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C | Citigroup C Q4 Earnings Beat Estimates | Citigroup NYSE C came out with quarterly earnings of 1 61 per share beating the Zacks Consensus Estimate of 1 55 per share This compares to earnings of 1 28 per share a year ago These figures are adjusted for non recurring items
This quarterly report represents an earnings surprise of 3 87 A quarter ago it was expected that this U S bank would post earnings of 1 66 per share when it actually produced earnings of 1 74 delivering a surprise of 4 82
Over the last four quarters the company has surpassed consensus EPS estimates four times
Citigroup which belongs to the Zacks Banks Major Regional industry posted revenues of 17 12 billion for the quarter ended December 2018 missing the Zacks Consensus Estimate by 2 05 This compares to year ago revenues of 17 25 billion The company has topped consensus revenue estimates just once over the last four quarters
The sustainability of the stock s immediate price movement based on the recently released numbers and future earnings expectations will mostly depend on management s commentary on the earnings call
Citigroup shares have added about 8 9 since the beginning of the year versus the S P 500 s gain of 3 6
What s Next for Citigroup
While Citigroup has outperformed the market so far this year the question that comes to investors minds is what s next for the stock
There are no easy answers to this key question but one reliable measure that can help investors address this is the company s earnings outlook Not only does this include current consensus earnings expectations for the coming quarter s but also how these expectations have changed lately
Empirical research shows a strong correlation between near term stock movements and trends in earnings estimate revisions Investors can track such revisions by themselves or rely on a tried and tested rating tool like the Zacks Rank which has an impressive track record of harnessing the power of earnings estimate revisions
Ahead of this earnings release the estimate revisions trend for Citigroup was mixed While the magnitude and direction of estimate revisions could change following the company s just released earnings report the current status translates into a Zacks Rank 3 Hold for the stock So the shares are expected to perform in line with the market in the near future You can see the complete list of today s Zacks 1 Rank Strong Buy stocks here
It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead The current consensus EPS estimate is 1 80 on 19 09 billion in revenues for the coming quarter and 7 41 on 74 67 billion in revenues for the current fiscal year
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well In terms of the Zacks Industry Rank Banks Major Regional is currently in the bottom 22 of the 250 plus Zacks industries Our research shows that the top 50 of the Zacks ranked industries outperform the bottom 50 by a factor of more than 2 to 1 |
C | Citigroup C Q4 Earnings Beat Estimates Revenues Down | Have you been eager to see how Citigroup NYSE C performed in Q4 in comparison with the market expectations Let s quickly scan through the key facts from this New York based money center bank s earnings release this morning An Earnings BeatCitigroup came out with adjusted earnings per share of 1 61 surpassing the Zacks Consensus Estimate of 1 55 Further the figure compared favorably with adjusted earnings of 1 28 in the prior year quarter Improvement in earnings was primarily driven by expense management How Was the Estimate Revision Trend You should note that the earnings estimate for Citigroup depicted pessimism prior to the earnings release The Zacks Consensus Estimate was revised 1 9 downward over the last seven days Also Citigroup has an impressive earnings surprise history Before posting earnings beat in Q4 the company also delivered positive surprises in the prior four quarters Overall the company surpassed the Zacks Consensus Estimate by an average of 5 48 in the trailing four quarters Citigroup Inc Price and EPS Surprise Revenue Came In Lower than ExpectedCitigroup s revenues of 17 1 billion missed the Zacks Consensus Estimate of 17 5 billion Moreover revenues decreased 2 year over year Key Takeaways
Adjusted net Income stood at 4 2 billion up 14 from the prior year quarter Cost of credit declined 7 year over year to 1 9 billion Fixed income markets revenues declined 21 year over year to 1 9 billionEquity markets revenues of 668 million surged 18 from the prior year quarter Returned 5 8 billion to shareholders as common stock repurchases and dividends during the quarter What Zacks Rank SaysThe estimate revisions that we discussed earlier have driven a Zacks Rank 3 Hold for Citigroup However since the latest earnings performance is yet to be reflected in the estimate revisions the rank is subject to change While things apparently look favorable it all depends on what sense the just released report makes to the analysts You can see How the Market Reacted So FarFollowing the earnings release Citigroup shares were down around 1 in the pre trading session This is in contrary to what the stock witnessed in the prior day s session Clearly the initial reaction shows that the investors have not considered the results in their favor However the full session s price movement may indicate a different picture Check back later for our full write up on this Citigroup earnings report Today s Stocks from Zacks Hottest StrategiesIt s hard to believe even for us at Zacks But while the market gained 21 9 in 2017 our top stock picking screens have returned 115 0 109 3 104 9 98 6 and 67 1 And this outperformance has not just been a recent phenomenon Over the years it has been remarkably consistent From 2000 2017 the composite yearly average gain for these strategies has beaten the market more than 19X over Maybe even more remarkable is the fact that we re willing to share their latest stocks with you without cost or obligation |
JPM | Global Manufacturing Momentum Melts ETFs To Watch | The manufacturing sector which started showing signs of stabilization in the initial phase of 2016 started to cool down lately The manufacturing purchasing managers index PMI dipped to 50 0 in May from 50 1 in April read
Though this signifies growth as any reading at or above 50 suggests expansion in activity such feeble growth and a deceleration definitely stoke concerns Soft demand in the wake of global growth worries can be held responsible for the overall global manufacturing slowdown Though the U S economy was better placed in the developed economies pack the situation in the other big economies is somewhat unsteady U S
As per Markit the U S manufacturing PMI declined to 50 7 in May from 50 8 in April Markit also noted that U S industrial output declined in May at the quickest pace in over years
With the greenback gaining strength lately the scenario could be dull in the coming months Sizable capex cuts by energy companies to fight back the plunge in oil prices have probably hurt the U S manufacturing sector
However as per the Institute for Supply Management ISM the reading was in May up from 50 8 recorded in April China
Coming to the second largest economy of the world the situation is more stressful After posting sluggish factory output data since July 2015 the economy posted growth in March going by official data
But the Caixin China manufacturing PMI was in May versus 49 4 in April However government s official manufacturing PMI in May remained unchanged from April at The figure was the lowest since February as per CNBC Euro Zone
The final Markit Eurozone Manufacturing PMI came in at 51 5 in May 2016 slightly lower than 51 7 in April The latest figure is the in three months New business growth cooled down to a 15 month low while the employment picture was also sluggish Japan
The Markit Nikkei Final Japan Manufacturing PMI was versus the final data of 47 6 in April May saw the fastest fall since January 2013 as output plunged the most in 25 months while new orders shrank at the quickest clip in 41 months read
Needless to say such drab data in the world s key regions give us reasons to look at the below mentioned international industrial ETFs These ETFs might be under pressure in the days to come here iShares Global Industrials ETF
The 181 3 million ETF is heavy on the U S which takes about 54 of the basket Japan France and U K take the next three positions with a single digit weight SPDR S P International Industrial Sector ETF
The fund looks to track the S P Developed Ex U S BMI Industrial Sector Index The 16 million ETF is heavy on Japan with about 33 1 weight U K France and Germany take the next three spots with about 9 8 9 7 and 7 2 weight respectively Siemens AG DE SIEGn 3 66 ABB Ltd 2 05 and Canadian National Railway Company 2 03 are the top three stocks of the fund |
JPM | U S Payrolls Verizon Noise Or Something More | U S job growth fell hard last month the Labor Department reports Private sector payrolls increased by a thin 25 000 in May the smallest monthly gain in five years Even adding the estimated loss of 30 000 plus workers due to the Verizon NYSE VZ strike last month still leaves payrolls in a dire state via the latest monthly profile It could be noise of course as it s always hazardous to make assumptions about the economy from one data point Nonetheless the sight of the year over year growth rate in private employment dipping below the 2 mark for the first time in two years suggests that the recent deceleration in the labor market recovery is picking up speed
Boy this is ugly economist Diane Swonk tells The New York Times The losses were deeper and more broad based than we expected and with the downward revision to previous months it puts the Fed back on pause
The optimistic spin is that the next update on payrolls will benefit from the return of formerly striking Verizon workers But the expected cure from mended labor relations may be less than satisfying since the strike only represents 40 000 workers at most As a result today s update still looks unusually weak no matter how you slice the numbers
The slowdown in job growth looks pretty pervasive across industries advises Michael Feroli chief U S economist at JPMorgan Chase NYSE JPM via Bloomberg It raises some questions about the momentum of growth and about the outlook The easy thing to say is this takes June off the table for a Fed hike To get to July we re going to need a pretty nice rebound in the data
Note however that yesterday s ADP national estimate of private payrolls looks dramatically brighter The firm reported that US companies added 173 000 jobs last month The chasm between this estimate and the government s official data is surprisingly wide Clearly one number is wrong big time Deciding which data set is misleading us will take a month or two
Note however that initial jobless claims continue to print at levels that are close to a multi decade low which implies that job growth will roll on at a healthy pace But as I said yesterday there are cracks in this seemingly upbeat picture via the raw year over year trend in claims New filings for unemployment benefits increased 6 6 last week vs the year earlier level The annual rise is the fourth time in the past five weeks that claims headed higher vs year ago figures If claims continue to rise on a year over year basis this leading indicator will signal trouble for the business cycle in a more convincing degree
Meantime if it turns out that the government s sharply weaker estimate is confirmed in the next update for June it ll probably be time for a major attitude adjustment for the macro outlook |
JPM | NDX Consolidates USB Breaks Out | VIX appears to be in the final decline of a Broadening Bottom formation that is marked by successive higher highs and lower lows This move may be truncated which means it may not exceed the prior 12 50 low In the meantime it has given several false buy and sell signals The Cycles Model suggests a probable low today Broadening formations tops and bottoms are often known as reversal patterns
ZeroHedge Who could have seen that coming
Worst jobs print in 6 years and tumbling PMI ISM and Factory Orders Did The Fed just lose it completely
VIX was crushed once again in just utter idiocy off the lows to get S P back to 2 100 notice a pattern there
SPX unchanged beneath round number resistance
SPX is at stall speed unable to make a new high but not ready to decline However a week later it is still challenging round number resistance at 2100 00 A sideways consolidation would usually be bullish However a critical Pivot day may have occurred on Thursday which may have fulfilled the minimum requirement for the rally
WSJ Investors reset their expectations for interest rates yet again Friday after data showed U S employers added the fewest jobs last month in nearly six years
Treasury yields and the U S dollar dropped after the May jobs report cast doubt on the possibility of an interest rate increase in the next few months
Declines were less pronounced in major U S stock indexes While weak economic data bodes poorly for stock market gains extremely low rates have bolstered stocks since the financial crisis
NDX consolidates at a lower high
NDX consolidated this week unable to advance higher The NDX Pivot may have also came in on Thursday Should the NDX turn down without making a new high the Head and Shoulders formation may be in play once NDX declines through its mid Cycle support at 4248 65
ZeroHedge As we touched upon earlier central banks have created an unprecedented disaster for investors and savers alike
One critical point in what has happened since central banks have intervened in the markets and distorted prices is that savers have been destroyed and investors are now exposed to significantly more risk For example in order to make a 7 5 return in 1995 research from Callan Associates Inc found that an investor could own a portfolio consisting entirely of bonds with a standard deviation of about 6 However to make a 7 5 return in 2015 an investor would have to shrink the allocation to bonds down to just 12 and allocate funds into other riskier assets increasing the portfolio s standard deviation risk to 17 2 In other words we re at the point where it takes nearly 3x the risk in order to generate the same return as twenty years ago
High Yield Bond Index at an all time high
The High Yield Index exceeded its April 27 high at 154 39 by a small margin Note that it reacts to the same pivots as equities making its high a day later than SPX Investors should be on the alert for a decline beneath its Cycle Top support resistance
MarketRealist High yield bond issuance activity increased significantly last week on a strong market condition Issuers were in a rush to close deals ahead of Memorial Day weekend According to data from S P Capital IQ LCD dollar denominated high yield debt amounting to 11 2 billion was issued in the week ended May 27 2016 the largest year to date or YTD In the previous week high yield issuance was 8 2 billion
The number of transactions increased to 17 last week from nine the previous week
Last week brought the total US dollar denominated issuance of high yield debt to 63 4 billion in 2016 YTD That s 39 0 lower than the corresponding period in 2015
USB breaks out
The Long Bond broke out above its previous two highs Its minimum target appears to be its Cycle Top resistance currently at 171 15 Bonds have not been this overpriced historically lowest yields in over 300 years
Bloomberg Bond bears were licking their wounds after a weaker than forecast May jobs report sent Treasuries surging Data released later Friday suggest the pain was widespread
Hedge funds and other speculative investors were net short Treasury two year note futures in the week ended May 31 by the most since before the financial crisis according to U S Commodity Futures Trading Commission data Two year notes surged Friday by the most since September after the Labor Department reported the U S created only 38 000 jobs in May the lowest monthly increase in almost six years
The euro bounced off Long term support
The euro bounced off Long term support at 111 07 the Cycles Model suggests another week of rally The trendline and mid Cycle resistance at 117 75 may be challenged
ZeroHedge Following Mario Draghi s seemingly constant mention of the ECB s credibility during yesterday s press conference none other than ECB member and Austrian national bank chief Ewald Nowotny exclaimed rather oddly that the ECB is the most independent central bank in the world This was apparently more than former Greek Fin Min Yanis Varoufakis could handle as he unleashed a scathing op ed to explain why in fact The ECB is the least independent central bank exclaiming that the pretense of independence serves as a fig leaf for interventions that are not only politically driven but that are also utterly inconsistent with the principles of liberal democracy
Euro Stoxx gives back its gains
The EuroStoxx 50 Index declined beneath weekly Short term resistance at 3002 06 A decline beneath Intermediate term support at 2984 39 may reinstate the sell signal A significant low may be due by mid month
Bloomberg European shares tumbled as investors considered the implications of disappointing U S jobs data that cast doubt on the strength of the world s biggest economy
The Stoxx Europe 600 Index slid 0 9 percent to 341 29 at the close of trading posting a weekly drop of 2 4 percent its first in four Shares erased earlier gains after the payroll data missed forecasts Peripheral markets in Italy Spain and Portugal fell the most After slipping as much as 5 4 percent from an April 20 high European shares had recovered momentum at the end of May as better than forecast U S data fueled optimism that the economy could cope with higher interest rates But progress stalled this week amid resurgent worries about global growth
The yen appears ready for a breakout
The yen bounced off Intermediate term support at 90 42 The rally may extend for another month or longer The inverted Cup with Handle formation appears to be activated While the Cup with Handle target may seem farfetched the Cycle Top at 99 65 may be attainable as a minimum target
WSJ The dollar rose against the euro and oil linked currencies Thursday as investors prepared for a closely watched report on the U S labor market report
The WSJ Dollar Index which measures the buck against a basket of 16 currencies was essentially up 0 1 as the buck logged gains against the euro and some oil dependent currencies Meanwhile the dollar was set to close at a three week low against the yen after the delay of a Japanese sales tax increase brightened the outlook for the Japanese currency
The Nikkei gives back last week s gains
The Nikkei completed its retracement then declined to its Intermediate term support at 16499 03 A decline beneath Intermediate term support may soon develop into a panic as the next support may be the Head Shoulders neckline near 15000 00 followed by the Cycle Bottom at 13766 41
Reuters Japanese stocks rose on Friday morning supported by gains on Wall Street and a sharp jump in index heavy Fast Retailing after the clothing retailer posted strong monthly sales
The Nikkei advanced 0 5 percent to 16 646 55 in midmorning trade after suffering its biggest daily percentage drop in a month on Thursday For the week the benchmark index has shed 1 0 percent
Trading is expected to be subdued before the outcome of the U S jobs report later in the day as investors continue to assess the prospects of the Federal Reserve hiking interest rates at its June 14 15 meeting
U S dollar reversed from Intermediate term resistance
USD reversed from weekly Intermediate term resistance at 95 33 declining beneath Short term support at 95 60 What may follow is a decline to retest the mid Cycle low and possibly the lower trendline The Cycles Model suggests the next low to occur in early June
Gold bounces at mid Cycle support
Gold bounced from mid Cycle support at 1202 79 challenging Intermediate term resistance at 1245 80 While the retracement amounted to 43 it may not have fulfilled either time or distance so we may see at least another week of positives for gold
MarketWatch Gold futures rallied Friday to score a gain for the week after May employment data showed the U S economy created the fewest number of jobs in nearly six years
Nonfarm payrolls rose by just 38 000 in May and hiring in the prior two months was weaker than initially estimated the Labor Department said The level of monthly hiring was the lowest since September 2010 Economists polled by MarketWatch had predicted an increase of 155 000 nonfarm jobs The unemployment fell to 4 7 from 5 as 458 000 people left the workforce
Market participants read the ugly employment data as all but eliminating the likelihood of an increase of benchmark interest rates in June or July That s seen as a boon for precious metals that don t offer a yield
Crude consolidates beneath its high
Crude continued to consolidate beneath the all important 50 00 level The period of strength may have expired with a potential two week decline ahead A decline beneath Short term support and the Ending Diagonal trendline at 45 52 may trigger a sharp decline in crude
ZeroHedge The story of the unprecedented build up of various commodity tankers off the coast of Singapore as well as everywhere else has been duly covered here as well as the reasons behind it
Notably two weeks ago we cautioned that with the contango no longer leading to profitable offshore storage of oil many shipping companies would have to start offloading their cargo or as we recently reported have started incurring debt to fund said storage costs in hopes of avoiding shifting storage to land
