of money laundering and counter terrorism financing laws that could result in billions of dollars in fines and damages Australia and New Zealand Banking Group Ltd AX ANZ and National Australia Bank Ltd AX NAB earlier this month agreed to pay A 50 million 38 million each to settle interest rate rigging cases Westpac is contesting the same allegations
Anna Bligh the head of the sector s lobby group had said Australia already had one of the most highly regulated finance sectors in the world and another inquiry would not help to improve confidence in the banking sector |
C | OPEC Clash With U S for Oil Supremacy Near Day of Reckoning | Bloomberg The clash between OPEC and America s oil industry is reaching a day of reckoning
The U S shale revolution is on course to be the greatest oil and gas boom in history turning a nation once at the mercy of foreign imports into a global player That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel forcing them into an alliance with long time rival Russia to keep a grip on world markets
So far it s worked global oil stockpiles are draining and prices are near two year highs But as the Organization of Petroleum Exporting Countries and Russia prepare to meet in Vienna this week to extend production cuts ministers have little idea how U S shale production will respond in 2018
The production cuts are effective it was absolutely the right decision and the fact of striking a deal with Russia was crucial said Paolo Scaroni vice chairman of NM Rothschild Sons and former chief executive officer of Italian oil giant Eni SpA Nonetheless OPEC has not the same power The U S becoming the biggest producer of oil in the world is a dramatic change
For OPEC members the stakes couldn t be higher Saudi Arabia s Crown Prince Mohammed Bin Salman is embarking on a radical economic transformation of the kingdom including a partial sale of its state oil company that could be the largest public offering in history Venezuela reeling from years of recession and a crushing debt burden is on the brink of political implosion
Eroding Surplus
The producers efforts to clear the oil surplus are starting to pay off They ve drained excess inventories in developed nations this year by 183 million barrels or more than half of the glut which now stands at about 140 million barrels according to OPEC data That has revived London traded crude futures which sank below 45 a barrel this summer to a two year high of 64 65 on Nov 7
That success goes some way to countering accusations that OPEC had lapsed from the dominant market force of the 1970s and 1980s into irrelevance Although its 14 members still pump 40 percent of the world s oil their share has dwindled from the days when OPEC held the global economy in thrall
People may have thought that OPEC was dead but Saudi Minister Khalid Al Falih has succeeded in building agreements and alliances within OPEC and non OPEC such as Russia to restrain production said Luis Giusti an adviser at the Center for Strategic and International Studies and former CEO of state run Petroleos de Venezuela SA
Losing Momentum
There are even signs that OPEC s opponents the dozens of drillers tapping shale oil deposits in Texas and North Dakota are losing momentum Companies may have already squeezed costs and maximized productivity as much as possible and their investors are finally insisting profits are returned to them rather than re invested in more drilling
Mark Papa CEO of Centennial Resource Development Inc and considered one of the industry s founders said in September that shale is not nearly the Big Bad Wolf that everybody thinks
A year long ramp up in drilling by American operators appeared to hit a plateau in July data from Baker Hughes show and companies such as Pioneer Natural Resources Co have lowered their output targets
The outlook for shale is so clouded that when OPEC officials invited industry experts to brief them on the topic last week they were disturbed by the diversity of opinions Veteran crude trader Andy Hall whose decision to close his main hedge fund this year was partly driven by shale s unpredictability told the organization that 2018 growth estimates vary from 500 000 barrels a day to 1 7 million a day
Yet the basic paradox confronting OPEC is that the more it succeeds in bolstering prices the more it emboldens shale explorers and other competitors said Mike Wittner head of oil market research at Societe Generale PA SOGN SA in New York
Increases in U S oil production next year will be big enough to cancel much of the sacrifices made by OPEC and Russia leaving the surplus more or less intact forecasts from the International Energy Agency show The recent rebound in prices could energize shale even further
Instead of being able to declare victory next year and restore the production they ve halted OPEC may find itself trapped in an open ended struggle Wittner said
Catch 22
Now that they re in it I don t see how they get out of it said Wittner They need to continue supply management for the foreseeable future
The need to cooperate indefinitely could strain the Saudi Russia partnership
While the Saudi Russia alliance has allowed them to call a truce in the battle for market share they may end up fighting over customers again when faced with a relentless tide of crude exports from the U S said Ed Morse head of commodities research at Citigroup Inc NYSE C in New York
With U S crude exports climbing from close to zero three years ago to now exceeding the combined shipments of OPEC s smallest members it increasingly looks as if the face off between the cartel and what was formerly its biggest customer has an endgame Morse said
And the endgame is there s an awful lot of shale in the world |
C | Moving Average Crossover Alert Citigroup | Citigroup Inc NYSE C is looking like an interesting pick from a technical perspective as the company is seeing favorable trends on the moving average crossover front Recently the 50 Day Moving Average for C broke out above the 200 Day Simple Moving Average suggesting a short term bullish trend This has already started to take place as the stock has moved higher by 2 4 in the past four weeks Plus the company currently has a Zacks Rank 2 Buy suggesting that now could definitely be the time for this breakout candidate More bullishness may especially be the case when investors consider what has been happening for C on the earnings estimate revision front lately One estimate has gone lower in the past two months compared to 7 higher while the consensus estimate has also moved higher too So given this move in estimates and the positive technical factors investors may want to watch this breakout candidate closely for more gains in the near future You can see Breakout Biotech Stocks with Triple Digit Profit PotentialThe biotech sector is projected to surge beyond 775 billion by 2024 as scientists develop treatments for thousands of diseases They re also finding ways to edit the human genome to literally erase our vulnerability to these diseases Zacks has just released Century of Biology 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance Our recent biotech recommendations have produced gains of 98 119 and 164 in as little as 1 month The stocks in this report could perform even better |