Shanghai Index rises to Short term resistance
The Shanghai Index rallied above Short term resistance at 2920 69 ending four weeks of sideways consolidation A sideways market implies that it may continue its previous trend once the consolidation completed The Cycles Model suggests the probability of another week of strength before reversing back down to new lows
ZeroHedge As simply put as possible over the next 2 decades there will be an average of 7 5 million fewer 0 55yr old Chinese every year vs an average annual increase of 9 5 million 55 yr olds And the wealthy minority of the elderly have stashed their reserves in a whole lot of expensive vacant real estate that they intend to pass along rent or sell to the declining young population What could go wrong since housing prices only go up right
The Banking Index reverses from last week s high
BKX reversed down this week from last week s print high of 71 53 A break of the Pennant trendline and Long term support at 69 05 are the keys to a resumption of the decline Once broken the Cycle Bottom support at 62 72 may not be capable of providing the next bounce The next significant low may be due in mid June
ZeroHedge The world passed a historic milestone in the past week when according to Fitch negative yielding government debt rose above 10 trillion for the first time which as the FT adds envelops an increasingly large part of the financial markets after being fueled by central bank stimulus and a voracious investor appetite for sovereign paper It also means that almost a third of all global government debt now has a negative yield The amount of sovereign debt trading with a sub zero yield climbed 5 in May from a month earlier to 10 4 trillion pushed higher or lower in yield as the case may be by rising bond prices in Italy Japan Germany and France
Japan and Italy fueled the increase in negative yielding debt in May with three year bonds issued by the latter sliding below the zero mark
ZeroHedge For a country that prides itself or used to at least on the success of the entrepreneur and small business creation a disturbing trend has developed According to according to a new analysis by the Economic Innovation Group fewer new businesses were created in the last five years than any other period since at least 1980
It s hard to put into scale the collapse of new business formation We have no precedent for that rapid and steep of a decline It will have a ripple effect in the economy You re going to feel that impact five 10 15 years in the future said John Lettieri co author of the report and co founder of EIG
ZeroHedge Yesterday JPMorgan NYSE JPM s chief executive for corporate and investment banking Daniel Pinto sparked hope that the collapse in investment banking revenue and profits plaguing the banking industry in the first quarter had ended when he said that JPM is on track for a mid teens percentage increase in markets revenue in Q2 compared with a weak period a year earlier he also added that compensation in fixed income is down 25 over the past five years and headcount is down 10 This guidance however was quickly dashed by Jamie Dimon today when the CEO said during a Bernstein investor conference not to project a 15 increase in trading revenue
Fortune Winter is coming for investment banks
The once rosy role of the trader hustling bustling and raking in dough is giving way to a new sort of financier The technologist Automation software data analysis and algorithms are taking the workplace by storm as financial firms seek ways to cut costs and manage increasingly dismal revenue results
ZeroHedge One doesn t have to be a financial guru to grasp that the problem with this strategy is that if a firm is going to continue to add debt to its balance sheet in order to fund buybacks and dividends then it needs to be able to generate enough operational cash flow in order to service the debt Even if one makes the argument that debt is cheap right now which may be true or that central banks are backstopping it which is certainly true in Europe as of the ECB s shocking March announcement in which the CSPP was revealed the fact remains that principal balances come due eventually and while debt can be rolled over at some point the inability to generate cash from the operations catches up furthermore even a small increase in rates means the rolling debt strategy is dies a painful death as early 2016 showed |
MS | Oil prices ease over uncertain supply picture | By Amanda Cooper LONDON Reuters Oil prices fell for a second day on Tuesday as concerns emerged that a six week rally may have fizzled after OPEC doused hopes for a speedy erosion of a global overhang of unwanted crude The Organization of the Petroleum Exporting Countries said on Monday demand for its crude would be less than previously thought in 2016 as supply from rivals proves more resilient to low prices increasing excess supply in the market To tackle the surplus Saudi Arabia and non OPEC member Russia the world s two largest oil exporters along with Qatar and Venezuela have proposed major producers freeze output at January levels Even with the proposed freeze continuously high production means global output still exceeds demand by at least 1 million barrels per day bpd We ran into 40 a barrel the idea OPEC was going to be able to at least freeze production and was along the right tracks has unraveled a bit CMC Markets strategist Jasper Lawler said Brent crude futures LCOc1 were down 92 cents at 38 61 a barrel by 1210 GMT while U S crude futures CLc1 were 83 cents lower at 36 35 While Russian and Saudi production remains stable analysts say Iran has raised output to around 3 1 million bpd from about 2 9 million bpd in January OPEC O Oil demand could also slow Morgan Stanley NYSE MS said there was a 30 percent probability of a global recession this year In spite of uncertainty about whether a production freeze will occur and over its effectiveness given concerns about the global economy investors have turned more friendly towards oil Speculators have added to their bets on a sustained rise in crude futures and the ratio of bullish bets to bearish in the Brent market has risen to its highest since last May consultancy JBC Energy said CFTC O ICE I d be very surprised if we just tanked down here and made fresh lows below 27 and the impression I get is I m not the only one Futures sentiment and futures positioning has switched around and is looking a lot more bullish CMC s Lawler said
This story has been corrected to show Iran output up from January level of 2 9 million bpd in paragraph 7 |
MS | Global banking system awash with cash but lending stagnates | LONDON Reuters The global banking system has more cash now than at any time since the 2008 crisis but the failure of banks outside the United States to lend that money out is fast becoming the biggest barrier to economic growth This is potentially dangerous for the world economy because after nearly a decade of unprecedented stimulus to revive the global economy and financial system the effectiveness of central banks policy measures is fading The slowdown in the velocity of money is being blamed on a range of factors including the large amount of debt still in the system banks sinking into a liquidity trap and the unwillingness of households businesses and banks themselves to take risks Rectifying this will require a mix of growth friendly measures in fiscal policy regulation and structural reforms analysts say It won t be a quick or easy fix Click on Analysis from Morgan Stanley NYSE MS shows that the amount of cash in the G4 economies of the United States the euro zone Japan and Britain has expanded up to five fold since 2008 thanks to unprecedented stimulus from these central banks The money base includes currency in circulation commercial bank deposits at the central banks and central bank liabilities Morgan Stanley said Yet only U S bank lending is higher now than it was then Lending is barely higher in Japan steady in the euro zone and notably lower in Britain Mohamed El Erian chief economic adviser at Allianz DE ALVG and former CEO and co CIO at bond fund Pimco reckons central banks firepower is almost exhausted and the responsibility for securing a stable and thriving economy must be shared broadly
Central banks have not run out of instruments they re running out of effective instruments But it s going to take a shift in the economic paradigm and that s not going to happen on its own he said |
JPM | Facebook 5 6 as analysts weigh financial hit from news changes | Facebook NASDAQ FB is down a hefty 5 6 premarket with JPMorgan NYSE JPM taking a dimmer view of what may be a sweeping set of changes to the social network s news feed That could mean well over 20B off the company s market cap today Emphasizing the personal over posts from businesses could easily mean fewer ads in the feeds though CEO Mark Zuckerberg deliberately didn t mention ads in explaining changes analyst Doug Anmuth says He has an Overweight rating and 230 price target still 22 5 upside implied Meanwhile Pivotal s Brian Wieser speculates that what it saw as a burgeoning decline in Nielsen s digital consumption rates could have come from the concerns reflected by Zuckerberg s post Zuckerberg admitted that the changes might mean some engagement measures including time on Facebook could go down in the short term And Stifel has downgraded shares to Hold departing from a few dozen analysts who have the shares at Buy Now read |
JPM | JPMorgan Stays Bearish on Pound Even Amid Brexit Breakthroughs | Bloomberg The pound has hit the highest level since the Brexit vote in 2016 yet JPMorgan Chase Co NYSE JPM remains relatively glum on its prospects
While recent Brexit developments have been constructive the bank sees sterling failing to maintain its strength amid flagging economic fundamentals and a non negligible risk that Brexit talks collapse It sees the pound falling to 1 30 by March 2018 compared with a median forecast in a Bloomberg survey for 1 33
Brexit still has the potential to drive large and potentially abrupt movements in sterling albeit this shouldn t completely overshadow more prosaic fundamentals wrote strategists including Paul Meggyesi in a research note And on this front conditions have moderately deteriorated for the pound as the U K economy is being left behind as the rest of the world powers ahead
The pound has been supported by the Bank of England s tightening policy said Meggyesi who sees two more interest rate hikes this year versus the market s current pricing for one by November 2018 However the rate cycle is inherently bad news as it reflects high inflation and low growth he said
That view contrasts with the currency s most bullish forecaster ING Groep AS INGA NV which sees positive economic data and a Brexit transition deal returning the pound to pre Brexit levels at 1 53 by year end |
C | Citigroup to pay 130 million to end Libor rigging lawsuit in U S | By Jonathan Stempel
NEW YORK Reuters Citigroup Inc N C has agreed to pay 130 million to settle private U S antitrust litigation accusing it of conspiring with rivals to manipulate the Libor benchmark interest rate
The bank is the second to resolve claims by so called over the counter investors that transacted directly with banks on a panel to determine Libor according to filings late Monday with the U S District Court in Manhattan
Barclays Plc L BARC the British bank reached a similar settlement in November 2015 for 120 million
Citigroup spokeswoman Danielle Romero Apsilos said the New York based bank was pleased to resolve the matter Court approval is required Citigroup did not admit wrongdoing
Banks use Libor or the London Interbank Offered Rate to set rates on hundreds of trillions of dollars of credit card mortgage student loan and other transactions and to determine the cost of borrowing from one another
Investors including the city of Baltimore and Yale University in New Haven Connecticut had accused 16 banks of conspiring to manipulate Libor in the private litigation which began in 2011
The lawsuit is among many in the Manhattan court accusing banks of colluding to rig rates or prices in various financial and commodities markets Others suing over Libor have included so called bondholder plaintiffs and exchange based plaintiffs
A hearing to consider final approval of Barclays settlement is scheduled for October 23 court records show
The case is In re Libor Based Financial Instruments Antitrust Litigation U S District Court Southern District of New York No 11 md 02262 |
C | Barclays names ex Citi banker Barry Rodrigues as head of Barclaycard | LONDON Reuters Barclays L BARC has named former Citigroup N C banker Barry Rodrigues as the head of its Barclaycard International credit card division the British bank said on Thursday Rodrigues formerly the head of Citi s digital payments business will be based in New York in his new role and will start in early November the bank said He replaces Amer Sajed who left the bank in July to focus on campaigning for civil liberties in the United States |
C | Deutsche Bank to beef up trade finance in emerging markets | FRANKFURT Reuters Deutsche Bank DE DBKGn plans to beef up its trade finance business in the developing world creating new jobs and investing in technology it said on Wednesday The focus is on Africa Latin America the Middle East Asia and central and eastern Europe Germany s largest bank said It plans to hire between 20 and 30 people for those locations and will invest a middle two digit million euro figure in information technology over the next three years it said Daniel Schmand who heads the bank s trade finance division told journalists that he sees unmet demand for trade financing in particular for small and medium sized companies Germany is an export nation that needs strong financing competence Schmand said Competitors in the market include Commerzbank DE CBKG BNP Paribas PA BNPP HSBC L HSBA and Citigroup N C he said
Deutsche Bank wants to gradually increase its market share in the business which currently stands at a two digit percent market share in Germany he said |
C | Citigroup Earnings Kick Off String Of Bank Results On Monday | Citigroup NYSE C kicks off earnings season and leads the banks with its report scheduled for before market open on Monday Jan 14 2018 ended up being a tough year for the stock and C ended 2018 down 30 with about 19 of that decline in December alone Shares have bounced back a little since the start of the new year and Mondays report could set the tone for the financial sector as the rest of the big banks get ready to report
For Q4 C is expected to report EPS of 1 61 on revenue of 17 94 billion according to third party consensus analyst estimates In the same quarter last year EPS came in at 1 28 on revenue of 17 25 billion Analysts are again expecting lower tax rates and share buybacks to boost the company s bottom line In Q3 C reported its effective tax rate was 24 compared to 31 the year prior and noted it had repurchased 8 of its common shares outstanding over 12 months
One area that analysts are likely to hone in on is the performance of the North America consumer banking division which saw revenue decline 1 year over year YoY to 5 1 billion in Q3 a negative surprise the company attributed to weakness in retail banking and Citi branded cards
Despite that hiccup analysts were still optimistic on the overall picture as loans were up 3 to 675 billion deposits increased 4 to 1 trillion and the bank s efficiency ratio and return on tangible common equity have continued to move closer towards management s targets
There are two parts of the business where investors are planning on some weakness in Monday s results thanks to CFO John Gerspach s comments at an investor presentation in December Gerspach said C s investment banking division had been impacted by a slowdown in equity issuance as well as a declines in debt underwriting in the fourth quarter
The investment banking division struggled for the same reasons when the company last reported In Q3 C reported an 8 YoY decline in revenue to 1 2 billion with equity underwriting revenue down 17 to 259 million and debt underwriting dropping 9 to 660 million
The other thing that Gerspach warned about was that revenue from fixed income and equity trading is expected to be slightly lower in Q4 as volatility didn t boost trading as much as the bank had hoped especially in its rates trading business While volatility is often a boon for bank trading desks the combination of uncertainty and heightened volatility across asset classes like there has been the past few months can result in investors holding off on making major moves until the dust settles a bit
Unlike the investment banking division C s trading division has delivered stronger results in recent quarters In Q3 revenue from fixed income markets increased 9 YoY to 3 2 billion and equity markets revenues were up 1 to 792 million
A TOUGHER GO The last stretch of 2018 hit many stocks hard C charted above since the start of the fourth quarter had a tougher go and ended the year down 30 The stock has rebounded since the end of December but shares are still down 21 53 since Oct 1 compared to an 11 69 decline for the S P Financial Select Sector Index IXM purple line and an 11 21 decline in the S P 500 SPX teal line Chart source thinkorswim by TD Ameritrade Not a recommendation For illustrative purposes only Past performance does not guarantee future results
Options traders appear to be expecting a 3 5 stock price move in either direction based on options data on the thinkorswim platform Implied volatility was at the 50th percentile as of this morning
In short term trading at the Jan 18 monthly expiration calls have been active at the 57 5 and 60 strike prices There s also a significant amount of open interest on the 65 strike calls up through the 85 strike calls a ways out of the money based on where the stock is currently trading but more in line with where the stock was at before December 2018 On the put side recent trading has been concentrated at the 52 5 and 55 strikes Open interest is elevated at the 57 5 strike puts and the 60 strike puts as well
Looking at the Feb 15 monthly expiration much of the trading has been right around where the stock has been trading at Calls have seen higher volume in recent trading at the 57 5 and 60 strikes while activity for puts has been concentrated at the 52 5 and 55 strikes
Note Call options represent the right but not the obligation to buy the underlying security at a predetermined price over a set period of time Put options represent the right but not the obligation to sell the underlying security at a predetermined price over a set period of time
TD Ameritrade commentary for educational purposes only Member SIPC Options involve risks and are not suitable for all investors Please read Characteristics and Risks of Standardized Options |
JPM | Bank Stock Roundup Wells Fargo Citi In Focus For Legal Matters Restructuring Plans | Over the last five trading days performance of the major banking stocks was bullish as lower than expected April trade deficit level which is likely to drive up Q2 GDP and positive momentum in oil prices reinforced the chances of the rate hike in June Rise in the interest rates will support top line growth for banks paving the way for improved results in the upcoming quarters Coming to the industry specific developments legal matters dominated the headlines Banks continue to be penalized for past business malpractices Though they are fully reserved to meet these charges such fines taint their brand image to some extent However in a very rare occurrence Bank of America Corp NYSE C was able to win a case against regulators leading to the dismissal of fines Though this is a setback for the U S government it is definitely going to set precedence for other banks to challenge regulatory fines Additionally slide in oil prices in the past few quarters had a significant adverse impact on the banks balance sheet Hence higher provisions are still likely in the upcoming results despite rise in oil prices Further streamlining and restructuring activities persisted over the last five trading days Read Important Developments of the Week1 A federal appellate panel reinstated the private antitrust lawsuits against 16 banks including big ones such as JPMorgan Chase Co NYSE JPM BofA Deutsche Bank AG NYSE DB Citigroup Inc NYSE C related to the rigging of London Interbank Offered Rate LIBOR indicating no respite for the banks from their past wrongdoings read more 2 Wells Fargo Company NYSE WFC has been hit with a 70 million penalty by The Office of the Comptroller of the Currency as the bank failed to correct the shortcomings identified in the 2011 consent orders related to mortgage practices in a timely fashion However the OCC ended the mortgage servicing consent order against Wells Fargo as the bank was found to be compliant read more Another major bank Citigroup was levied a charge of 425 million by the Commodity Futures Trading Commission for manipulating certain key currency valuation benchmarks However the bank neither admitted nor denied the allegations Also the settlement would be covered by Citigroup from the existing legal reserves read more 3 The 2nd U S Circuit Court of Appeals in New York dismissed the 1 27 billion penalty imposed on BofA related to the sale of risky residential mortgage backed securities by Countrywide Financial Corp acquired in 2008 The three judge panel found the evidences inadequate to hold the bank responsible for the fraud The appeals court stated the evidence provided by the regulators only proved that underlying mortgages were of lower quality than promised in the agreements read more 4 On its Investor Day conference Wells Fargo announced the reduced financial targets in the wake of persistently low interest rates and stricter regulations Moreover per Chief Financial Officer John Shrewsberry the bank was recording lower returns as compared to the set targets It looks very different frankly than we would have imagined a couple of years ago he said read more 5 JPMorgan is said to eliminate around 100 employees in its private bank as part of the company s restructuring strategy regarding the latter The decision was announced internally and first reported by the Wall Street Journal The layoffs which will affect the staff in several locations and departments come on the heels of previous rounds of layoffs in recent months read more 6 Wells Fargo launched a new affordable mortgage program that allows the customers to make a down payment of just 3 for fixed rate mortgages Targeting first time homebuyers and low to moderate income consumers the new program yourFirstMortgage includes a key feature it requires a minimum credit score of 620 on a typical scale of 300 to 850 Among other features it allows the borrowers to include income from family members tuition and utility bill payments or renters to qualify for the loan Also by completing a homebuyer education course a borrower with a down payment of less than 10 may receive one eighth percentage interest rate reduction Interestingly the new loan program partnered with Fannie Mae and Self Help is offering mortgage that is not obtained under a government program such as Federal Housing Administration program The latest move by Wells Fargo comes at a time when the housing market seems to be showing signs of robust improvement Notably new home sales hit a more than eight year high in April Also home prices surged to record levels signaling strong demand in the all important spring selling season Amid such backdrop with its new loan program the nation s largest mortgage lender should be able to reap benefits Price PerformanceOverall the performance of banking stocks was positive Here is how the seven major stocks performed In the last five trading sessions Wells Fargo Citigroup and JPMorgan were the major gainers with their shares increasing 3 7 2 7 and 2 4 respectively Additionally Capital One Financial Corp NYSE C shares rose 2 3 Over the last six months BofA and Citigroup were the worst performers with their shares plunging 15 2 and 14 5 respectively Further Capital One shares fell 7 1 What s Next in the Banking Space Over the next five trading days performance of banking stocks is expected to continue in a similar manner unless any unforeseen incident crops up |
JPM | I See Gold Correction In 2017 | When titans clash reverberations are felt around the world The US central bank has begun a titanic clash with the US government and as the battle unfolds all markets will be impacted significantly
This short term chart shows gold beginning a small uptrend with higher lows and higher highs
A broadening formation is now in play on this key daily gold chart
Broadening formations are formed by higher highs and lower lows and these patterns indicate a loss of control in the market
I predicted the Fed would hike rates in 2015 and that would be a warning shot to the US government to get its financial house in order or more hikes would follow
I do not believe the Fed s first rate hike had anything to do with GDP or employment and nor will the rate hikes that follow The Fed is enticing banks to move the QE money ball out of government bonds and T bills and into the private fractional reserve banking system
There it can be loaned out more profitably and money velocity will begin to rise For the first time in US history rate hikes are not being used to cool inflation but to heat it up Rate hikes raise the cost of borrowing money for the government and for stock market buyback programs that have created questionable price earnings ratios in the US stock market
Gold is trading in a broadening formation because institutional investors are beginning to sense a loss of control emanating from both government and central banks
I expect gold will trade essentially sideways until mid July which is when it often bottoms anyways That s because early preparations for gold oriented Diwali begins in India and demand begins to surge
Demand from India was weak in 2013 because of the imposition of a duty and import restrictions and in 2014 and 2015 because the monsoon season in both years was very dry
The 2016 monsoon season looks good It should produce great crops and gold demand from millions of farmers will rise significantly as that happens India just killed the tax on cash purchases of jewellery That s very good news for farmers They will be holding a lot of cash as their crops are harvested
Also if Janet Yellen hikes rates in July not only will she be hiking just as Indian demand picks up she will be doing so just as the US stock market enters what I call crash season That s the August October time period
If Janet hikes in September the damage to the US stock market could be even worse Goldman analysts predict she will hike in both September and December That would put enormous pressure on both the US stock market and US government bonds
Powerful JPMorgan NYSE JPM analysts have forecast gold will surge to 1400 in the second half of 2016 and now Citi adds a nice price forecast
This is the NYSE GDX daily chart I realize that some of the old guard of the Western gold community envisioned gold soaring to stratospheric prices as the US government debt crisis deepened
Gold forecasts of 1400 from banks like JP Morgan may not sound very exciting to investors who envisioned gold at much higher prices by now but it s important to understand that it only takes a modest amount of upside action in the price of bullion to create dramatic movement in the price of gold stocks
Gold bullion rose about 25 from the December lows to the May highs and GDX surged about 100 in the same timeframe Many individual gold and silver stocks staged five bagger and ten bagger performances
This is the daily silver chart
Silver bullion rallied about 30 from the 14 area lows to about 18
In the same time frame the Global X Silver Miners NYSE SIL silver stocks ETF surged well over 100 higher What is even more important is that while silver bullion has now fallen about 25 from the 18 area high the SIL silver stocks ETF is only down about 15
How is it possible for gold stocks and silver stocks to pullback so slightly after such a huge rally even while bullion has a solid pullback
It s possible because so many powerful value oriented institutional investors are showing great concern about coming inflation loss of control in government and central banking and overvaluation of the US stock market They are buyers of gold stocks and silver stocks on price corrections price rallies and when they trade sideways
A real correction is coming to the gold market but I don t believe it will happen until well into the 2017 calendar year A lot of US economic reports will be released this week including the jobs report on Friday morning Gold has a strong tendency to rally following the release of that report
Investors who may have recently become somewhat obsessed with calling a gold price correction may want to consider throwing a bit of caution to the wind This is a time for investors to position themselves for the next wave higher and for gold stocks that wave may just begin on Friday morning
Written between 4am 7am 5 6 issues per week Emailed at aprox 9am daily
Stewart Thomson is a retired Merrill Lynch broker Stewart writes the Graceland Updates daily between 4am 7am They are sent out around 8am 9am The newsletter is attractively priced and the format is a unique numbered point form Giving clarity of each point and saving valuable reading time
Risks Disclaimers Legal
Stewart Thomson is no longer an investment advisor The information provided by Stewart and Graceland Updates is for general information purposes only Before taking any action on any investment it is imperative that you consult with multiple properly licensed experienced and qualified investment advisors and get numerous opinions before taking any action Your minimum risk on any investment in the world is 100 loss of all your money You may be taking or preparing to take leveraged positions in investments and not know it exposing yourself to unlimited risks This is highly concerning if you are an investor in any derivatives products There is an approx 700 trillion OTC Derivatives Iceberg with a tiny portion written off officially The bottom line
Are You Prepared |
JPM | Will Pension Funds Face More Volatility Ahead | By investing mostly in bonds pension funds have been able to generate promising returns for a considerable period of time But that isn t happening now as investors are struggling with lower interest rates and lackluster economic growth Hence in order to achieve the level of returns raked up two decades back such funds are increasing their exposure to riskier assets such as equities This in turn is heightening the chances of volatility for such funds Pension Funds Shift StrategiesPension funds are mostly designed to provide a steady stream of income at retirement These funds have a larger exposure to less riskier assets such as bonds By purchasing and holding investment grade bonds for nearly two decades such funds have put up stellar performance In 1995 a pension fund s portfolio predominantly consisted of bonds and still yielded a return of 7 5 according to the Callan Associates Inc But things have started to change with pension funds piling up riskier assets to get a reasonable return Callan figured out that pension funds have spread its money across riskier assets like equities last year These included U S large cap firms U S small cap firms non U S equities and private equity On the other hand investments in bond shrunk to just 12 Thanks to near zero interest rates and lackluster economic growth investors are taking on more and more risk for higher returns Reasons behind the ShiftInvestors were convinced for a pretty long time that the Fed won t raise rates further after the December lift off The Fed had hiked its rates to 0 25 in December for the first time in almost a decade A data dependent central bank found it impossible to pursue a hawkish stance given the global turmoil in the stock market and a weak Chinese economy at the start of the year Meanwhile the U S economy increased at an annual rate of 0 8 in the first quarter below the consensus estimate of a 0 9 rise This growth was way below the previous quarter s growth rate of 1 4 In response to weak global financial conditions and a slump in oil prices companies tightened their belts resulting in lackluster economic growth in the opening months of the year Courting UncertaintyHistorically bonds have yielded safe returns and a steady stream of profits which helped pension funds to give solid returns However such funds had to willy nilly increase their exposure to equities to repeat such performances in a low rate environment But Callan reported that such risky endeavor has exposed these funds to more volatility In fact the standard deviation of pension funds increased considerably in the last two decades In 1995 the standard deviation of such funds was about 6 while it jumped to around 17 2 in 2015 according to Callan Associates Standard deviation is used to determine volatility in a portfolio Investors regard standard deviation measurement on a fund s annual returns as a way of finding out the degree of fluctuation that can happen from one year to the next OutlookThese developments have made investment in pension funds hitherto regarded as stable a big time gamble with the nation s largest public pension fund the California Public Employees Retirement System slipping 1 3 since Jul 1 2015 However investors who are looking for pension funds may invest in the following three funds that boast a favorable Zacks Rank While T Rowe Price Retirement Balanced and Vanguard Target Retirement Income Investor possess a Zacks Rank 1 Strong Buy JPMorgan NYSE JPM SmartRetirement Income A has a Zacks Rank 2 Buy About Zacks Mutual Fund RankBy applying the Zacks Rank to mutual funds investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward Pick the with the Zacks Rank |
MS | Oil falls as hopes for quick deal on output cuts fade | Investing com Oil prices fell on Monday after Iran dashed hopes that there would be a coordinated production freeze any time soon Brent crude futures fell back below 40 a barrel while U S crude was down almost 2 Iran s oil minister said it would only join the output freeze group once they reached production of 4 million barrels a day Worries about demand also weighed as Morgan Stanley NYSE MS warned that a slowing global economy and high production would prevent any sharp rises in oil prices |
MS | Oil falls as worry over growing stockpile cuts short rally | By Barani Krishnan NEW YORK Reuters Oil prices fell about 3 percent on Monday on concerns that a six week market recovery has gone beyond fundamentals as U S crude stockpiles continue to build and Iran maintains little interest in joining major producers in freezing production Crude inventories across the United States likely hit record highs for a fifth straight week last week rising 3 3 million barrels a Reuters poll of analysts said EIA S Stockpiles at the Cushing Oklahoma grew almost 850 000 barrels to 69 6 million in the week to March 11 bringing storage at the delivery hub for U S crude futures to near capacity traders said citing market intelligence firm Genscape The Organization of the Petroleum Exporting Countries meanwhile said global demand for crude from its members including Saudi Arabia and Iran will be less than previously thought in 2016 due to competing non OPEC supply OPEC supply will likely exceed demand by about 760 000 barrels per day up from 720 000 bpd it implied earlier Russia said OPEC s meeting with other key oil producers on an output freeze will probably be held in Doha in next month It said Iran supports the plan while Tehran says it wants to double its crude exports to 4 million bpd first All the data out there is suggesting higher supply and lesser demand for oil and that could only mean lower prices said Phillip Streible market strategist at RJO Futures in Chicago U S crude futures CLc1 settled down 1 32 or 3 4 percent at 37 18 a barrel while Brent LCOc1 finished down 86 cents or 2 percent at 39 53 Monday s price slide came after last week s rally of 7 percent in U S crude which was up for a fourth straight week Brent gained 4 percent last week up for a third week in a row Investment bank Morgan Stanley NYSE MS predicted a 25 45 trading range for U S crude in an oversupplied but volatile market concurring with several analysts views From a longer term perspective over the coming four to six weeks we still anticipate an ultimate crude price decline to the 26 28 area said Jim Ritterbusch at Chicago energy consultancy Ritterbusch Associates Money managers including hedge funds raised their bullish bets on U S crude for a third week in a row to November highs last week but cut net long positions in Brent
I think we are back to inventory watching and the pressure will start moving to the bulls positioning as the market will likely have little patience with large net stockpile builds said Scott Shelton broker with ICAP LON IAP in Durham North Carolina |
JPM | FX Options Traders Get Wake Up Call From Central Bank Signals | Bloomberg The currency world showed signs of emerging from its low volatility stupor this week after the Bank of Japan and the European Central Bank surprised traders with messages on their bond buying policy that fueled rallies in the euro and yen
The BOJ kicked things off Tuesday by cutting purchases of long dated Japanese government bonds spurring bets it may also tweak its yield curve control policy Then on Thursday ECB policy makers said they re open to tweaking policy guidance soon to align it with an improving economy leading traders to speculate the bank will end its bond buying this year
On the heels of those developments the currency options market kicked into high gear Euro options transactions reported Thursday to the Depository Trust Clearing Corp were more than double the five day average while activity in the yen was about 75 percent higher than it s been The euro surged Thursday approaching a four month high while the yen touched the strongest level since November
There s a palpable feeling that the euro and the yen will be among the best performing currencies this year said Bipan Rai a foreign exchange and macro strategist at Canadian Imperial Bank of Commerce There s going to be more demand in the options space to participate in those gains
The burst of business in options and the prospect of heightened volatility is likely to be welcome news for currency investors whose returns suffered last year as volatility tumbled amid well telegraphed central bank policy The JPMorgan NYSE JPM FX volatility index a gauge of three month implied volatility this week touched the lowest level since 2014
The market is catching on that central banks are going to be adjusting policy this year said Rai |
JPM | Putin s Break From Recession Fleeting as Economy Hits a Pothole | Bloomberg After suffering its longest economic contraction this century Russia may just have had the shortest recovery
JPMorgan Chase Co NYSE JPM says the world s biggest energy exporter probably capped last year with two consecutive quarters of contraction or a technical recession a surprise cooldown that ranged from struggling consumer spending to a flop in industrial output
Gross domestic product is still growing relative to a year earlier with the central bank putting expansion at 1 7 percent to 2 2 percent in 2017 and predicting it will continue at a similar pace in 2018 No official GDP data is yet available past the third quarter
Growth was driven by a number of one off factors and now these are unwinding said Liza Ermolenko an economist at Barclays LON BARC Capital in London It does look like the output gap is pretty much closed so there is not a lot of scope for the recovery to continue
The slip up which came against the backdrop of a recovery in oil prices leaves the economy in a precarious position going into the new year Although government led efforts propped up investment in 2017 with Raiffeisenbank estimating that four state led projects accounted for more than half of the total in capital spending some of them will come to an end already this year
While JPMorgan says the weakness will be transitory a letdown so soon after Russia moved past the slump in mid 2015 highlights the dilemma President Vladimir Putin now faces in making the economy a selling point in a campaign for another six year term in March elections
Worse and Worse
Despite Russia s resilience to the twin challenges of cheaper oil and Western sanctions state development lender Vnesheconombank estimates a drop in GDP accelerated on a monthly seasonally adjusted basis in September October and November
The Russian economy lost momentum in the second half after a very strong first half said JPMorgan analyst Anatoliy Shal The extreme weakness of the past couple of months comes as a surprise
Putin has stayed upbeat telling factory workers on Wednesday that the economy is still on the upswing As evidence he pointed to a budget deficit running narrower than expected and growth in gold and foreign currency reserves
The broader drop off in output went unmentioned however GDP contracted at a seasonally adjusted annual rate of about 1 5 percent in the last three months of 2017 from the previous quarter after a decline of 0 2 percent in July September according to JPMorgan The economy hasn t suffered a technical recession since the first half of 2015 Vnesheconombank estimates
The Economy Ministry has partly blamed the downbeat performance by industry on unseasonably warm weather late in the year and on oil output curbs negotiated with the Organization of Petroleum Exporting Countries Industrial production shrank in November for only the second time in 2017 after zero growth in October
Russia officially calculates GDP performance only on an annual basis By that measure growth peaked in the second quarter of last year at 2 5 percent before easing in the following three months Federal Statistics Service data show While GDP probably added 1 9 percent in October December before rising further this quarter it s set to decelerate slightly until the final three months of 2018 according to analysts surveyed by Bloomberg
The rebound from the lowest point of the crisis didn t last long said Natalia Akindinova director of the Development Center at the Higher School of Economics in Moscow After mid 2017 the trend of macroeconomic indicators reversed |
JPM | Top 5 Things to Know in the Market on Friday | Investing com Here are the top five things you need to know in financial markets on Friday January 12
1 JP Morgan to kick off Q4 earnings season
Friday marks the unofficial start to the fourth quarter earnings season 22 S P 500 firms have already reported as JP Morgan NYSE JPM steps up to the plate as the first Dow component and big bank to reveal figures
The blue chip financial institution will report its numbers at around 7 00AM ET 12 00GMT in what is widely expected to be a messy quarter for bank earnings due to the recent tax overhaul
Despite the fact that lenders are expected to benefit from the legislation they will first have to adjust deferred tax assets and liabilities to account for a lower corporate rate and also take charges related to other tax changes