C | Why Is Citigroup C Down 5 8 Since Last Earnings Report | It has been about a month since the last earnings report for Citigroup C Shares have lost about 5 8 in that time frame underperforming the S P 500
Will the recent negative trend continue leading up to its next earnings release or is Citigroup due for a breakout 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 Citigroup Q1 Earnings Beat Estimates on Lower ExpensesCitigroup delivered a positive earnings surprise of 5 1 in first quarter 2019 backed by expense control Earnings per share of 1 87 for the quarter handily outpaced the Zacks Consensus Estimate of 1 78 Also earnings climbed 11 year over year Adjusted net income was 4 7 billion up 2 year over year Citigroup displayed prudent expense management during the reported quarter Moreover higher fixed income revenues along with loan growth were positives Further investment banking revenues escalated on strong advisory business and higher debt underwriting partly offset by lower equity underwriting fees In addition lower equity market revenues amid challenging trading environment reflect reduced volumes and client activity levels Citigroup s costs of credit for the Mar end quarter were up 7 year over year to 1 98 billion This upside largely underlines elevated net credit losses of 1 9 billion and a credit reserve build of 20 million and provision for benefits and claims of 12 million Expenses Drop Revenues DisappointRevenues were down 2 year over year to 18 6 billion in the first quarter The reported figure also missed the Zacks Consensus Estimate of 18 8 billion Lower revenues from Institutional Clients Group ICG and the wind down of legacy assets in Corporate Other segment were responsible for the downside In the ICG segment revenues came in at 9 7 billion in the quarter down 2 year over year Equity market revenues decreased 24 year over year contributing to lower total markets and securities services revenues down 6 However fixed income market revenues were up 1 and total banking revenues rose 8 aided by strong advisory business GCB revenues increased slightly year over year to 8 5 billion Higher revenues in North and Latin America were offset by lower revenues in Asia GCB Corporate Other revenues came in at 431 million slipping 27 from the prior year quarter The decline mainly underscores wind down of legacy assets Operating expenses at Citigroup dipped 3 year over year to 10 6 billion Efficiency savings and the winding down of legacy assets muted the ongoing investments Strong Balance SheetAt the end of the quarter Citigroup s end of period assets was 1 96 trillion up 2 sequentially The company s loans inched up 1 sequentially to 682 billion Deposits increased 3 sequentially to 1 03 trillion Credit Quality ImprovesTotal non accrual assets decreased 13 year over year to 3 8 billion The company reported a dip of 14 in consumer non accrual loans to 2 2 billion In addition corporate non accrual loans of 1 5 billion slipped 11 from the year earlier period Citigroup s total allowance for loan losses was 12 3 billion at the end of the quarter or 1 82 of total loans compared with 12 4 billion or 1 85 recorded in the year ago period Solid Capital PositionAt the end of the Jan Mar period Citigroup s Common Equity Tier 1 Capital ratio was 11 9 down from 12 1 in the prior year quarter The company s supplementary leverage ratio for the quarter came in at 6 4 down from 6 7 in the year earlier quarter As of Mar 31 2019 book value per share was 77 09 up 8 year over year and tangible book value per share was 65 55 up 7 from the comparable period last year Capital DeploymentDuring first quarter 2019 the company bought back about 66 million of common stock and returned around 5 1 billion to common shareholders as common stock repurchases and dividends OutlookIn second quarter 2019 management expects to return to year over year revenue growth In ICG in the fixed income and equity markets given the slower start to the year same magnitude of seasonal decline in revenues as witnessed in the prior years in the second quarter on a sequential basis is unlikely Investment Banking revenues are expected to trend down year over year Nevertheless continued year over year growth in core businesses across TTS Security Services Corporate Lending and the Private Bank are anticipated on global network of clients On the consumer side in North America continued year over year revenue growth with US Branded Cards is likely to occur In Asia year over year revenue growth is expected to improve on continued growth in accrual businesses and reduced headwinds from investment revenues Further in Mexico year over year revenue growth is likely to be subdued given strong growth and performance in the second quarter 2018 although continued growth in pre tax earnings is anticipated Management estimates expenses in the second quarter to be roughly flattish on a year over year basis and cost of credit will continue to reflect loan growth and normal portfolio seasoning For 2019 management continues to expect modest revenue growth flattish expenses and higher but manageable cost of credit along with continued balance sheet and capital optimization to drive improved returns for shareholders Looking forward management expects the NIR percent to decline in the second quarter based on seasonality and for 2019 spreads are expected to remain at a level similar to or slightly higher than fourth quarter 2018 For the remainder of 2019 management projects a modest pre tax quarterly loss in Corporate Other segment On a full year basis management expects to generate at least 2 billion of growth in net interest revenue year over year Though no mid year rate increase in 2019 is assumed the anticipated benefit from the rate hike was relatively lower at less than 100 million of incremental revenues Further total non interest revenue is expected to remain flat year over year Management expects loan growth to trend higher similar to recent levels in the second quarter For U S Branded Cards NCL rate is anticipated in the range of 300 to 325 basis points for 2019 NCL rate for Retail Services are expected in the range of 500 basis points to 525 basis points Full year RoTCE of 12 is targeted for 2019 and more than 13 5 for 2020 In addition on the expense side management noted that efficiency saving significantly outpaced incremental investments in the second half of 2018 realizing a net benefit to expenses of roughly 200 million This amount is likely to increase to around 500 600 million of net incremental savings in 2019 along with an additional 500 600 million of net incremental benefits in 2020 These net savings should offset volume driven expenses on ongoing investments in the business Moreover positive operating leverage the bank as a whole and for consumer and institutional businesses is anticipated in 2019 Management targets efficiency ratio in the low 50 range In addition the company s primary goal is to sustainably improve the return on shareholders equity from the roughly 11 achieved in 2018 to about 12 in the current year and more than 13 5 in 2020 Tax rate is likely to be 23 this year
How Have Estimates Been Moving Since Then
In the past month investors have witnessed an upward trend in fresh estimates
VGM Scores
At this time Citigroup has a poor Growth Score of F however its Momentum Score is doing a lot better with a B However the stock was allocated a grade of D on the value side putting it in the bottom 40 for this investment strategy
Overall the stock has an aggregate VGM Score of F If you aren t focused on one strategy this score is the one you should be interested in
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising Notably Citigroup has a Zacks Rank 3 Hold We expect an in line return from the stock in the next few months |
JPM | 5 Stocks To Buy On Rising Consumer Spending | Better than expected earnings are a clear indication that the corporate sector is having a good time The primary reason for overall gains is that the U S consumer is an emboldened one willing to spend more and more A new report from Macquarie Research suggests that most of the gains being made are in two specific areas ecommerce and services
At a point when the U S economy is poised for growth as reflected in higher GDP numbers it makes perfect sense to invest in that part of the economy which makes the largest contribution Adding stocks from services and ecommerce to your portfolio makes perfect sense at this point
Labor Market Cheap Gasoline Boost Purchasing Power
The labor market is in the pink of health as indicated by this month s labor numbers At a total of 287 000 jobs in June reported data was significantly higher than the consensus estimate of 177 000 Additionally the unemployment rate increased to 4 9 primarily because of a jump on the labor force participation rate read
But what has been making purchasing decisions easier are the lowest gasoline prices in some time A report released earlier this month by JPMorgan NYSE JPM examined how lower gas prices impacted customer last year One of its conclusions was that a fall in gas prices had led to an increase in expenditure on goods and services Spends had gone up for the restaurants and retail categories in particular read
Retail Sales Consumer Confidence Impressive
Data on retail sales and consumer confidence clearly reflected the strength of the consumer at this point Sales at retail stores and restaurants advanced 0 6 in June from the prior month Retail sales also increased 2 7 from the same period last year read
Consumer confidence is also high given the latest University of Michigan consumer sentiment which declined to 89 5 in July Despite the fact it came in below estimates consumer sentiment remains at appreciably high levels
E Commerce Services Primary Gainers
Consumer spending contributes nearly 70 of U S GDP which is why these signs are particularly encouraging According to the report from Macquarie Research most of the expenditure is attributable to ecommerce and services Over the last two years nearly 100 of the increase in consumer expenditure took place on the ecommerce and services categories
Meanwhile the average prices of services have increased by 50 over the last 15 years while prices of goods have gone up by only 8 While outsourcing has reduced the prices of goods services which can t be easily outsourced have accounted for the price increases Over the last year prices of goods have declined by 1 8 In contrast prices of services have gone up 2 2
Our Choices
Overall the report indicates that the outlook for ecommerce and services remains bright However certain categories such as clothing footwear and transport requiring a higher level of industrial involvement should be avoided
Picking stocks from the rest of the large services sector as well as ecommerce looks like a prudent option at this time At the same time it is important to pick winning stocks
This is where our comes in Here V stands for Value G for Growth and M for Momentum and the score is a weighted combination of these three scores Such a score allows you to eliminate the negative aspects of stocks and select winners However it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score
Stamps com Inc NASDAQ STMP is a leading provider of Internet based postage services
Stamps com has a Zacks Rank 1 Strong Buy and a VGM Score of B The company has expected earnings growth of 37 6 for the current year
Five Star Quality Care Inc NASDAQ FVE is in the business of leasing and operating senior living facilities including senior apartments assisted living facilities congregate communities and nursing homes
Five Star Quality Care has a Zacks Rank 2 Buy and a VGM Score of A The company has expected earnings growth of 91 7 for the current year Its earnings estimate for the current year has improved by 66 7 over the last 30 days
Liberty TripAdvisor Holdings Inc s NASDAQ LTRPA businesses consist of its subsidiaries TripAdvisor and BuySeasons through which it operates in the online travel information and ecommerce industries
Liberty TripAdvisor has a Zacks Rank 2 and a VGM Score of B The company has expected earnings growth of more than 100 for the current year
Carrols Restaurant Group Inc NASDAQ TAST is a franchisee of Burger King restaurants across 16 states in the U S
Carrols Restaurant has a Zacks Rank 2 and a VGM Score of A The company has expected earnings growth of 48 7 for the current year The forward price to earnings P E ratio for the current financial year F1 is 22 65 lower than the industry average of 22 89
Diamond Resorts International Inc NYSE DRII is an operator of hospitality facilities and also offers vacation ownership options
Diamond Resorts has a Zacks Rank 2 and a VGM Score of A Its earnings estimate for the current year has improved by 0 2 over the last 30 days It has a P E F1 of 14 73 which is lower than the industry average of 18 00 |