JP Morgan is estimated to take about a 35 hit to net income from the adjustments
On the other hand Wells Fargo NYSE WFC which reports earnings at 8 00AM ET 13 00GMT Friday is expected to report a 2 5 billion boost to its bottom line largely because it will owe less tax in the future on income from a set of businesses including mortgage servicing
2 December inflation on watch for impact on Fed rate hike path
Market participants will digest the latest U S inflation figures from the last month of 2017 at 8 30AM ET 13 30GMT Annual headline inflation is expected to ease to 2 1 from November s reading of 2 2 while core CPI is forecast to stand pat at 1 7
Core prices are viewed by the Federal Reserve as a better gauge of longer term inflationary pressure because they exclude the volatile food and energy categories The central bank usually tries to aim for 2 core inflation or less
Although the Fed s next decision comes on January 31 markets have penciled in the next rate hike for March with odds at 68 according to Investing com s Fed Rate Monitor Tool
Also on Friday s docket December retail sales will accompany inflation figures at 8 30AM ET 13 30GMT
3 Euro surges past 1 21 to 3 year high on ECB tapering speculation
Ahead of Friday s data the dollar hit fresh four month lows with particular pressure coming from the euro as investors speculated that the European Central Bank is preparing to wind down its massive stimulus program
On Thursday minutes from the last ECB meeting showed that the euro zone monetary authority had taken into account the positive economic momentum and policymakers believed that language pertaining to various dimensions of the monetary policy stance and forward guidance could be revisited early in the coming year
Euro dollar broke through the 1 20 level on the news and the rally continued on Friday taking the pair to a three year high above 1 21
At 5 53AM ET 10 53GMT EUR USD gained 0 76 to 1 2122 placing pressure on the U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies which fell 0 56 to 91 15
4 Oil on track for 3 weekly gains despite pull back from 3 year high
Oil prices pulled back from its highest level since December 2014 as investors took profit after five consecutive sessions of gains
U S crude oil futures fell 0 39 to 63 55 at 5 54AM ET 10 54GMT while Brent oil lost 0 06 to 69 22
The U S benchmark was still on track for weekly gains of more than 3 although weak oil data from China weighed on prices China s crude oil imports in December eased to 33 7 million metric tons or 7 97 million barrels per day versus 37 04 million metric tons in November customs data showed on Friday
Later on Friday market participants will also keep an eye on U S shale production when Baker Hughes releases its most recent weekly rig count data
Last week that oil services provider said that oil rigs operating in the U S declined from 747 to 742 helping to soothe concerns that increases in American production would derail OPEC s attempts to curb output and rebalance global markets
5 China trade boom stutters
Data out from China on Friday showed the world s second largest economy saw a strong slowdown in trade activity during December
In December Chinese exports rose 10 9 from a year earlier beating expectations of a 9 1 advance but cooling from a robust 12 3 gain in November the General Administration of Customs said on Friday
More worrying for global partners imports grew at an even slower pace of 4 5 year on year at the end of 2017 missing estimates for a 13 0 rise and a far cry from November s 17 7 surge |
JPM | JPMorgan tops estimates even as trading revenue tumbles | Q4 net income of 2 4B or 1 07 per share vs 6 7B and 1 71 a year ago This year s result however includes a 2 4B negative impact from the new tax bill Backing that out Q4 earnings would have been flat from last year and EPS was 1 76 up a nickel Y Y and topping estimates by 0 07 6 7B returned to owners in Q4 4 7B of buybacks and 0 56 per share dividend Among Consumer Community Banking items provisions of 1 231B were up 30 Y Y with a net reserve build this year vs a sizable release a year ago Behind the build was 200M in credit cards driven mostly by loan growth Among Corporate Investment Bank items FICC revenue plunged 34 Y Y or 27 if excluding the impact of the tax bill Estimates had been for a drop in the high teens Tangible book value per share of 53 56 up 4 CET 1 ratio of 12 1 Conference call at 8 30 ETPresentation slidesPreviously JPMorgan Chase beats by 0 07 beats on revenue Jan 12 JPM 0 15 premarketNow read |
JPM | JP Morgan Shares Turn Higher as Investors Digest Tax Impact on Q4 Earnings | Investing com After shares in JP Morgan NYSE JPM initially reacted to the downside falling more than 1 in pre market trade Friday investors seemed to accept the fact that the hit to income was a result of the recent tax reform and shares managed to once again turn higher
The bank reported that net income for the last three months of 2017 was 4 2 billion with earnings per share EPS of 1 07 while consensus was looking for earnings of 1 69 a share
However the largest financial services firm by assets noted that excluding significant items fourth quarter income would have been 6 7 billion or 1 76 per share
Under the heading for significant items JP Morgan highlighted that it took a charge of 2 4 billion or 0 69 per share due to the recent tax overhaul
Meanwhile the company s revenue came in at 24 2 billion compared to the forecast of 25 18 billion
Chairman and chief executive Jamie Dimon commented that 2017 was a record year for JP Morgan as the bank added clients and customers and delivered a record EPS
The enactment of tax reform in the fourth quarter is a significant positive outcome for the country Dimon stated
U S companies will be more competitive globally which will ultimately benefit all Americans he explained
The cumulative effect of retained and reinvested capital in the U S will help grow the economy ultimately growing jobs and wages he added
We have always invested even in difficult times in our employees customers and communities and as a result of the tax plan we will be increasing and accelerating some of these investments Dimon concluded
Prior to the report JP Morgan shares had been trading mostly flat barely in positive territory The initial reaction to the report saw shares drop more than 1 However at 7 15AM ET 12 15GMT shares once again changed direction and gained 0 44 to 111 32
Investors now look forward to JP Morgan s conference call at 8 30AM ET 13 30GMT |
C | Another oil bull bites the dust | According to Bloomberg Andy Hall is closing his main Astenbeck hedge fund after suffering big losses in H1 Hall made headlines in 2008 after getting a 100M bonus from Citigroup NYSE C where his hedge fund was then housed amid the financial meltdown In his investor letter a month ago Hall appeared to throw in the towel on oil saying the market had materially worsened thanks to a fast pace of U S shale drilling ETFs USO OIL UWT UCO DWT SCO BNO DBO UGA DTO USL DNO OLO SZO UHN OLEM OILK WTIU OILX WTID USOINow read |
C | Citigroup C Stock Sinks As Market Gains What You Should Know | Citigroup C closed the most recent trading day at 55 46 moving 0 27 from the previous trading session This change lagged the S P 500 s daily gain of 0 97 Elsewhere the Dow gained 1 09 while the tech heavy Nasdaq added 1 08
Heading into today shares of the U S bank had lost 2 56 over the past month lagging the Finance sector s loss of 1 97 and outpacing the S P 500 s loss of 3 04 in that time
C will be looking to display strength as it nears its next earnings release which is expected to be January 14 2019 The company is expected to report EPS of 1 58 up 23 44 from the prior year quarter Meanwhile the Zacks Consensus Estimate for revenue is projecting net sales of 17 65 billion up 2 31 from the year ago period
Investors should also note any recent changes to analyst estimates for C These revisions help to show the ever changing nature of near term business trends As a result we can interpret positive estimate revisions as a good sign for the company s business outlook
Research indicates that these estimate revisions are directly correlated with near term share price momentum Investors can capitalize on this by using the Zacks Rank This model considers these estimate changes and provides a simple actionable rating system
Ranging from 1 Strong Buy to 5 Strong Sell the Zacks Rank system has a proven outside audited track record of outperformance with 1 stocks returning an average of 25 annually since 1988 The Zacks Consensus EPS estimate has moved 1 42 lower within the past month C currently has a Zacks Rank of 3 Hold
In terms of valuation C is currently trading at a Forward P E ratio of 7 43 This valuation marks a discount compared to its industry s average Forward P E of 9 71
Meanwhile C s PEG ratio is currently 0 65 This popular metric is similar to the widely known P E ratio with the difference being that the PEG ratio also takes into account the company s expected earnings growth rate The Banks Major Regional industry currently had an average PEG ratio of 1 02 as of yesterday s close
The Banks Major Regional industry is part of the Finance sector This industry currently has a Zacks Industry Rank of 101 which puts it in the top 40 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
To follow C in the coming trading sessions be sure to utilize Zacks com |
JPM | 3 Top Rated Balanced Mutual Funds To Buy Now | Investors looking to gain exposure to both equity and fixed income securities may consider balanced mutual funds Also these mutual funds are believed to provide greater returns compared to pure fixed income investments while maintaining a low volatility level The proportion of equity and fixed income investments in these funds may also vary in response to market conditions While managers may raise the share of fixed income securities during a downturn to avoid losses the share of equity securities may be increased during an upswing Hence these funds are expected to harness the inherent strengths of both classes of investments Below we will share with you three Each has earned a as we expect the fund to outperform its peers in the future To view the Zacks Rank and past performance of all balanced funds investors can Bruce Fund mostly invests in domestic common stocks convertible bonds and zero coupons government bonds BRUFX may invest in future interest and principal of U S government securities zero coupons bonds without any limit BRUFX seeks long term growth of capital The Bruce Fund has a three year annualized return of 9 2 BRUFX has an expense ratio of 0 68 lower than the category average of 0 85 Invesco Income Allocation A seeks current income ALAAX invest in both U S and non U S companies fixed income instruments and REITs It allocates 60 70 of its assets in fixed income instruments and 30 40 in equities The Invesco Income Allocation A fund has a three year annualized return of 4 2 Duy Nguyen is the portfolio manager of ALAAX since 2014 Franklin Balanced A invests in dividend yielding stocks debt securities and convertible instruments A minimum of 25 of its assets are invested in debt securities which include bonds notes debentures and money market securities FBLAX aims to invest a maximum of 15 of its assets in foreign securities or issuers domiciled outside the U S FBLAX seeks both income and capital appreciation The Franklin Balanced A fund has a three year annualized return of 4 2 As of March 2016 FBLAX held 150 issues with 1 60 of its total assets invested in JP Morgan Chase NYSE JPM Co To view the Zacks Rank and past performance of all balanced mutual funds investors can About Zacks Mutual Fund RankBy applying the Zacks Rank to mutual funds investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward Pick the with the Zacks Rank |
JPM | Today s Trading Plan What Selling | Technical Outlook
Strong follow through yesterday as stocks have now rallied 65 points since last Thursday That is impressive and considering how tight the price range previously was it s a monster move
Three weeks of losses that concluded in mid May is now completely wiped out in just three trading sessions this week That goes to show how hard and how fast a market can move and how you have to be willing to be flexible with your trading bias
In essence don t get married to the long side or short side
Head and shoulders pattern that had been in the works for over two weeks was completely cancelled out yesterday No surprise the bears have become extremely good at blowing it at key moments
Almost comical you now have a massive inverse head and shoulders pattern that is forming over the past seven months A move around 2103 would confirm the pattern
SPDR S P 500 NYSE SPY volume fell off some yesterday and was below recent average levels
It appears to me that the market isn t seeing a lot of retail participants to the degree it had seen in past years
30 minute chart looks over stretched a bit The pattern of late for it has been to Rally Rest Rally Rest Rally Rest
VIX continues to melt away shedding another 3 6 to close at 13 90 The lower 13 s is where the indicator has consistently bounced hard at going back a couple of years
United States Oil NYSE USO broke the 50 day moving average yesterday and is now prime to see crude open above 50 barrel
April highs of 2111 should be the next target for market bulls Closing highs are 2102
The longer term head and shoulders pattern on the weekly chart going back two years would be nullified on a move back above 2116
There is a lot at play here and a lot of potential to change the scope and shape of the market should this market continue rallying higher
2040 2138 price range on SPX continues to show just how difficult this price range is for trading and over the last two years the price action has spent its time trading in it
The up down up down price action over the previous eight trading sessions ended yesterday with a second consecutive day of stocks rallying
The 50 week and 100 week moving average have crossed two weeks ago to the downside Last time this happened was 2001 before the tech correction and again in June 2008 before the mortgage crisis saw its major correction
I believe at this point profits have to be taken aggressively and avoid the tendency to let the profits run the market is in a very choppy range that has mired stock price for the past two years Unless it breaks out of it and onto new all time highs then taking profits aggressively is absolutely important
Historically the May through October time frame is much weaker than the rest of the year
My Trades
Sold JPMorgan Chase Co NYSE JPM yesterday at 65 58 for a 1 9 profit
Added one new long position yesterday
Currently 20 Long 80 Cash
I will look to add 1 3 new long positions to the portfolio today May also hedge the portfolio if we start to see signs of weakness start to creep into the market
Chart for SPX |
MS | Another economic slump another communications test for Fed | By Jonathan Spicer
NEW YORK Reuters The Federal Reserve facing the delicate task of explaining how it will forge ahead with rate hikes in a stormy world economy is wary of again tying its actions to calendar dates but officials want to keep forward guidance as an emergency tool
San Francisco Fed President John Williams said on Friday such time based guidance can be like a sledgehammer a powerful tool when it s needed while Fed Vice Chairman Stanley Fischer said it is as close as the U S central bank can get to a cohesive forecast
The debate over how the world s most powerful central bank should best communicate policy was prompted by a research paper that warned the Fed against slipping back into the trap of an over reliance on time frames in explaining when it planned to adjust interest rates
Economists presented the paper to a roomful of top Fed officials in New York They argued that now that rates are up a notch the Fed should stress that further moves are based on very hard to predict economic data and policymakers should be more unassuming in speeches and published forecasts
With the U S central bank headed into a key March 15 16 meeting in which one option is to pause policy for an extended period the conclusion that it would be imprudent to offer specific time lines may yet hold some sway
Time based forward guidance should only be used in extremely unusual circumstances five Wall Street and university economists concluded in the high profile paper We believe that the current situation does not justify it
A frustratingly slow economic rebound delayed the Fed s ability to get off zero rates until December while a projected path of four rate hikes this year is viewed as unrealistic by financial markets
Beginning in late 2008 the Fed made conditional promises about when rates might rise including specific time frames In one of the biggest blunders then Chairman Ben Bernanke s 2013 suggestion that a bond buying program could be trimmed in the next few meetings of the Fed set off market turmoil that delayed the move
Current Fed Chair Janet Yellen has mostly retreated from this so called forward guidance though even she had to ditch telegraphed rate hikes in June and again in September last year before finally moving in December
In October when leading Fed governors openly opposed each other s views the effectiveness of Fed communications fell to a two year low according to a New York Fed poll of primary dealers
CHART TROUBLES
Data dependency is the Fed s new communications mantra
Yet remnants of time based forward guidance are still found in Fed statements speeches and most explicitly in charts published every three months showing individual policymakers expected path of rate hikes the so called dot plot
What s worrying me is that it looks like a commitment it looks like a freight train St Louis Fed President James Bullard said on Wednesday
Fed Governor Jerome Powell on Friday defended the use of dates and said they may be hard to avoid given he and colleagues expect rates to only gradually return to pre crisis levels
Try saying that without referring to time Powell said
The charts published in December suggested the Fed would hike rates four times in 2016
But since then a global market selloff and fears of recession have forced Yellen and some other Fed officials to downplay those expectations Traders have grown deeply skeptical of any more tightening this year and some have even predicted a policy reversal
The critical paper warned that returning to calendar based forward guidance only mutes the effect of macroeconomic news on interest rates and unnecessarily places restrictions on future Fed action
The authors were JPMorgan N JPM s Michael Feroli Morgan Stanley N MS s David Greenlaw Deutsche Bank DE DBKGn s Peter Hooper former Fed governor Frederic Mishkin of Columbia University and Amir Sufi of the University of Chicago Booth School of Business
It criticized tunnel vision of a press focused on time based comments from the Fed found that market volatility drops during these periods and recommended changes to the dots charts to show the level of confidence in forecasts
The Fed itself considered such changes at last month s policy meeting but decisions were put off |
MS | Oil to average just over 40 a barrel in 2016 Reuters poll | By Koustav Samanta and Vijaykumar Vedala Reuters Oil prices will average just over 40 a barrel this year due to subdued demand and the likelihood a tentative agreement by leading producers to freeze output will do little to drain a supply glut a Reuters poll showed on Monday The price which has fallen by 45 percent in the last 12 months is unlikely to recover much beyond its current levels around 34 a barrel until the second half of the year when output from producers outside OPEC is expected to decline The survey of 30 economists and analysts forecast benchmark Brent crude LCOc1 will average 40 10 a barrel down 2 40 from last month s poll Brent crude which averaged about 54 a barrel in 2015 has averaged 32 57 so far this year This is the ninth successive monthly Reuters poll in which analysts have lowered their price forecasts Russia and OPEC members Saudi Arabia Qatar and Venezuela have agreed to work on a global deal to freeze oil output at January levels if other producers follow suit in a bid to tackle the global crude glut and support prices But Iran is planning to ramp up its output following the end of Western sanctions and has said the proposal is laughable Iraq has also said it will boost production While it s the first coordinated supply move of any kind by OPEC members and Russia in the past 15 years it is clear that any deal without Iranian and Iraqi participation will do little to tighten the market at least in 2016 Raymond James analyst Luana Siegfried said Analysts are also skeptical that freezing production near record levels will support the market Oil prices have fallen 70 percent since mid 2014 due to surplus crude piling up and a decision by the Organization of the Petroleum Exporting Countries in late 2014 to refrain from cutting output to shore up prices as it had done for decades The analysts polled believed supply and demand would not be balanced until late 2016 though the gap between the two is expected to narrow compared with last year Although supply will not meet demand before 2017 anticipation of less oversupply should be supportive for oil prices ABN AMRO AS ABNd senior energy economist Hans Van Cleef said I believe that this agreement is a clear signal that some of the major oil producers indicate that oil prices should not go lower from current levels Global demand growth would likely remain subdued in the medium term due to a slowing Chinese economy and a decline in consumption in OECD countries on improving energy efficiencies and a shift towards cleaner fuels the analysts said Analysts see U S crude futures CLc1 averaging 38 90 a barrel in 2016 down 2 10 from the January poll forecast West Texas Intermediate WTI has averaged 31 03 a barrel so far in 2016
Morgan Stanley N MS had the lowest 2016 forecast for Brent at 30 a barrel while Raymond James had the highest at 53 |
MS | Business ponders horrific cost of end to borderless Europe | By Victoria Bryan and Edward Taylor BERLIN GENEVA Reuters European business is increasingly concerned about the potential collapse of the region s 26 nation border free zone under the pressure of a huge influx of migrants with companies from automakers to logistics firms warning of serious losses Some use words such as horrific and devastating to describe the prospect of an end to the 30 year old Schengen accord seen one of the essential linchpins of post World War Two peace and prosperity in Europe Schengen has already been temporarily suspended by seven countries to keep migrants from crossing their borders and fears are rising of an European wide reversal towards costly and delaying frontier checks Now stretching from Greece in the south to Iceland in the north and encompassing more that 400 million people the Schengen area has offered border free commercial and personal movement since an initial 10 nation pact in 1985 It has been widely considered one of the European Union s most successful wealth creating projects stretching to several non EU countries and excluding just Britain and Ireland in Western Europe One of the benefits of Schengen to manufacturers has been to allow them to work with very low stocks of components relying on the fact they can be delivered on time as demand rises But the frontier free zone is now on the brink of seizing up driven to the edge by the crisis that saw more than 1 million refugees and migrants enter the EU last year many fleeing wars in the Middle East Politicians have long warned about the danger German Chancellor Angela Merkel said on Tuesday that the EU must come to an agreement very soon possibly at a March 7 summit on how to deal with the crisis in order to get Schengen back up and running properly Business however is worrying that it won t happen A breakdown of Schengen would be horrific for us carmaker Opel s chief executive Karl Thomas Neumann told reporters on Tuesday noting Opel depends on the reliable transport of goods and components from Germany Spain Poland Britain and Italy We have huge logistics operations in southern Europe any disruption would have an immediate impact on the bottom line Airports association ACI Europe meanwhile warned that a Schengen collapse would create major congestion and cost larger airports hundreds of millions of euros to redesign terminals The impact would be quite devastating Olivier Jankovec the association s director general said though adding that he did not believe this would transpire Other businesses including delivery specialists DHL Express UPS and TNT played down the impact of Schengen unraveling saying that they had ways of mitigating it But DHL cautioned Border controls would lengthen delivery times to most target countries Parallel with this fuel and wage costs for a given route would probably increase and new administrative costs could also arise ECONOMIC HIT The nature and scope of a Schengen closure makes estimates of the macro economic impact hard to gauge ranging from an immediate slowdown of commerce to knock on effects on sectors such as tourism One study released by the European Commission however sought to assess the impact of just a small slowdown caused by border controls on roughly 57 million road transport journeys a year Assuming that each of these crosses one border and has an additional waiting time of one hour This could easily add up to a total cost of around 3 billion euros per year it said citing an estimate by DG Move the EU directorate general for mobility and transport That is small in the context of a 13 9 trillion euro 15 06 trillion EU economy But the impact could be far greater especially if a shutdown was long lasting A study conducted for Bertelsmann Stiftung found that losses in overall EU growth as a result of reinstating border controls could reach 470 billion euros for the years 2016 to 2025 Another study from France suggested that over time widespread border controls would decrease trade between Schengen countries by 10 percent to 20 percent In the same vein Morgan Stanley NYSE MS estimates that the overall loss of to GDP growth resulting simply from a 5 percent rise in transport costs would amount to 0 2 percent A suspension of Schengen would undermine the functioning of the single market hurting cross border trade transport and tourism Morgan Stanley said |
MS | Morgan Stanley raises 3 6 billion for second infrastructure fund | By Olivia Oran Reuters Morgan Stanley NYSE MS said on Thursday it had raised 3 6 billion for its second infrastructure fund North Haven Infrastructure Partners II making it the latest Wall Street firm to target the sector Investors are increasingly looking to infrastructure as an alternative to low yielding fixed income products with more stable returns than traditional private equity Morgan Stanley said it had also received commitments for up to 2 2 billion more from investors in NHIP II including from public and private pension funds sovereign wealth funds and insurance companies bringing the total capital available raised for the fund to 5 8 billion The fund which will invest in assets in the energy utilities and transportation sectors is part of its investment management division led by Dan Simkowitz who took on the role last October The division had more than 406 billion in assets under management at the end of last year Energy in particular is seen as an attractive area for outside investment as large companies are under pressure to sell off assets amid a sharp decline in oil prices Morgan Stanley s first infrastructure fund raised 4 billion The firm s various investments in infrastructure include parking meters in Chicago natural gas gathering pipeline system Eureka Hunter and a company that manages Italian airports A lot of investors have been switching out of fixed income said Markus Hottenrott chief investment officer for Morgan Stanley Infrastructure They want higher returns but still expect a long term predictable nature that infrastructure provides ArcLight Capital Partners last year closed a 5 6 billion fund focused on energy infrastructure investments and KKR Co LP also closed a 3 1 billion fund Global Infrastructure Partners is seeking to raise as much as 15 billion for its third fund according to reports last year
The amount of uninvested capital from infrastructure funds topped 108 billion in 2015 an all time high according to market research firm Preqin as firms look to raise large funds while facing competition for assets |
MS | Asian shares set for best week in 5 months await US jobs data | By Hideyuki Sano and Nichola Saminather TOKYO SINGAPORE Reuters Asian shares looked set on Friday to post their strongest week in five months as global investors returned to riskier assets after a string of positive U S economic data and a bounce in oil and commodity prices The rebound could continue if the February U S employment report later in the session shows job gains but remains weak enough to discourage rate increases in the near term MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS rose 0 4 percent to the highest in almost two months That put in on track for a 5 4 percent gain for the week the its strongest weekly performance since October Japan s Nikkei N225 was little changed on the day but poised for a weekly gain of 4 7 percent Globally markets are rolling back the extreme risk off trading they did in January and February said Norihiro Fujito senior investment strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities Part of the reason is that the Fed seems to be easing its insistence on raising rates Chinese shares however failed to gain from the optimism with the Shanghai Composite index down 0 5 percent while the CSI 300 CSI300 was little changed Investors are awaiting the start of the annual meeting of China s parliament on Saturday which will map out economic goals for the next five years The MSCI World equity index covering 46 markets MIWD00000PUS held near its two month high touched on Thursday The rally was led by emerging markets with a measure of emerging markets shares MSCIEF rising 0 4 percent on Friday for a sixth day of gains its longest winning streak since October The biggest move on Thursday came from Brazil s Bovespa index BVSP which rose more than 5 percent its biggest gain in six years on news that President Dilma Rousseff could be implicated in a sweeping corruption scandal That encouraged investors who blame her administration s policies for driving Brazil into deep recession On Wall Street the S P 500 Index SPX rose 0 35 percent to a two month high of 1 993 4 U S data on Thursday was positive on the whole with factory orders rising and the service sector index showing continued expansion Somewhat dimming the optimism however the services survey showed employment in the sector fell in February for the first time in two years But that was not necessarily bad for U S stocks as it helped to reduce expectations for a rate hike this month by the Federal Reserve and pushed the dollar lower The dollar s index against a basket of six major currencies DXY USD slipped 0 6 percent on Thursday It pared some of those losses to trade up 0 1 percent at 97 712 on Friday The dollar s weakness helped push gold to a 13 month high of 1 268 30 per ounce on Thursday The precious metal was last trading at 1 259 50 The euro jumped back to 1 0938 from Wednesday s one month low of 1 08255 The yen traded at 113 61 to the dollar recovering from Wednesday s two week low of 114 56 The Australian dollar stood at 0 7364 holding near a three month high of 0 7374 hit on Thursday helped by rising iron ore prices It s on track for a weekly gain of 3 2 percent the most in five months Spot iron ore for immediate delivery to China s Tianjin port hit a 4 1 2 month high on Thursday Commodity prices have been on the mend with oil recovering more than 30 percent from January s 12 year lows helped by hopes of measures to ease global glut Brent futures LCOc1 touched a two month high of 37 40 per barrel this week They were last trading at 37 20 on track for a gain of 6 percent this week
U S crude futures CLc1 have risen 6 2 percent this week to 34 80 |
JPM | Artisan Partners Asset Management AUM flat in December | APAM 0 5 Dec 31 AUM of 115 5B Separate accounts 58 1B Artisan Funds 57 4B Global equity team 29 24B Global value team 41 69B Growth team 30 63B Now read |
JPM | Tivo hits Comcast with new round of patent lawsuits | By Jan Wolfe Reuters Tivo Corp O TIVO has again sued cable operator Comcast Corp O CMCSA of using its patented interactive programing technology without authorization the latest salvo in the companies long running royalty dispute Tivo filed lawsuits in Boston and Los Angeles on Wednesday saying Comcast s X1 video recording system infringed on patents describing functionality like pausing and resuming shows on different devices and restarting live programing in progress A pioneer in digital video recording technology Tivo said on Thursday that it also planned to sue Comcast at the U S International Trade Commission a government agency that can hear patent disputes and ban infringing products from entering the country Comcast said in a statement that it independently created its X1 products and that it would aggressively defend itself against the lawsuits calling them an attempt by Tivo to make money from an aging and increasingly obsolete patent portfolio Tivo subsidiary Rovi Corp sued Comcast in federal court in Texas and at the ITC in April 2016 after the cable operator declined to renew a long standing agreement to license the company s patents That deal reached 13 years ago and valued at 250 million expired in March 2016 according to a Tivo court filing The ITC ruled in November that Comcast s X1 platform infringed on two Tivo patents describing a system for s 1cheduling recordings through a smartphone app The agency said four other Tivo patents were not infringed Comcast said it would remove the scheduling feature which only a small percentage of customers used so it could continue to offer X1 to customers while it appealed the ITC s ruling JPMorgan NYSE JPM analyst Sterling Auty said in a November research note that the ruling could prompt Comcast to resolve the lawsuits through a new licensing agreement San Carlos California based Tivo was one of the first DVR makers but in recent years has focused on licensing its patent portfolio
The patents at issue in Wednesday s lawsuits were originally granted to Rovi a provider of digital television guides that merged with Tivo in 2016 and its Andover Massachusetts based subsidiary Veveo Inc |
C | Citigroup to move part of private banking to Madrid due to Brexit source | MADRID Reuters Citigroup N C is at an advanced stage in plans to move part of its private banking unit from London to Madrid next year as a result of Britain s decision to leave the European Union a source familiar with the matter said on Thursday Several banks are opting to build up subsidiaries outside Britain so their trading operations in the EU continue without too much disruption once Britain leaves the bloc in March 2019 There is an advanced plan to move part of the private banking unit to Madrid during 2018 the source said confirming an earlier report about such a move by Citgroup that was carried in the Spanish newspaper El Pais El Pais said that fewer than 50 people could be transferred while the source said the number would be lower still and the final number and a decision would be taken as Brexit negotiations unfold Citigroup in Madrid declined to comment Madrid has been seeking to lure global banks after Brexit but so far few have signaled that they will use the Spanish capital as a significant hub Details of banks Brexit arrangements are starting to emerge following a July 14 deadline for them to submit contingency plans to the Bank of England Last week Citigroup and Deutsche Bank DE DBKGn said they would beef up their presence in Frankfurt due to Brexit When Citigroup first revealed its plans on July 20 to have its main footprint in Frankfurt the U S bank also said it would over time increase its presence in other key EU cities including Amsterdam Dublin Madrid and Paris |
C | Euroclear s blockchain gold settlement venture with Paxos dissolved | By Anna Irrera NEW YORK Reuters A partnership between Euroclear and U S startup Paxos to develop a blockchain based service for the London gold market has been dissolved a spokeswoman for the Belgium based settlement house said on Thursday The joint venture which had been announced in June 2016 aimed to develop a new system to settle London bullion by using Paxos Bankchain technology Euroclear one of the world s largest settlement houses will no longer be working with Paxos on the project Christine Vanormelingen global head of communications and investor relations at Euroclear said in an interview Not all of the startup collaborations come to a conclusive end that is part of how you develop an innovation strategy she said We remain committed to offering a solution to the London bullion market Paxos could not immediately be reached for comment It is unclear whether Paxos formerly knows as itBit will proceed with a gold settlement project on its own The joint system has already been tested with at least 16 market participants including Citigroup Inc NYSE C Societe Generale PA SOGN Scotiabank and INTL FCStone Ltd The project aimed to make settlement of unallocated gold less capital intensive for banks and other market participants by using blockchain technology Blockchain which first emerged as the system underpinning cryptocurrency bitcoin is a distributed record of transactions that is maintained by a network of computers on the internet without the help of trusted third party Financial institutions have been investing large sums of money and partnering with startups globally to test whether the technology can be used to simplify some cumbersome processes such as securities settlement The Euroclear and Paxos pilot was one of the most ambitious projects announced While excitement around blockchain has not abated on Wall Street the technology has yet to be deployed at scale in mainstream financial markets with skeptics warning that its potential may have been hyped
Proponents say the technology is still in its early days and that its major challenge in financial markets is getting groups of large institutions to agree to significant changes in their processes |
C | Citigroup C Stock Moves 1 95 What You Should Know | In the latest trading session Citigroup C closed at 49 26 marking a 1 95 move from the previous day This change was narrower than the S P 500 s 2 71 loss on the day At the same time the Dow lost 2 91 and the tech heavy Nasdaq lost 2 21
Heading into today shares of the U S bank had lost 20 09 over the past month lagging the Finance sector s loss of 9 53 and the S P 500 s loss of 8 68 in that time
Wall Street will be looking for positivity from C as it approaches its next earnings report date This is expected to be January 14 2019 The company is expected to report EPS of 1 61 up 25 78 from the prior year quarter Meanwhile the Zacks Consensus Estimate for revenue is projecting net sales of 17 95 billion up 4 05 from the year ago period
Looking at the full year our Zacks Consensus Estimates suggest analysts are expecting earnings of 6 65 per share and revenue of 73 63 billion These totals would mark changes of 24 77 and 3 06 respectively from last year
Investors might also notice recent changes to analyst estimates for C These revisions help to show the ever changing nature of near term business trends As such positive estimate revisions reflect analyst optimism about the company s business and profitability
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
Ranging from 1 Strong Buy to 5 Strong Sell the Zacks Rank system has a proven outside audited track record of outperformance with 1 stocks returning an average of 25 annually since 1988 Within the past 30 days our consensus EPS projection has moved 0 4 lower C is holding a Zacks Rank of 3 Hold right now
Valuation is also important so investors should note that C has a Forward P E ratio of 7 55 right now This valuation marks a discount compared to its industry s average Forward P E of 9 7
We can also see that C currently has a PEG ratio of 0 66 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 C s industry had an average PEG ratio of 1 03 as of yesterday s close
The Banks Major Regional industry is part of the Finance sector This group has a Zacks Industry Rank of 147 putting it in the bottom 43 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 |
C | Citigroup C Gains But Lags Market What You Should Know | In the latest trading session Citigroup C closed at 52 06 marking a 0 44 move from the previous day This move lagged the S P 500 s daily gain of 0 85 Meanwhile the Dow gained 1 15 and the Nasdaq a tech heavy index added 0 77
Heading into today shares of the U S bank had lost 20 14 over the past month lagging the Finance sector s loss of 9 41 and the S P 500 s loss of 9 35 in that time
C will be looking to display strength as it nears its next earnings release which is expected to be January 14 2019 In that report analysts expect C to post earnings of 1 66 per share This would mark year over year growth of 29 69 Our most recent consensus estimate is calling for quarterly revenue of 17 95 billion up 4 05 from the year ago period
Investors should also note any recent changes to analyst estimates for C These recent revisions tend to reflect the evolving nature of short term business trends As such positive estimate revisions reflect analyst optimism about the company s business and profitability
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 The Zacks Consensus EPS estimate has moved 0 52 lower within the past month C is currently sporting a Zacks Rank of 4 Sell
Digging into valuation C currently has a Forward P E ratio of 7 79 Its industry sports an average Forward P E of 10 04 so we one might conclude that C is trading at a discount comparatively
We can also see that C currently has a PEG ratio of 0 68 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 The Banks Major Regional was holding an average PEG ratio of 1 05 at yesterday s closing price
The Banks Major Regional industry is part of the Finance sector This group has a Zacks Industry Rank of 198 putting it in the bottom 23 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
Be sure to follow all of these stock moving metrics and many more on Zacks com |
C | Citigroup C Earnings Expected To Grow What To Know Ahead Of Next Week s Release | Citigroup C is expected to deliver a year over year increase in earnings on higher revenues when it reports results for the quarter ended December 2018 This widely known consensus outlook gives a good sense of the company s earnings picture but how the actual results compare to these estimates is a powerful factor that could impact its near term stock price
The stock might move higher if these key numbers top expectations in the upcoming earnings report which is expected to be released on January 14 On the other hand if they miss the stock may move lower