MS | Fed rate hike Morgan Stanley more dovish than consensus and markets | Investing com As the countdown begins to the Federal Reserve s Fed next policy decision on July 27 Morgan Stanley NYSE MS took the possibility for a rate hike either this year or in 2017 completely off the table and revealed themselves to be more dovish on the possible return to monetary policy normalization than both the consensus of economists and financial markets
The economy is slowing further progress in the labor market has stalled inflation is low and inflation expectations have fallen precipitously Morgan Stanley said in a report released on Sunday
Is there anything in this description of current conditions that would inform policymakers further rate hikes are warranted No these analysts concluded
In its prior Fed policy outlook Morgan had expected one hike to arrive in December and had penciled in another two for 2017
Given the starting point of low growth the downside risk from a wide range of economic uncertainty has to be given more weight in policy deliberations compared with consideration of more benign scenarios they explained
Given the heightened uncertainties around the global outlook the level of financial conditions will need to remain neutral to accommodative to support growth these experts suggested concluding that the Fed will need to remain on the sidelines
Morgan Stanley s report was more dovish than a recent survey of economists that suggested the possibility of monetary tightening in December
In a Wall Street Journal monthly survey released last week half of the 60 economists surveyed expected the Fed to hike in December
Markets were slightly more dovish than the WSJ survey with Fed fund futures putting the odds for a December rate hike at only 42 6 on Monday
Still financial markets seemed slightly more hawkish than Morgan Stanley with the probability for policy tightening passing the 50 threshold for the May 3 2017 decision according to the CME Group FedWatch tool |
MS | Morgan Stanley sees no U S rate hike this year nor 2017 | Investing com Morgan Stanley NYSE MS analysts see no U S rate hike this year and next It said economy is slowing while inflation expectations haven fallen Morgan Stanley previously expected one hike in December and possibly two in 2017 A WSJ survey last week showed half of 60 economists polled expect December hike Fed fund futures Monday put the odds for a December hike at 42 6 |
MS | Oil prices slide amid rise in crude fuel supplies | By Barani Krishnan NEW YORK Reuters Oil prices fell more than 1 percent on Monday after rising stockpiles of crude and refined fuel intensified fears of another major glut building Market intelligence firm Genscape reported that the Cushing Oklahoma delivery hub for U S crude futures saw a supply build of 26 460 barrels in the week to July 15 traders who saw the data said Morgan Stanley NYSE MS said it still expected a supply demand rebalancing in oil by mid 2017 but added that fundamental headwinds were growing the market Tail risks are admittedly large in both directions as geopolitics add to uncertainty An attempted coup in Turkey barely supported the market as Istanbul s Bosphorus Strait which handles about 3 percent of global oil shipments mainly from Black Sea ports and the Caspian region reopened from a brief closure Brent crude LCOc1 was down 84 cents or 1 8 percent at 46 77 a barrel by 12 41 p m EDT 1641 GMT It fell more than 1 earlier to an intraday low of 46 50 U S West Texas Intermediate WTI crude CLc1 slid by 82 cents or 1 8 percent to 45 13 a barrel after a session low of 44 86 Prices came off session lows after a labor union said a 24 hour strike on July 26 by Wood Group L WG oil and gas maintenance workers employed at Royal Dutch Shell s L RDSa platforms in the North Sea will severely disrupt operations We are maintaining a bearish trading stance as we still see an ultimate price downdraft in WTI and Brent to about 37 and 38 areas respectively said Jim Ritterbusch of Chicago based oil markets consultancy Ritterbusch Associates Morgan Stanley said in a report that demand for fuels such as diesel and gasoline were lagging petrochemicals clouding the outlook for oil A rapid rise of non petroleum products demand is boosting total product demand but this is unhelpful for crude oil Based on the latest data even our tepid 800 000 barrels per day growth estimate for global crude runs looks too high it said U S gasoline and distillate stocks surged unexpectedly last week government data showed crimping margins for refiners at the height of summer driving season when demand for fuels were generally healthy Oil prices are up nearly 75 percent since hitting 12 year lows of around 27 for Brent and about 26 for U S crude in the first quarter The rally has stalled since the two benchmarks breached the 50 a barrel mark in May as worries grew that higher prices will fuel more production
Hedge funds last week cut their bullish bets on Brent to the lowest since February even they raised their positive wagers on U S crude data showed |
MS | Saudi conglomerate Binladin pulls back from financial precipice | By Katie Paul RIYADH Reuters Saudi Binladin Group the kingdom s biggest construction conglomerate appears to have pulled back from the brink of a financial crisis that risked damaging the wider economy SBG was hard hit last year as low oil prices forced the government its chief customer to cancel or suspend projects and delay payments It was then barred from receiving new state contracts altogether after one of its cranes toppled into Mecca s Grand Mosque during a storm killing 107 people Facing a severe cash squeeze it has been forced to halt work at a string of projects and lay off thousands of staff Many of its foreign workers in Jeddah Mecca and Riyadh did not receive their salaries for months Some staged public protests and in once case they set company buses on fire But the government has taken a more benign approach to SBG in the past three months letting it resume bidding for new contracts and according to banking and construction industry sources making some long overdue payments to the group This has helped the firm pay salaries to some 10 000 workers secure a 2 5 billion riyal 667 million loan from local banks repay bondholders and resume work at some stalled projects An SBG spokesman declined to discuss details of the conglomerate s finances or the status of its projects Riyadh has a strong incentive to keep SBG afloat The group s health matters to the Saudi banking system and wider economy because of its large debt it is estimated to owe local