While the sustainability of the immediate price change and future earnings expectations will mostly depend on management s discussion of business conditions on the earnings call it s worth handicapping the probability of a positive EPS surprise
Zacks Consensus Estimate
This U S bank is expected to post quarterly earnings of 1 60 per share in its upcoming report which represents a year over year change of 25
Revenues are expected to be 17 81 billion up 3 2 from the year ago quarter
Estimate Revisions Trend
The consensus EPS estimate for the quarter has been revised 0 65 lower over the last 30 days to the current level This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period
Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts
Price Consensus and EPS Surprise
Earnings Whisper
Estimate revisions ahead of a company s earnings release offer clues to the business conditions for the period whose results are coming out This insight is at the core of our proprietary surprise prediction model the Zacks Earnings ESP Expected Surprise Prediction
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter the Most Accurate Estimate is a version of the Zacks Consensus whose definition is subject to change The idea here is that analysts revising their estimates right before an earnings release have the latest information which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier
Thus a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate However the model s predictive power is significant for positive ESP readings only
A positive Earnings ESP is a strong predictor of an earnings beat particularly when combined with a Zacks Rank 1 Strong Buy 2 Buy or 3 Hold Our research shows that stocks with this combination produce a positive surprise nearly 70 of the time and a solid Zacks Rank actually increases the predictive power of Earnings ESP
Please note that a negative Earnings ESP reading is not indicative of an earnings miss Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and or Zacks Rank of 4 Sell or 5 Strong Sell
How Have the Numbers Shaped Up for Citigroup
For Citigroup the Most Accurate Estimate is lower than the Zacks Consensus Estimate suggesting that analysts have recently become bearish on the company s earnings prospects This has resulted in an Earnings ESP of 2 99
On the other hand the stock currently carries a Zacks Rank of 4
So this combination makes it difficult to conclusively predict that Citigroup will beat the consensus EPS estimate
Does Earnings Surprise History Hold Any Clue
While calculating estimates for a company s future earnings analysts often consider to what extent it has been able to match past consensus estimates So it s worth taking a look at the surprise history for gauging its influence on the upcoming number
For the last reported quarter it was expected that Citigroup would post earnings of 1 66 per share when it actually produced earnings of 1 74 delivering a surprise of 4 82
Over the last four quarters the company has beaten consensus EPS estimates four times
Bottom Line
An earnings beat or miss may not be the sole basis for a stock moving higher or lower Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors Similarly unforeseen catalysts help a number of stocks gain despite an earnings miss
That said betting on stocks that are expected to beat earnings expectations does increase the odds of success This is why it s worth checking a company s Earnings ESP and Zacks Rank ahead of its quarterly release Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they ve reported
Citigroup doesn t appear a compelling earnings beat candidate However investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release |
C | Sector ETF Week In Review For December 31 January 4 | Summary
For the first time in a while the weekly performance charts were positive
The longer term performance table however remains defensive
I take a deeper look at the basic materials and financial ETFs and sectors
Let s begin where we always do the performance tables starting with this week s table
This is a very bullish orientation Energy and discretionary are leading the pack while defensive sectors are at the bottom The best news above is all the green we re seeing especially in ETFs like XLE NYSE XLE and Consumer Discretionary Select Sector SPDR NYSE XLY that have underperformed recently
Here s the one month table
While there is no clear pattern between the bullish and bearish sectors there is one clear result red Performance over the last month has been terrible with the best performing sector down 4 28 and the worst sector off nearly 8
Finally we have the three month table
This is where a clear defensive orientation is clear utilities staples real estate and healthcare are the best performers while tech industrials and energy are at the bottom We also see this orientation in the relative strength graph
From stockcharts com
Defensive sectors continue to hold court in the leading area of the table But note all are losing strength they re heading lower and healthcare is near the line separating leading and weakening Staples has been declining for the last three weeks and utilities have taken a pretty sharp downturn as well Oddly XLB continues to strengthen relative to SPY and the financial ETF is nearing a cross over into the leading sector of the graph
Since they re in the improving category let s take a deeper look at XLBs and XLFs starting with the former
XLB was clobbered in the market s fall downturn falling from 60 66 to 47 05 an absolute decline of 22 5 slightly further than the 20 bear market delineation Recent developments are positive however While still negative momentum is rising It s possible the latest drop to 47 was a selling climax as evidenced by the volume on the sell off Finally the ETF has advanced slightly over 9 since the end of December
Here is a look at the charts of the 10 largest members
There are four potential double bottoms and an additional two charts could be considered as such One chart is in a solid uptrend Although momentum is negative on all the charts it is rising While not ideal some of these charts could be setting up for additional gains
Six members are leading SPY and the other four are improving
Next let s look at the financial sector starting with the daily chart
This is nearly a mirror image of XLB recent developments are bullish although the chart isn t yet at a true technical turnaround The sector has fallen from 28 82 to 22 05 for an absolute decline of 23 5
These charts are less bullish at least in their current form Only one CB has printed a true turnaround pattern a double bottom A majority of the others are similar to the XLFs a sharp sell off a potential bottom and a rising MACD
The RRG chart is very interesting
Goldman NYSE GS and Citigroup NYSE C NYSE C are lagging badly But six other companies are leading SPY
In looking at the RRG charts it s important to remember that relative performance doesn t mean rallying it simply means doing better than And while some of the issues above are doing better than SPYs they aren t necessarily the best issues to invest in right now The basic materials sector is more dependent on international sales than other sectors which means the current trade environment is less than supportive The flattening yield curve will eventually translate into weaker back earnings So as we start the new year be careful
Disclosure I we have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours I wrote this article myself and it expresses my own opinions I am not receiving compensation for it other than from Seeking Alpha I have no business relationship with any company whose stock is mentioned in this article
Original post |
JPM | Fed Minutes Put A Bow On Earlier Fedspeak | Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter labor market conditions continuing to strengthen and inflation making progress toward the Committee s 2 percent objective then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June Some participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June meeting and they emphasized the importance of communicating clearly over the intermeeting period how the Committee intends to respond to economic and financial developments
It was noted that communications could help the public understand how the Committee might respond to incoming data and developments over the upcoming intermeeting period Some members expressed concern that the likelihood implied by market pricing that the Committee would increase the target range for the federal funds rate at the June meeting might be unduly low Minutes of the Federal Reserve Meeting April 26 27 2016 released May 18 2016
The timing could not have been better Right on the heels of Fedspeak insisting that financial markets are under appreciating the odds of a rate hike in June minutes from the last meeting of the Federal Reserve underlined the Fed s general commitment to pushing multiple rate hikes through the turnstyle this year The discussion was convincing enough to rush market expectations for the next rate hike from November of this year to July The odds for a December hike are high enough to suggest the market even expects two rate hikes this year The odds for a June rate hike soared from 15 to 34
Financial markets are again strong believers in rate hikes for 2016
As I mentioned in my last post on this topic A Reluctant Market Nudges the Expected Timing for Fed Rate Hikes the market s slow appreciation of the Fed s seriousness presented an opportunity to get long the U S dollar short emerging markets and short commodities I missed one other opportunity get long financials I honestly forgot about the Fed minutes as the next catalyst Still I think the market is only going to adjust reluctantly to the changing reality surrounding the prospects for rate hikes Since I follow what the Fed Fund futures do I was also reluctant to believe The futures can move a lot faster than portfolio managers with positions spread across some poor plays for a rate hiking cycle
The U S dollar index convincingly broke through resistance at its 50 day moving average This confirms the dollar has indeed bottomed for now
The U S dollar index breaks through critical resistance
I will say it again as I feel I cannot emphasize it enough traders are generally leaning the wrong way The unwind I claimed was coming in various currencies has begun I cannot estimate how strong it will get but I have duly noted the huge amount of confidence speculators have expressed in existing previous currency trends
Oil is in an interesting spot for commodities On the one hand fundamentals have apparently turned the corner to support higher prices production cuts turmoil with suppliers etc On the other hand a strengthening U S dollar will work against further price appreciation It just so happens that United States Oil NYSE USO is testing critical resistance at its downtrending 200DMA I am gratified that my call for a more sustainable bottom in USO proved true these past several months but I am lamenting the potential temporary rollback on my long term mixed options position
United States Oil USO hits the first major test of its uptrend from a double bottom
I closed out my latest short on commodity giant BHP Billiton LON BLT and plan more aggressive fades of rallies in the stock BHP broke down below 50DMA support again but is not yet at a new low for the month
While I have turned bearish on the stock market one of the last long positions I recommended did astoundingly well today JP Morgan Chase NYSE JPM The presumed explanation is that higher rates help banks achieve better returns on capital Even so I was taken aback by JPM s 3 9 surge on the day Traders are moving quickly to reposition in financials
JP Morgan Chase JPM celebrates the imminent arrival of rate hikes
iShares Shares MSCI Emerging Markets continues its breakdown
Shares MSCI Emerging Markets EEM slid to a new low off its 50 200DMA breakdown
So what is all the fuss about anyway As it turns out the minutes are VERY clear in the reinforcement of this week s Fedspeak on rate hikes Starting with my lead in quote I think it is fair to assume that the Fed will be on a mission to get the market as comfortable as possible with imminent rate hikes Here are some other quotes that particularly interest me
The Fed did NOT intend for financial markets to walk away from the MARCH meeting even MORE dovish than before on the prospect of rate hikes In other words expect Fedspeak to get more clear on the real prospect for imminent rate hikes
Federal Reserve communications following the March FOMC meeting were interpreted by market participants as more accommodative than expected In particular investors were attentive to the larger than expected downward revisions to the projections of the federal funds rate in the FOMC s Summary of Economic Projections as well as to references in the March FOMC statement and the Chair s prepared remarks at the press conference to risks to the U S economic outlook stemming from global economic and financial developments Meanwhile domestic data releases were mixed and elicited only modest market reactions On net financial market quotes implied that the federal funds rate path expected by investors flattened notably and that their estimated probability of a rate hike by the June FOMC meeting declined significantly In the Survey of Market Participants the median investor s modal path for the federal funds rate also moved down substantially while in the Survey of Primary Dealers the median dealer s modal path was little changed
Having said that I am surprised that there is any bias for rate hikes given on going risks that data will move away from the Fed s targets
Consistent with the downside risk to aggregate demand the staff viewed the risks to its outlook for the unemployment rate as skewed to the upside The risks to the projection for inflation were still judged as weighted to the downside reflecting the possibility that longer term inflation expectations may have edged down
Several FOMC participants judged that the risks to the economic outlook were now roughly balanced However many others indicated that they continued to see downside risks to the outlook either because of concerns that the recent slowdown in domestic spending might persist or because of remaining concerns about the global economic and financial outlook Some participants noted that global financial markets could be sensitive to the upcoming British referendum on membership in the European Union or to unanticipated developments associated with China s management of its exchange rate
Might the Fed even push through a rate hike in June to get ahead of potential turbulence from the Brexit vote Fallout from the vote could make it impossible for the Fed to even talk rate hikes much like the experience last year with Chinese economic policies causing global financial turmoil
Overall the Fed had a lively debate about the economic justification for rate hikes
Despite the recent rise in core inflation some participants continued to see progress toward the Committee s 2 percent inflation objective as likely to be gradual Several commented that the stronger labor market still appeared to be exerting little upward pressure on wage or price inflation Moreover several continued to see important downside risks to inflation in light of the still low readings on market based measures of inflation compensation and the slippage in the past couple of years in some survey measures of expected longer run inflation However for many other participants the recent developments provided greater confidence that inflation would rise to 2 percent over the medium term Some viewed the recent firming in core inflation as broadly based and unlikely to unwind with several noting recent increases in alternative measures of the trend in inflation such as the trimmed mean PCE and the median CPI or citing evidence that wage growth was picking up In addition to the ongoing tightening of resource utilization the recent depreciation of the dollar and the firming in oil prices suggested that the downward pressures on both core and headline inflation from declining prices of non oil imports and energy should begin to subside
Members of the Fed are definitely itching to get on with rate hikes
Some participants saw limited costs to maintaining a patient posture at this meeting but noted the risks including potential risks to financial stability of waiting too long to resume the process of removing policy accommodation especially given the lags with which monetary policy affects the economy A couple of participants were concerned that further postponement of action to raise the federal funds rate might confuse the public about the economic considerations that influence the Committee s policy decisions and potentially erode the Committee s credibility
The itching is SO great that a few Fed members wanted to get moving in April
A few participants judged it appropriate to increase the target range for the federal funds rate at this meeting citing their assessments that downside risks associated with global economic and financial developments had diminished substantially since early this year that labor market conditions were consistent with the Committee s maximum employment objective and that inflation was likely to rise this year toward the Committee s 2 percent objective Two participants noted that several standard policy benchmarks such as a number of interest rate rules and some measures of the equilibrium real interest rate continued to imply values for the federal funds rate well above the current target range Such large and persistent deviations of the federal funds rate from these benchmarks in their view posed a risk that the removal of policy accommodation was proceeding too slowly
So the pendulum has swung back toward imminent movement on rate hikes The path higher for rate friendly trades will not be a straight line especially since economic data will likely continue to send mixed messages Regardless I am now on board with biasing my trading as if rate hikes are on their way this summer
Full disclosure net long the U S dollar long JPM call options long EEM call and put options |
JPM | Inside JPMorgan U S Mid Cap ETF | The broader U S market has been in a tight spot since the beginning of 2016 due to a host of global issues and uncertainty about the rate hike Amid these concerns mid cap funds offer the best of both worlds growth and stability when compared to small cap and large cap counterparts
Mid cap funds are believed to provide higher returns than their large cap counterparts while witnessing a lower level of volatility than small cap ones Given the swings in the broader market segment so far this year mid cap funds have garnered a lot of attention as they are not very susceptible to volatility read
Recently one of the renowned ETF issuers JPMorgan NYSE JPM introduced a product in the U S targeting the mid cap space The new product JPMorgan Diversified Return U S Mid Cap Equity ETF hit the market on May 11 Below we highlight the product in detail
JPME in Focus
The fund seeks to track the performance of the Russell Midcap Diversified Factor Index JPME does not seek to outperform the underlying index nor does it seek temporary defensive positions when markets decline or appear overvalued Its sole intention is to replicate the constituent securities of the underlying index as closely as possible
JPME is a well diversified fund where Westar Energy Inc takes the top spot with 0 61 weight Other stocks in the fund have less than 0 60 exposure individually In total the fund holds about 602 stocks
Sector wise Consumer Goods gets the highest exposure with 15 5 of the portfolio Utilities Financials Consumer Services Health Care Industrials and Technology also get double digit exposure in the basket
The fund has an expense ratio of 0 34
How Does it Fit in a Portfolio
The fund is a good choice for investors seeking high return potential that comes with lower risk than their small cap counterparts
With the tone of the minutes from the April FOMC meeting released last week being more hawkish than expected chances of a rate hike in the June meeting have gone up This could be due to a series of recently released upbeat U S economic data read more
Meanwhile global growth worries are still at large So mid cap stocks with higher exposure to the U S markets than their large cap counterparts look attractive at this point Thus the launch of the new ETF targeting the U S mid cap market seems well timed
ETF Competition
The newly launched ETF will have to face competition from mid cap focused ETFs like iShares Core S P Mid Cap ETF IJH is one of the most popular ETFs in the space with an asset base of 26 3 billion and average trading volume of 1 3 million shares The fund tracks the S P MidCap 400 index and charges 12 basis points as fees which is much lower than the aforementioned product read
SPDR S P MIDCAP 400 ETF is another popular fund in the space with an asset base of 15 3 billion and trades in a good volume of more than 2 1 million shares a day The fund tracks the S P MidCap 400 Index The fund charges 25 basis points as fees see
Apart from these JPME could also face competition from iShares Russell Mid Cap ETF tracking the Russell MidCap Index The fund has an asset base of 12 billion and volume of almost 359 000 shares a day It has an expense ratio of 20 bps
Thus the newly launched fund is costlier than the popular ETFs in the space So the path ahead can be challenging for JPME
Want the latest recommendations from Zacks Investment Research Today you can download 7 Best Stocks for the Next 30 Days |