and foreign banks a total of about 30 billion and its involvement in many of the kingdom s most important projects Continued turmoil at the company could also have a ripple effect on its large network of suppliers SBG still faces a challenging future however The group may never regain the preferential access to big projects and control over pricing that it enjoyed for decades bankers and analysts say an example of the pressures that Saudi Arabia s family business empires face as cheap oil forces the kingdom to restructure its economy Binladin has enjoyed for a long time a very privileged position that will probably go and never come back said a senior banker in the region declining to be named because of commercial sensitivities David Butter a business analyst at the Chatham House think tank in London said The whole system has gotten a bit sloppy and complacent over the past 10 to 15 years in an environment where there have been no constraints on spending You ve had companies able to count on a sweetheart system whereby contracts were allocated among an elite group Now perhaps there s space for other companies The crisis over the past year and Saudi Arabia s new economic realities have forced SBG to seek to reduce its reliance on government revenue It has hired overseas experts and drawn up a new business plan which executives have been presenting in talks with creditors Banking sources briefed on the plan say the group will aim for more modest growth and focus more on private sector leisure projects and overseas business EXPOSED SBG benefited for many years from close ties with the government Mohammed Binladin a Yemeni immigrant who founded the group in the 1940s distinguished himself as a dependable partner by building palaces for the kingdom s expanding line up of princes SBG became a behemoth with hundreds of subsidiaries But as the business grew the group tolerated cost overruns and poor bookkeeping confident that it could secure additional financing from its royal patrons said bankers employees and construction industry sources Saudi Binladin Group is a family business that ballooned based on relationships said a construction executive who worked with SBG for over a decade As they started to grow in scale they developed inefficiencies That left SBG severely exposed as low oil prices caused the government to cut spending and left it reeling when it was subsequently banned from receiving state contracts The cash squeeze over the past year has forced the company to halt work at projects including Jeddah s new King Abdulaziz International Airport and the King Abdullah Financial District in Riyadh Work also stopped at Abraj Kudai a gaudy 3 5 billion 45 storey luxury hotel in Mecca that is to feature royal floors and rooftop helipads It slowed for several months at Jeddah Tower designed to be the world s tallest building REFORM DRIVE The cash crunch has now partially eased The government let SBG resume bidding for new state projects in May and made some delayed payments to the group The brighter outlook helped the company secure the 2 5 billion riyal Arab National Bank SE 1080 and Saudi British Bank SE 1060 around the same time according to banking sources SBG resumed work at the Jeddah airport in early June and repaid holders of a 1 billion riyal Islamic bond maturing late that month albeit after a delay The company has hired about 30 finance and management professionals from overseas including former Morgan Stanley NYSE MS banker Klaus Froehlich as chief financial officer and drawn up the new business plan The SBG spokesman said it had finished laying off and compensating about 70 000 foreign workers reducing staff numbers from about 200 000 over the past several months a purge which bankers see as positive The group remains under pressure however It has asked banks to extend an 817 million riyal loan that matured last week and was being used to fund construction at the Grand Mosque with government payments for the project still delayed according to sources familiar with the matter Ultimately bankers willingness to extend credit may depend on SBG s relations with the government An economic reform drive launched by authorities last month emphasizes cost cutting and efficient use of state money which could affect SBG s business Big family conglomerates in Saudi Arabia are also under pressure from authorities to invest more in the economy now that oil prices are low This has become a source of friction between SBG and the government bankers said All of the major family business groups in this country have done very well under an economic system that is on its way to reform said the senior banker
But time will tell whether the government s reforms work he added They re taking on some strong vested interests |
JPM | JPMorgan Expects New Profit Record With Help From Trump the Fed | Bloomberg JPMorgan Chase Co NYSE JPM is the most profitable bank in U S history It expects to keep that title with help from the Fed and Donald Trump
Higher U S interest rates engineered by the Federal Reserve and lower corporate taxes spearheaded by the Trump administration translate into about 7 billion more in pretax profit in coming years JPMorgan said Tuesday in a presentation Annual earnings may jump by a third from last year s high point based on the lender s forecasts
The gains give Chief Executive Officer Jamie Dimon room to plow money into technology investments 400 new branches and a massive new corporate headquarters on Park Avenue It also bolsters Dimon s years long contention that the bank could accelerate profits once it got more help from monetary policy and politicians
Management continues to play the long game and build even bigger competitive moats around each of its businesses Glenn Schorr an Evercore Inc bank analyst wrote in a note to investors The firm is making investments that some smaller and or less profitable peers can t fully do
The bank s two sources of revenue net interest income and non interest fees may both jump to about 55 billion in 2018 the company said JPMorgan boosted its outlook for medium term pretax income to as much as 47 billion from about 40 billion in 2017 and said the U S tax overhaul will boost return on tangible common equity up to 3 percentage points
The more optimistic outlook appears reasonably consistent with our forecast and entirely consistent with a franchise focused on investment and well positioned for profitable growth Credit Suisse SIX CSGN Group AG analysts led by Susan Roth Katzke said in a note
The bank s forecasts equate to annual net income of 33 billion to 36 billion according to Jefferies LLC analyst Ken Usdin That s up significantly from the 27 billion the bank produced over the 12 months ended in September
The shares fell 0 2 percent to 118 50 at 12 43 p m in New York
Along with rising interest rates JPMorgan expects a large windfall from the Republican tax overhaul passed last year While the bank said last month it would boost wages for some workers and expand branches in response to the tax cuts much of the benefit will fall to shareholders through higher profits
The changes appear to benefit the asset management division the most with the bank forecasting return on equity in that business of about 35 percent up from 25 percent Consumer banking ROE will jump to more than 25 percent from about 20 percent according to the presentation
Favorable Trends
More intense competition will mean some of the tax benefit will flow to customers as well the bank said
While relatively strong we view its medium term targets as generally in line with expectations Barclays LON BARC Plc analysts led by Jason Goldberg wrote in a note to investors
Non interest expenses will rise to less than 62 billion in 2018 from 58 5 billion this year as the company increases spending on investments such as technology which will get about 1 4 billion more according to the forecast The figure compared with the 61 billion projected by analysts at Credit Suisse |
JPM | Asian shares slide as weak China Japan manufacturing data add to Fed worries | By Swati Pandey SYDNEY Reuters Asian shares extended losses on Wednesday as weak Chinese and Japanese manufacturing data revived worries about global growth amid anxiety over faster rate rises in the United States MSCI s broadest index of Asia Pacific shares outside Japan slipped more than 1 percent its biggest daily percentage drop since Feb 9 when world financial markets were battered by concerns U S inflation is picking up The index is now down nearly 5 percent in February Japan s Nikkei stumbled 1 percent on a slightly firmer yen China s blue chip CSI300 skidded 0 6 percent while Shanghai s SSE LON SSE Composite fell 0 8 percent and Hong Kong s Hang Seng index declined more than 1 percent In an indication of the dour mood S P E Mini futures slipped 0 1 percent while FTSE futures were off 0 6 percent Asian markets had opened mildly lower but selling intensified after data showed growth in China s manufacturing sector in February slowed more than expected to the weakest in over 1 1 2 years Growth in China s services industry also slowed suggesting the key sector was starting to display signs of fatigue The weakness was driven by disruption due to the Lunar New Year holidays and curbs to factory output from tougher pollution rules but there are worries of a bigger loss in momentum Julian Evans Pritchard senior China Economist at Capital Economics said the the risk is still that the economy fares worse this year than is generally expected Some analysts cautioned the timing of the long holiday may have skewed the activity readings In Japan the world s third largest economy industrial output in January took its biggest tumble since a devastating earthquake in March 2011 highlighting a weakening in demand and a build up of inventory Growth in India s factory activity slowed too in February Sentiment across financial markets was already sour after Fed s Jerome Powell gave an upbeat view of the U S economy on Tuesday and said recent data had strengthened his confidence on inflation When asked about likely catalysts for more than three rate hikes in 2018 he said each member would write a new dot plot rate path ahead of the March meeting and that he wouldn t want to prejudge that outcome Rate futures fell following Powell s remarks as traders began pricing in about a one in three chance of a fourth hike this year Fears of faster U S rate hikes have caused anxiety that other central banks will start to tighten policy and raise borrowing costs That would in turn hurt corporate earnings clouding the outlook for what had been expected to be another solid year of global economic growth Today s comments appear to open the door for others on the Fed Committee to revise their forecast as they see fit and that Powell himself may be inclined to look for four hikes this year JPMorgan NYSE JPM economist Michael Feroli said in a note The Fed moved three times in 2017 and is seen as certain to do the same or more this year with the first move expected as early as March CURRENCIES The dollar held on to gains after rallying against most major currencies on Tuesday It hovered near a recent 1 1 2 month top against the Australian dollar and held near a three week high on the euro at 1 2221 However it did not fare well against the Japanese yen a perceived safe haven The dollar was last down 0 2 percent at 107 10 yen Dollar bulls were wrongfooted after the Bank of Japan announced it would trim the amount of super long Japanese government bonds it offered to purchase at its regular debt buying operation Analysts are predicting a stronger yen this year despite faster U S rate rises although speculators and Japanese retail investors have built huge short positions in yen futures setting the scene for a massive shakeout In commodities oil prices extended declines on weak output data from China and Japan and as an industry data showed an increase in U S crude stockpiles Brent crude futures fell 40 cents to 66 23 a barrel while U S crude was last down 33 cents at 62 68 Spot gold eased to 1 317 61 an ounce not far from Tuesday s 1 313 26 which was the lowest in three weeks
This version of the story has been refiled to add dropped word in first paragraph |
C | Treasuries Yielding 0 Becoming Reality Again for Japan s Buyers | Bloomberg Treasuries are on a fast track to yielding nothing for investors from Japan And that could spell trouble for bond bulls
For Japanese buyers who use swaps to shield their returns from currency swings the yield on 10 year Treasuries fell as much as 12 basis points Wednesday to 0 24 percent the lowest in more than a year It sparks flashbacks of mid 2016 when hedging costs got so steep and U S rates so low that Treasury yields fell below zero for yen based investors for the first time since the financial crisis
As a result it came as little surprise that Japanese investors looked elsewhere From August to December 2016 they sold Treasuries for five straight months matching the longest streak since 2000 To Jabaz Mathai at Citigroup Inc NYSE C the risk is they ll do it again crimping demand and supporting his straightforward trade idea Sell the long bond
We see no fundamental reason for real yields to break lower Mathai wrote in a note Wednesday Not only are real yields at the low end of the range but the yield pickup for foreign investors especially on an FX hedged basis for Japanese investors has vanished