JPM | JESC Long Term Outperformance | JPMorgan NYSE JPM European Smaller Companies Trust LON JESC is a relatively concentrated portfolio of 60 80 stocks offering the potential for capital growth The fund has well established managers Jim Campbell since 1995 and Franceso Conte since 1998 who draw on their experience to select high quality companies with strong management teams with positive stock price and earnings momentum that they perceive to be undervalued JESC has outperformed its benchmark over both short and long term periods and over 20 years has outperformed its nearest peer by 410pp
Investment strategy Quality momentum and value
The managers working within the wider J P Morgan Asset Management European equity team select a portfolio of European smaller companies with potential for capital appreciation aiming to outperform the benchmark Euromoney Smaller European Companies ex UK index The fund is actively managed leading to relatively high portfolio turnover and although diversified by country and sector exposure can diverge meaningfully from the benchmark Frequent meetings with existing and potential portfolio companies are an important part of the process Liquidity and gearing is actively managed a range of 20 gearing to 20 net cash is permitted
To read the entire report Please click on the pdf File Below |
MS | Oil rebounds after prediction of declining U S shale output | By Karolin Schaps LONDON Reuters Oil prices rose 7 percent on Monday after the world s oil consumer body said it expected U S shale production to fall this year and next potentially reducing the glut in supplies that has cut prices by 70 percent in 18 months A bounce in global stock markets and the after effect of a fall in the U S oil rig count last week also supported prices International benchmark Brent crude futures LCOc1 were up 1 68 or 5 1 percent at 34 69 a barrel at 1501 GMT while U S crude futures CLc1 surged through the 30 a barrel mark trading up 2 05 or 6 9 percent at 31 69 a barrel The International Energy Agency IEA said in its medium term outlook on Monday that U S shale oil production was expected to fall by 600 000 barrels per day bpd this year and another 200 000 bpd in 2017 This fed into data released late last week that showed U S drilling rig numbers had fallen to the lowest level since December 2009 Global stock markets also bounced on Monday extending last week s gains and bringing a more upbeat tone to commodity markets Positive sentiment on the stock market and the impact of the lower U S rig count gives some support to oil prices said Hans van Cleef senior energy economist at ABN Amro in Amsterdam Speculators are increasingly betting on a rise in Brent crude prices weekly data from the InterContinental Exchange showed Despite Monday s gains analysts said market conditions remained weak especially as demand is slowing The sharp deceleration in demand growth in recent months especially gasoline is a key feature of our more bearish view and expectations for a longer rebalancing period Morgan Stanley N MS analysts said China demand looks particularly challenged with several negative trends of late they added The IEA also said in its report the global oil market would begin rebalancing in 2017 Today s oil market conditions do not suggest that prices can recover sharply in the immediate future the agency said In the United States record crude stocks of 504 1 million barrels were also weighing on markets countering a proposed production freeze at January levels by Russia and the Organization of the Petroleum Exporting Countries OPEC Russia and OPEC both pumped oil at near record volumes last month with Russia reaching another post Soviet high of 10 88 million bpd OPEC member Iraq said on Monday it plans to raise oil output levels to more than 7 million bpd over the next five years and to export 6 million bpd of that
Oil production in Iraq hit a record high of 4 775 million bpd in January |
JPM | S P 500 extends new year s gains dollar up as euro falters | By Caroline Valetkevitch NEW YORK Reuters The S P 500 edged up for a fifth straight session on Monday extending its winning streak for the new year while the dollar hit its highest level in more than a week against a basket of currencies as the euro s rally faltered A global index of equities also rose slightly The S P 500 is now up 2 8 percent since Dec 31 after rising 19 4 percent in 2017 Historically the first five days of January can be an indicator for the market s direction for the full year according to the Stock Traders Almanac Attention in the United States now turns to the quarterly earnings season with investors expected to focus on what U S companies will say about the recently approved tax overhaul and corporate tax cuts Results from JPMorgan Chase N JPM are due Friday We had a big move last week and everyone knows earnings is coming up People don t want to chase too much further when you have a round of fundamental inputs in the next few weeks said Michael O Rourke chief market strategist at JonesTrading in Greenwich Connecticut The Dow Jones Industrial Average DJI fell 12 87 points or 0 05 percent to 25 283 the S P 500 SPX gained 4 56 points or 0 17 percent to 2 747 71 and the Nasdaq Composite IXIC added 20 83 points or 0 29 percent to 7 157 39 With the New Year s Day holiday falling on a Monday this year there were only four trading days last week The pan European FTSEurofirst 300 index FTEU3 rose 0 23 percent and MSCI s gauge of stocks across the globe MIWD00000PUS gained 0 11 percent A surprise dip in German industrial orders which fell in November for the first time since July appeared unlikely to dent growing confidence in the euro zone s biggest economy after a strong run of positive economic news Investors took profits in the euro after the common currency s recent rally The dollar index DXY which measures the greenback against six rival currencies was up 0 42 percent at 92 338 The euro slipped 0 52 to 1 1966 The euro hit a nearly four month high of 1 2089 last week It s a little bit of profit taking and some healthy correction going on the euro s side which is driving some of the dollar trades said Brad Bechtel managing director FX at Jefferies in New York In the U S Treasury market bond yields were little changed after a boost from stronger German government debt and a Federal Reserve official s remarks that the U S central bank may only raise interest rates two times this year Benchmark 10 year notes US10YT RR last fell 1 32 in price to yield 2 48 percent from 2 476 percent late on Friday Oil prices ended up slightly as protests in Iran and the arrests of 11 princes in Saudi Arabia offset projections for higher U S oil production U S crude CLc1 rose 29 cents to settle at 61 73 a barrel while Brent crude LCOc1 gained 16 cents to settle at 67 78 Gold retreated from last week s 3 1 2 month high as the U S dollar regained some ground against the euro Spot gold was down 0 1 percent at 1 318 84 an ounce
For Reuters Live Markets blog on European and UK stock markets open a news window on Reuters Eikon by pressing F9 and type in Live Markets in the search bar |
JPM | Top 5 Things to Know in the Market on Tuesday | Investing com Here are the top five things you need to know in financial markets on Tuesday January 9
1 Global stocks continue move higher
The S P 500 and Nasdaq both closed at fresh record highs on Monday though the Dow took a slight step back and U S futures pointed to another small move higher for Tuesday s session as investors took positions ahead of Friday s full schedule when Wells Fargo NYSE WFC and JPMorgan NYSE JPM kick off the fourth quarter reporting season and the latest inflation data will be released At 6 00AM ET 11 00GMT the blue chip Dow futures rose 42 points or 0 17 S P 500 futures advanced 1 point or 0 05 while the Nasdaq 100 futures edged forward 7 points or 0 07
Elsewhere European equities continued the upward trend in global equities on Tuesday hitting highs not seen since August 2015 The benchmark Euro Stoxx 50 advanced 0 26 by 6 01AM ET 11 01GMT Germany s DAX rose 0 18 while London s FTSE 100 traded up 0 37
Earlier Asian shares also edged higher on Tuesday Of particular note Japan s Nikkei 225 returned from a holiday to close with gains of 0 6 at its highest level since November 1991
2 U S 10 year Treasury yield hits 2 5
Yields on the 10 year U S Treasury note moved higher on Tuesday briefly breaking through the 2 5 level overnight to an intraday high of 2 506
That was the first time the benchmark yield which moves inversely to bond prices moved above 2 5 since the tax reform bill was confirmed back in December although it still remained far from the 2017 high of 2 629
At 6 02AM ET 11 02GMT the 10 year yield gained 1 4 basis points or 0 58 to 2 496
3 Dollar hits 1 week highs ahead of JOLTS
The dollar was hovering at one week highs against other major currencies on Tuesday as investors looked ahead to a light day for economic data
Market participants will take stock of more labor market data with the release of Job Openings and Labor Turnover Survey JOLTS at 10 00AM ET 15 00GMT
Coming after last Friday s employment report that disappointed consensus but still showed a solid labor market outgoing Federal Reserve chair Janet Yellen has cited JOLTS when assessing labor market conditions
Strong fundamentals would encourage the U S central bank to forge ahead with gradually tightening monetary policy this year despite inflation persistently running below its 2 target
Markets price in odds of 68 for the next 25 basis point hike to occur in March according to Investing com s Fed Rate Monitor Tool
At 6 03AM ET 11 03GMT the U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies gained 0 24 at 92 30
4 BoJ trims bond purchases pushing yen higher
Markets seemed to be reminded on Tuesday that the eventual path of the Bank of Japan s ultra loose monetary policy will be towards tightening
The BoJ trimmed its buying of long dated Japanese government bonds in market operations helping to stoke speculation about a future exit from its massive stimulus policy
Specifically the Tokyo s central bank cut its purchases of Japanese government bonds of 10 to 25 years left to maturity and those of 25 to 40 years to maturity by 10 billion yen 88 39 million each from its previous operations
Furthermore Kyodo News reported that the BoJ will consider raising its forecast for 2018 economic growth at its January 22 23 meeting
Even though most economists expect the BOJ to keep both short term rates and the 10 year bond yield target unchanged at least until the second half of 2019 while most experts believe the Japanese central bank will not begin scaling back its stimulus until late 2018 or after the hint of removing accommodation pushed the yen higher despite generalized dollar strength on Tuesday
At 6 04AM ET 11 04GMT USD JPY fell 0 27 to 112 81
5 Oil breathes sigh of relieve from drop in active U S oil rigs
Crude oil prices remained supported near multi year highs on Tuesday still boosted by a decline in U S oil rigs and supply cuts by major oil producers while market prices waited to see if U S stockpiles would fall for an eighth straight week
The American Petroleum Institute will release its weekly stockpiles data after the market close Tuesday while the official government data will be released a day later amid expectations for an inventory decline of 4 1 million barrels
U S crude oil futures gained 0 24 to 61 88 at 6 05AM ET 11 05GMT while Brent oil was unchanged at 67 78 |
JPM | Top 5 Things to Know in the Market on Wednesday | Investing com Here are the top five things you need to know in financial markets on Wednesday January 10
1 Warnings of a bond bear market
Bond guru Bill Gross warned after the market close Tuesday that the bond bear market was confirmed as 25 year long term trendlines had been broken both 5 year and 10 year Treasuries
The Bank of Japan s tapering of bond purchases caused a wave in sovereign debt markets as investors began to worry that global central banks were set on a path to trim their purchases suggesting an imminent decline in prices Bond yields move inversely to pricing
Yields on the 10 year U S Treasury note hit an intraday high of 2 593 in early morning trade Wednesday
Ahead of an auction of 20 billion in 10 year U S debt in a re opening later on Wednesday the 10 year yield had pulled back from intraday highs but was steady at 2 586 by 6 03AM ET 11 03GMT
2 Global stock rally takes a break
After yet another bullish close on Wall Street a day earlier with the S P 500 notching its best start to a year since 1987 U S futures finally pointed to a break in the rally as market participants awaited the unofficial start of fourth quarter earnings season with reports from Wells Fargo NYSE WFC and JPMorgan NYSE JPM on Friday At 6 03AM ET 11 03GMT the blue chip Dow futures fell 119 points or 0 47 S P 500 futures lost 12 point or 0 43 while the Nasdaq 100 futures traded down 38 points or 0 57
Elsewhere European equities also showed caution as the Old World s own reporting season got underway and buyer exhaustion seemed to hit stock floors The benchmark Euro Stoxx 50 lost 0 56 by 6 05AM ET 11 05GMT Germany s DAX fell 0 79 while London s FTSE 100 traded down 0 10
Earlier Asian shares flinched from testing their 2007 record peak as investors took profits in high tech shares
3 Oil hits 3 year high ahead of U S inventories
Oil prices jumped to three year highs on Wednesday as faith in OPEC s capacity to curb production and signs of healthy global demand buoyed bullish sentiment in black gold
However observers will continue to keep an eye on U S shale production amid concerns that rising output stateside could derail OPEC s efforts to rebalance global markets
Also supporting oil prices on Wednesday the American Petroleum Institute said late Tuesday that crude inventories fell by 11 2 million barrels in the week ending January 5 compared to expectations for a 3 9 million barrel decline
Market participants were looking ahead to the U S Energy Information Administration s weekly U S crude oil inventories data due later Wednesday amid expectations for a decline of 3 9 million barrels
U S crude oil futures gained 0 71 to 63 41 at 6 05AM ET 11 05GMT while Brent oil rose 0 38 to 69 09 The U S benchmark was off an intraday high of 63 56 last seen in December 2014
4 Dollar hits 6 week lows against yen on BoJ jitters
The dollar extended losses against the yen on Wednesday after the Bank of Japan trimmed the size of its bond purchases in the prior session sparking speculation that it could start to scale back its monetary stimulus later this year
Even though most economists expect the BOJ to keep both short term rates and the 10 year bond yield target unchanged at least until the second half of 2019 while most experts believe the Japanese central bank will not begin scaling back its stimulus until late 2018 or after the hint of removing accommodation pushed the yen higher
At 6 06AM ET 11 06GMT USD JPY fell 1 13 to 111 38 its lowest level since November 28
5 UK ups effort to secure Brexit deal on financial services
UK finance minister Philip Hammond and Brexit secretary David Davis were in Germany on Wednesday with the hopes to convince the country s business leaders to pressure the European Union s representatives to forge a deal to secure the future of Britain s financial services
The British politicians warned that an integrating approach to banking would be vital once the UK leaves the economic bloc suggesting that the lack of a deal would leave Europe open to a repeat of the euro zone financial crisis
In a joint article published in German news Hammond and Davis argued that the 2008 global financial crisis proved how fundamental financial services are to the real economy and how easily contagion can spread from one economy to another without global and regional safeguards in place
They expressed their view that the UK supports collaboration within the European banking sector rather than forcing it to fragment |
JPM | Buffett says he will never invest in cryptocurrencies | Reuters Berkshire Hathaway NYSE BRKa s Warren Buffett said on Wednesday he will never invest in cryptocurrencies
I can say almost with certainty that cryptocurrencies will come to a bad end Buffett told CNBC in an interview
Buffett s comments come a day after JPMorgan NYSE JPM Chase Chief Executive Jamie Dimon said he regrets calling bitcoin a fraud referring to comments he made at a banking conference in September nL4N1P4434
Bitcoin has taken the investing world by storm surging to a high of more than 19 000 and created a divide on Wall Street about whether it is a legitimate financial instrument
Bitcoin was down around 3 percent at 13 981 53 |
C | Deutsche Bank JPMorgan to pay 148 million to end yen Libor cases in U S | NEW YORK Reuters Deutsche Bank AG DE DBKGn and JPMorgan Chase Co N JPM have agreed to pay a combined 148 million to end private U S antitrust litigation claiming they conspired with other banks to manipulate the yen Libor and Euroyen Tibor benchmark interest rates The preliminary settlements totaling 77 million for Deutsche Bank and 71 million for JPMorgan were detailed in filings late Friday in the U S District Court in Manhattan and require a judge s approval They followed similar settlements last year with Citigroup Inc N C and HSBC Holdings Plc L HSBA totaling 23 million and 35 million respectively Investors including the California State Teachers Retirement System and J Kyle Bass hedge fund Hayman Capital Management LP had accused more than 20 banks of conspiring to rig yen Libor Euroyen Tibor and Euroyen Tibor futures contracts to benefit their own positions from 2006 through at least 2010 Deutsche Bank and JPMorgan did not admit wrongdoing or liability in agreeing to settle court papers show Banks use the London Interbank Offered Rate Libor and Tokyo Interbank Offered Rate Tibor to set costs of borrowing from each other Libor is often used to set rates on mortgages credit cards and other loans
Investors have filed many lawsuits in the Manhattan court accusing banks of conspiring to rig rates or prices in various financial and commodities markets |
C | European banks struggle to solve toxic shipping debt problem | By Jonathan Saul LONDON Reuters Dutch shipowner Vroon is finding talks with banks tough going as it tries to navigate a way out of a long slump in the shipping industry But it is not an easy time for the lenders either Vroon a 127 year old family owned group which operates about 200 vessels and transports livestock oil and other commodities wants to extend its credit lines and adjust repayment schedules But European banks that lent heavily to the sector when it boomed more than a decade ago have a heavy toxic debt burden following the 2008 09 global financial crisis and a shipping markets crash in 2010 Shipping firms and banks are caught in a vicious circle of debt causing a credit crunch that is hindering the industry s recovery Overcapacity a glut of available ships for hire is a big concern and another is a lack of profitability caused by problems such as slower demand and global economic turmoil One of the major companies South Korean container line Hanjin Shipping Co Ltd has gone under We have difficulty in meeting all repayment obligations that we have and that is what we are in discussion with our banks about Those discussions are constructive but are not easy not for us or the banks Herman Marks the chief financial officer at Vroon told Reuters It is the lack of profitability for the industry that is causing the lack of availability of finance Marks said Vroon was confident of reaching agreements with its financiers soon Shipping finance sources say the shipping industry which transports 90 percent of the world s goods including oil food and industrial products such as coal and iron ore has an estimated capital shortfall of 30 billion this year Some banks are being driven out of shipping and those that remain are now more conservative in their financing Marks said It is an industry that requires consolidation he added That consolidation has begun especially in container shipping Denmark s Maersk Line the global leader in the sector is acquiring German rival Hamburg Sud and China s COSCO Shipping Holdings Co Ltd has bid 6 3 billion for Hong Kong peer Orient Overseas International Ltd Germany s Rickmers filed for insolvency in June and firms that have filed for Chapter 11 bankruptcy protection since March include Singapore s Ezra Holdings Ltd and U S based firms Tidewater GulfMark Offshore and Montco Offshore For a graphic on global shipping click DOWNTURN Banks were happy to lend to the shipping industry when it boomed after the surge in trade that accompanied globalization Even the 2008 09 crisis did not deter all creditors Expectations that China s fast economic growth would revive the industry prompted a brief new wave of lending before many shipping markets crashed again This left European banks with a debt burden of more than 100 billion and the value of at least 70 percent of those loans has fallen according to industry estimates Banks are struggling to find ways to recoup their mounting losses There is probably about 150 billion of distressed bank debt stuck with mainly European banks mainly German that has still got to be de gorged from the system said Michael Parker global industry head for shipping with Citigroup NYSE C Large banks that once had a big role in the industry such as Britain s Royal Bank of Scotland LON RBS are pulling out Some more specialist lenders such as Germany s HSH Nordbank are still working through their legacy loans Ratings agency Moody s said in June it expected further losses as problem shipping loans continue to mount