Japan owned 1 1 trillion of Treasuries as of August second only to China for international buyers Treasury data show For institutional investors with conservative mandates hedging out currency risk when buying U S debt saves them from having to worry about daily swings in exchange rates which can be more volatile than yields
Investors often do that via cross currency basis swaps A Japanese investor pays both the U S Libor rate now 1 42 percent in addition to their local Libor rate at minus 0 04 percent On top of that they have to cover the basis as it s known in the transaction It stands at minus 0 51 percentage point for yen based investors which is close to the most expensive since January
Do The Math
Adding it all up hedging currency risk these days takes away a big chunk of the 2 35 percent yield on 10 year Treasuries for yen based buyers In comparison similar maturity Japanese debt yields about 0 04 percent after years of massive monetary stimulus
For Japanese investors Treasuries have become much less attractive after hedged costs said Tetsuo Ishihara U S macro strategist in the fixed income division of Mizuho Securities USA in New York He said they re shifting to either European sovereign bonds or U S corporate securities
Many clients seek yields of at least 1 percent after hedging Ishihara said
They had their shot earlier this year In February and March the hedged 10 year Treasury yield exceeded 1 percent for Japanese investors That was enough to stem the trend of outflows seen in the second half of 2016
Yet Japan s Treasury holdings are down from their 2017 peak And with the allure seemingly waning bond bulls ought to be on alert for diminished demand from a usually reliable source |
C | Oil Loses Ground on German Political Stalemate OPEC Doubts | Bloomberg Oil notched its fourth decline in five sessions in New York as markets digested political uncertainty in Germany amid anticipation about OPEC s next move
Futures slipped 0 8 percent reversing course after a 2 6 percent gain Friday In Germany the breakdown of talks to form a new government coalition raised questions about the future of Europe s biggest economy That led the U S dollar to rally reducing the appeal of commodities The Organization of Petroleum Exporting Countries meanwhile will be briefed this week by oil service provider Schlumberger Ltd as well as Citigroup Inc NYSE C as the cartel debates whether to extend output cuts at a summit in Vienna Nov 30
The political turmoil in Germany helped strengthen the dollar which tends to depress oil prices said Bill O Grady chief market strategist at Confluence Investment Management in St Louis Data released Friday showed wagers on lower Brent prices rose by the most in five months through the week ended Nov 14 as doubts persist about whether the Saudi Arabia led cuts will be extended
Politically around the world there are just a lot of plates spinning O Grady said in a telephone interview Monday There s potentially a lot of supply out there and the only thing keeping it off the market right now is OPEC discipline
Traders may also be closing out some bullish bets on crude ahead of the Thanksgiving holiday in the U S when light volumes could make it harder to adjust to any bearish news O Grady said What you re seeing is a lot of position squaring he said
West Texas Intermediate for December delivery which expires Monday slipped 46 cents to 56 09 a barrel on the New York Mercantile Exchange after declining 0 3 percent last week Total volume traded was about 20 percent below the 100 day average The more active January contract dropped 29 cents to 56 42
To watch interview with Saudi oil minister on OPEC cuts click here
Brent for January settlement lost 50 cents to 62 22 a barrel on the London based ICE Futures Europe exchange after dropping 1 3 percent last week The global benchmark crude traded at a premium of 5 79 to January WTI
Saudi Arabia has had extensive consultations with Russia Saudi energy minister Khalid Al Falih said on Thursday OPEC will ensure that its exit strategy from the current accord will be a gradual adjustment that prevents the return of any glut he said Oil inventories are unlikely to drain to average levels by the time the OPEC agreement expires at the end of March the minister added
The U S drilling rig count was unchanged at 738 on Friday data from Baker Hughes showed
Oil dipped slightly last week on a weaker demand outlook while Russia cast doubts on the timing of a decision to extend supply cuts An extension still remains likely according to PVM Oil Associates Ltd
It is widely believed that OPEC together with 10 non OPEC countries will roll over their production for the whole of 2018 said Tamas Varga an analyst at PVM in London
Oil market news
Most OPEC members are in favor of extending the supply cuts Iranian Oil Minister Bijan Namdar Zanganeh said according to the state run IRNA news agency
Japan s crude imports from Russia dropped to a five year low in October according to preliminary data from the Ministry of Finance
In the U S Nebraska regulators approved TransCanada Corp s Keystone XL oil sands pipeline Monday but required an alternative route that could offer opponents new avenues to challenge the project |
C | All You Need To Know About Citigroup C Rating Upgrade To Buy | Citigroup C could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank 2 Buy An upward trend in earnings estimates one of the most powerful forces impacting stock prices has triggered this rating change
The Zacks rating relies solely on a company s changing earnings picture It tracks EPS estimates for the current and following years from the sell side analysts covering the stock through a consensus measure the Zacks Consensus Estimate
Since a changing earnings picture is a powerful factor influencing near term stock price movements the Zacks rating system is very useful for individual investors They may find it difficult to make decisions based on rating upgrades by Wall Street analysts as these are mostly driven by subjective factors that are hard to see and measure in real time
Therefore the Zacks rating upgrade for Citigroup basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price
Most Powerful Force Impacting Stock Prices
The change in a company s future earnings potential as reflected in earnings estimate revisions and the near term price movement of its stock are proven to be strongly correlated The influence of institutional investors has a partial contribution to this relationship as these big professionals use earnings and earnings estimates to calculate the fair value of a company s shares An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock and institutional investors typically buy or sell it Their transaction of large amounts of shares then leads to price movement for the stock
Fundamentally speaking rising earnings estimates and the consequent rating upgrade for Citigroup imply an improvement in the company s underlying business Investors should show their appreciation for this improving business trend by pushing the stock higher
Harnessing the Power of Earnings Estimate Revisions
Empirical research shows a strong correlation between trends in earnings estimate revisions and near term stock movements so it could be truly rewarding if such revisions are tracked for making an investment decision Here is where the tried and tested Zacks Rank stock rating system plays an important role as it effectively harnesses the power of earnings estimate revisions
The Zacks Rank stock rating system which uses four factors related to earnings estimates to classify stocks into five groups ranging from Zacks Rank 1 Strong Buy to Zacks Rank 5 Strong Sell has an impressive externally audited track record with Zacks Rank 1 stocks generating an average annual return of 25 since 1988 You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
Earnings Estimate Revisions for Citigroup
For the fiscal year ending December 2019 this U S bank is expected to earn 7 60 per share which is a change of 14 3 from the year ago reported number
Analysts have been steadily raising their estimates for Citigroup Over the past three months the Zacks Consensus Estimate for the company has increased 1 3
Bottom Line
Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations the Zacks rating system maintains an equal proportion of buy and sell ratings for its entire universe of more than 4000 stocks at any point in time Irrespective of market conditions only the top 5 of the Zacks covered stocks get a Strong Buy rating and the next 15 get a Buy rating So the placement of a stock in the top 20 of the Zacks covered stocks indicates its superior earnings estimate revision feature making it a solid candidate for producing market beating returns in the near term
You can learn more about the Zacks Rank here
The upgrade of Citigroup to a Zacks Rank 2 positions it in the top 20 of the Zacks covered stocks in terms of estimate revisions implying that the stock might move higher in the near term |
C | Are You Looking For A High Growth Dividend Stock Citigroup C Could Be A Great Choice | Whether it s through stocks bonds ETFs or other types of securities all investors love seeing their portfolios score big returns But for income investors generating consistent cash flow from each of your liquid investments is your primary focus
While cash flow can come from bond interest or interest from other types of investments income investors hone in on dividends A dividend is the distribution of a company s earnings paid out to shareholders it s often viewed by its dividend yield a metric that measures a dividend as a percent of the current stock price Many academic studies show that dividends account for significant portions of long term returns with dividend contributions exceeding one third of total returns in many cases
Citigroup in Focus
Headquartered in New York Citigroup C is a Finance stock that has seen a price change of 33 52 so far this year Currently paying a dividend of 0 45 per share the company has a dividend yield of 2 59 In comparison the Banks Major Regional industry s yield is 2 84 while the S P 500 s yield is 1 87
Looking at dividend growth the company s current annualized dividend of 1 80 is up 16 9 from last year Citigroup has increased its dividend 4 times on a year over year basis over the last 5 years for an average annual increase of 145 49 Looking ahead future dividend growth will be dependent on earnings growth and payout ratio which is the proportion of a company s annual earnings per share that it pays out as a dividend Citigroup s current payout ratio is 26 meaning it paid out 26 of its trailing 12 month EPS as dividend
Looking at this fiscal year C expects solid earnings growth The Zacks Consensus Estimate for 2019 is 7 60 per share representing a year over year earnings growth rate of 14 29
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages investors like dividends for a variety of different reasons However not all companies offer a quarterly payout
Big established firms that have more secure profits are often seen as the best dividend options but it s fairly uncommon to see high growth businesses or tech start ups offer their stockholders a dividend During periods of rising interest rates income investors must be mindful that high yielding stocks tend to struggle With that in mind C presents a compelling investment opportunity it s not only an attractive dividend play but the stock also boasts a strong Zacks Rank of 2 Buy |
C | Has Citigroup C Outpaced Other Finance Stocks This Year | Investors focused on the Finance space have likely heard of Citigroup C but is the stock performing well in comparison to the rest of its sector peers By taking a look at the stock s year to date performance in comparison to its Finance peers we might be able to answer that question
Citigroup is one of 856 companies in the Finance group The Finance group currently sits at 11 within the Zacks Sector Rank The Zacks Sector Rank gauges the strength of our 16 individual sector groups by measuring the average Zacks Rank of the individual stocks within the groups
The Zacks Rank is a successful stock picking model that emphasizes earnings estimates and estimate revisions The system highlights a number of different stocks that could be poised to outperform the broader market over the next one to three months C is currently sporting a Zacks Rank of 2 Buy
Within the past quarter the Zacks Consensus Estimate for C s full year earnings has moved 1 35 higher This means that analyst sentiment is stronger and the stock s earnings outlook is improving
Based on the latest available data C has gained about 33 52 so far this year In comparison Finance companies have returned an average of 14 14 This shows that Citigroup is outperforming its peers so far this year
To break things down more C belongs to the Banks Major Regional industry a group that includes 16 individual companies and currently sits at 100 in the Zacks Industry Rank On average this group has gained an average of 18 24 so far this year meaning that C is performing better in terms of year to date returns
Going forward investors interested in Finance stocks should continue to pay close attention to C as it looks to continue its solid performance |
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