possibly affecting banks profitability and capital in 2017 and potentially beyond The European Central Bank said in May it would be carrying out on site inspections at banks with a view to possible remedial actions Regulators want banks to shore up their balance sheets and comply with stress tests which assess whether a bank has enough capital to cope with adverse developments The belief that the regulators will allow the banks to go back to creating the disaster they created five 10 years ago I think is highly unlikely Citi s Parker told a Capital Link shipping conference in March German state controlled lenders known as landesbanken including HSH and NordLB are among the hardest hit HSH was forced to take a second bailout from its public sector owners because of provisions for bad shipping loans and has to be privatized under European state aid rules by the end of February 2018 HSH had reduced its total shipping portfolio to 16 6 billion euros 19 36 billion by the end of the first quarter of 2017 from more than 30 billion euros nearly a decade ago By the end of the first quarter of 2017 HSH had 9 9 billion euros in its so called bad bank that it is running down and the remaining 6 7 billion euros in its core bank We have learned a lot of lessons from the past We are conservative we are cautious Christian Nieswandt global head of shipping at HSH told Reuters I do not think people would do the same things now that they did in the past LOSSES PILED UP NordLB set aside 2 94 billion euros in 2016 in provisions for bad shipping loans NordLB is preparing a sale of its property lender Deutsche Hypothekenbank as it seeks to repair its balance sheet following heavy writedowns related to its exposure to bad shipping loans people close to the matter told Reuters Banks in Germany were exposed when a number of closed shipping investment funds known as KG houses were forced into insolvency leaving the banks carrying the risks The banks were also exposed when the container shipping sector which traditionally accounted for a large segment of Germany s shipping industry ran into trouble Dagfinn Lunde former head of shipping at Germany s DVB Bank said a further problem arose because loans had been used to finance a type of container ship which became obsolete once the Panama Canal was extended in 2016 The losses were clocking up without them the banks seeing it Lunde said With the shipping industry still struggling the banks prospects for offloading their toxic debts are challenging How are they going to recoup an asset that is losing money all the time said Mark Clintworth head of shipping at the European Investment Bank They will have to ring fence their shipping assets and in a worst case scenario take a complete haircut on it FIRE SALES European banks have stepped up efforts to get rid of shipping loans by selling portfolios RBS has sold hundreds of millions of dollars in loans to buyers including Japanese financial services firm Orix Corp Others have found selling more difficult Attempts by HSH to sell a 500 million euro segment of shipping loans as part of a 3 2 billion euro portfolio sale which included other assets proved unsuccessful because the debt was deemed toxic and attracted offers that the bank considered too low shipping finance sources said HSH declined to comment NordLB said in July it had abandoned efforts to sell a 1 3 billion euro portfolio of loans to U S private equity group KKR Germany s Commerzbank DE CBKG said in June it had sought to shed its 4 5 billion euro portfolio of distressed shipping loans through swaps with covered bonds securities backed by shipping mortgages It is not yet known whether it will succeed Sellers still trying to offload billions of dollars in loans include Deutsche Bank DE DBKGn shipping finance sources say Investors will want to see a bit more sustained profitability to the sector there is some way to go before that said Paul Taylor global head of shipping offshore with French bank Societe Generale PA SOGN CIB |
C | Citi lays out targets at investor day | By 2020 the bank promises an efficiency ratio in the low 50 area current is 59 return on assets of 90 110 basis points return on tangible common equity around 11 and around 13 when excluding the deferred tax asset Improved returns will come thanks to boosted earnings and capital optimization with the bank noting it has about 18B of excess capital The presentations begin with CEO Michael Corbat at 8 45 ET Investor Day website and presentation slides are here C 0 8 premarketNow read |
C | Citigroup sets higher profit targets at first investor day since crisis | By David Henry NEW YORK Reuters Citigroup Inc N C issued loftier projections for its long term profitability on Tuesday at the first major conference it has held for its own investors in more than nine years The fourth largest U S bank said it expects to generate higher returns on shareholder equity and boost profits per share by 80 percent over the next few years About half of Citigroup s profit forecast is based on an expectation that it will be able to buy back more stock Another 40 percent comes from expected performance of underlying businesses helped by revenue growth and cost controls with just 10 percent coming from rising interest rates Evercore ISI analyst Glenn Schorr characterized the bank s forecasts as not only better than expected but credible We think investors will be happy he wrote in a note to clients ahead of the event Citigroup shares rose 2 9 percent in early trading to 68 In its presentation the bank said its projections imply a stock worth 100 per share Citigroup invited about 250 stock analysts and investors to hear executives speak in New York its first investor day since May 2008 The event comes four weeks after the U S Federal Reserve said Citigroup could begin trimming back extra capital it has built up since the 2007 2009 financial crisis when it received three government bailouts to survive Since that time Citigroup has sold and closed businesses around the world It has also struggled to meet previous targets Chief Executive Michael Corbat set out in part because it did not have the Fed s permission to use more capital to buy back stock In prepared remarks Corbat said the bank decided to host its investor day now because it has finally crossed an inflection point We haven t yet delivered the level of returns that you our investors both expect and deserve Corbat said You have been patient with us And I want you to know that we don t take that patience for granted and we don t think it is inexhaustible Citigroup is still some distance from the targets it set out on Tuesday morning and far behind some rivals The bank maintained a target for return on tangible common equity of 10 percent by 2019 but said it now expects that return to improve to 11 percent by 2010 and 14 percent over the longer term Shareholders closely watch that statistic as a sign of how much profit a bank can generate from the money they have provided to it During the first half of this year Citi generated an 8 2 percent return on tangible common equity compared with 14 percent at JPMorgan Chase Co N JPM Analysts generally like to see minimum returns of 10 percent which Corbat had intended to reach in 2015 but did not Ahead of the event investors had questioned whether Corbat could produce enough profit from Citigroup s remaining business to hit long term targets Investors want to see additional drivers of revenue beyond capital returns Michael Cronin an analyst with Standard Life LON SL Investments who planned to attend the investor day said in an interview on Monday He also wanted to hear about expenses Revenue growth is harder to control than expenses said Cronin whose firm manages 350 billion of assets In its presentations Citigroup said it expects to generate 9 in earnings per share in 2020 up from 5 per share over the last 12 months It expects to save 2 5 billion in annual costs over that timeframe 1 5 billion of which it plans to reinvest in its businesses each year
In addition to Corbat and Chief Financial Officer John Gerspach executives scheduled to speak at the event include Stephen Bird chief executive for global consumer banking Jud Linville chief executive for Citi branded cards and Jamie Forese chief executive over institutional client businesses including capital markets investment banking corporate lending and transaction services |
C | Citigroup C Stock Moves 1 4 What You Should Know | Citigroup C closed the most recent trading day at 54 25 moving 1 4 from the previous trading session This move was narrower than the S P 500 s daily loss of 2 08 Meanwhile the Dow lost 2 11 and the Nasdaq a tech heavy index lost 2 27
Coming into today shares of the U S bank had lost 14 83 in the past month In that same time the Finance sector lost 5 28 while the S P 500 lost 3 6
Wall Street will be looking for positivity from C as it approaches its next earnings report date This is expected to be January 15 2019 The company is expected to report EPS of 1 65 up 28 91 from the prior year quarter Meanwhile the Zacks Consensus Estimate for revenue is projecting net sales of 17 95 billion up 4 05 from the year ago period
C s full year Zacks Consensus Estimates are calling for earnings of 6 69 per share and revenue of 73 73 billion These results would represent year over year changes of 25 52 and 3 19 respectively
It is also important to note the recent changes to analyst estimates for C These recent revisions tend to reflect the evolving nature of short term business trends As a result we can interpret positive estimate revisions as a good sign for 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 Over the past month the Zacks Consensus EPS estimate remained stagnant C currently has a Zacks Rank of 3 Hold
Investors should also note C s current valuation metrics including its Forward P E ratio of 8 23 This valuation marks a discount compared to its industry s average Forward P E of 10 23
We can also see that C currently has a PEG ratio of 0 72 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 The Banks Major Regional industry currently had an average PEG ratio of 1 09 as of yesterday s close
The Banks Major Regional industry is part of the Finance sector This group has a Zacks Industry Rank of 155 putting it in the bottom 40 of all 250 industries
The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
You can find more information on all of these metrics and much more on Zacks com |
JPM | Hecla Mining Suburban Propane Partners Citigroup Wells Fargo And JPMorgan Chase Highlighted As Zacks Bull And Bear Of The Day | For Immediate Release
Chicago IL May 16 2016 highlights Hecla Mining as the Bull of the Day and Suburban Propane Partners as the Bear of the Day In addition Zacks Equity Research provides analysis on Citigroup Inc NYSE C Wells Fargo Company NYSE WFC and JPMorgan Chase Co NYSE JPM
Here is a synopsis of all five stocks
Just last week when asked Federal Reserve Chair Janet Yellen said that she would not completely rule out the use of negative interest rates in some future very adverse scenario The use of negative interest rates are already being utilized in Japan and Central banks in Europe Currently Europe has a 0 4 interest rate and Japan has a 0 1 interest rate Further Bank of Japan Governor Haruhiko Kuroda stated that they could match the 0 4 interest rate in Europe if conditions become worse
Just imagine what people and Europe and Japan are facing you have to pay to keep your money in the bank Because of this many people in Japan and Europe are buying gold and silver instead of putting their money in a bank with negative interest rates This shift from putting money into the banks to buying precious metals has driven the demand for gold and silver and that is why Hecla Mining is the Zacks Bull of the Day
This Zacks Rank 1 Strong Buy is a leading low cost U S silver producer with operating mines in Alaska and Idaho and is a growing gold producer with an operating mine in Quebec Canada The Company also has exploration and pre development properties in five world class silver and gold mining districts in the U S Canada and Mexico and an exploration office and investments in early stage silver exploration projects in Canada
In the company s most recent earnings report they saw year over year gains in sales 10 adjusted EBITDA 33 highest level in three years and record silver production of 4 6 million ounces Also the company was able to decrease exploration and pre development expenses by 1 7 million Further due to the strong performance the Board of Directors elected to declare a quarterly cash dividend of 0 0025 per common share
According to Phillips Baker Jr President and CEO Consistent with our strategy to grow despite price weakness the first quarter production was the highest in our 500 quarter history Our focus on high return growth like we have at San Sebastian gives Hecla leverage to increasing silver prices And Casa Berardi s growing production from the East Mine Crown Pillar pit should do the same for gold
I can only speak for myself but I believe that most people like warm weather better than cold weather But the weather does play a key role in some areas of commerce The winter that is almost behind us it still gets cold in Chicago at night but it was a mild winter compared to recent years According to NOAA National Oceanic and Atmospheric Administration the 2015 2016 winter was 13 warmer in the contiguous United States This warmer weather negatively impacted Suburban Propane Partners and they are our Zacks Bear of the Day
This Zacks Ranked 5 Strong Sell company is a publicly traded Delaware limited partnership is engaged through subsidiaries in the retail and wholesale marketing of propane and related appliances and services The Partnership believes it is the third largest retail marketer of propane in the United States Suburban Propane Partners serves active residential commercial industrial and agricultural customers from customer service centers in over 40 states The Partnership s operations are concentrated in the east and west coast regions of the United States
In their most recent earnings report the company saw year over year declines in adjusted EBITDA 32 3 retail propane gallons sold 19 1 sales of fuel oil 33 2 revenues 32 6 and average posted propane prices and fuel oil prices fell 27 and 40 2 respectively
According to Michael Stivala President and CEO Our results for the second quarter of fiscal 2016 reflect the challenging operating environment stemming from record warm temperatures during this year s heating season that adversely impacted customer demand during the quarter The flexible nature of our cost structure and the strength of our balance sheet helped mitigate some of the short term weather driven earnings shortfall Despite the lower earnings we continued to fund all of our working capital requirements without the need to borrow under our revolving credit facility and we ended the quarter with approximately 59 0 million of cash on hand
Additional content
Bank Stock Roundup
Over the last five trading days banks were seen undertaking measures to combat the adverse impact of several macroeconomic concerns Restructuring activities of banks are likely to support their financials amid a challenging operating environment
Though capital markets are gradually stabilizing the overall scenario is still pessimistic This has raised fresh doubts about the timing of the next rate hike by the Federal Reserve Therefore top line pressure for banks is expected to persist for some time
Moreover banks continue to face legal headwinds Fast resolution of legal matters is expected to help banks to focus on improving profitability over time
Read Important Developments of the Week
1 Amid heightened regulatory scrutiny and focus on core operations Citigroup Inc is planning to divest its electronic market making unit Automated Trading Desk Per a Bloomberg report Chicago based Citadel Securities has emerged as the potential buyer and Citigroup is in advanced talks with it read more
2 As traditional lending faces competitive pressure from the burgeoning online lenders Wells Fargo Company launched its own online small business loan product FastFlex The new loan offering that will be available to existing customers later this month is funded as soon as the next business day read more
3 JPMorgan Chase Co s 150 million accord to settle investor claims related to the London Whale case was approved by the U S District Judge George Daniels in New York The approval will bring an end to a suit filed in 2012 which accused the bank officials of insufficient actions to avoid losses in the London Whale trading scandal read more
Want the latest recommendations from Zacks Investment Research Today you can download7 Best Stocks for the Next 30 Days
About the Bull and Bear of the Day
Every day the analysts at Zacks Equity Research select two stocks that are likely to outperform Bull or underperform Bear the markets over the next 3 6 months
About the Analyst Blog
Updated throughout every trading day the provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long term
Continuous analyst coverage is provided for a universe of 1 150 publicly traded stocks Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance Recommendations and target prices are six month time horizons
Zacks Profit from the Pros e mail newsletter provides highlights of the latest analysis from Zacks Equity Research Find out What is happening in the on zacks com |
JPM | These 3 Investing Apps Make Building Wealth Easier Than Ever | News of a gun in a 12 year old s hands isn t often something that s celebrated these days But I promise you this story is one of innocence And if you use the ideas I m about to show you it very well could lead to true financial liberty
It did for me
I ve been a passionate sportsman for as long as I can remember I ve written about it spoken about it and even lived it in the Alaskan wilderness
Needless to say when I finally reached that magical age when I could join Grandpa in the woods all I wanted was a gun of my own
But I needed money
It didn t take long until I made a deal with my dad You see each night after work he d empty his pockets typically putting a small handful of coins on the table
Those coins were mine They would buy my gun
I found an old pickle jar and kept an eagle eye on that table Quarters were king but even pennies had their place
Now decades later I realize my old man wasn t giving me a handout He was teaching me a lesson
Within a few months the jar was full I had my gun a combination shotgun that could take birds or deer I ve got much more expensive firearms in my collection now but that one s still my favorite
It taught me a lesson
It s a lesson that investors of every age should understand
On Friday Alex Green wrote about the idea of financial education in America It s a popular theme around here Our nation has done a disastrous job teaching our youngest generations common sense investing concepts
Instead we ve allowed Wall Street to complicate the scene We ve allowed a false sense of complexity and difficulty to taint a rather simple idea
But that s changing and it s driving Wall Street nuts
These days my kids would go broke if they depended on the change from my pocket I m notorious for not carrying cash But technology offers an alternative
It s a popular application called
It does what my pickle jar did but it does it much much more effectively Here s how it works
Dark Money Spending in the 2016 Presidential Election Will Make Investors Very Rich
The 2016 election is already projected to cost 5 billion almost double the amount of the previous election Thanks to a Supreme Court ruling that gave the OK for dark money spending more and more cash is flooding into campaigns and during the last presidential election year three companies outperformed the market by 215 05 That means investors who act now could be in for a blockbuster year
Create an Acorns account attach it to the card you use for daily expenses and the app will automatically round up every purchase you make to the nearest dollar It then invests that change in a diversified portfolio that matches your risk profile
Editor s Note For more on how Acorns works check out the Oxford Club Radio interview with CEO Walter Cruttenden
It s a simple no brainer investment strategy If you ve ever said you don t have money to invest you just lost your excuse
But it s not just Acorns that s making it easy to make money
If you re a frequent reader you know we often tout the idea of following the leader In other words don t try to reinvent the investment wheel just follow the world s smartest investors
That s exactly what another popular app will help you do
It s called and it s a simple way to track the investments of presumably the world s greatest investors the folks worth a billion bucks or more For a fee of 0 08 per month you can create a portfolio that mimics the strategies used by your favorite rich guy
Worried you don t have the time or smarts even though I m certain you have both to make smart investment decisions Once again you just lost an excuse Lean on the wisdom of a billionaire or two
And finally one of our favorites at The Oxford Club It s an app created by two Stanford University students who realized the trade fees charged by traditional brokers even as low as 7 to 10 are absurdly high compared to their costs
With the sort of spirit we applaud the students challenged the norm They created an app that allows investors to make trades entirely for free Robinhood is now quite popular and has saved investors millions of dollars in trade fees
It s no wonder folks like Jamie Dimon at JPMorgan Chase NYSE NYSE JPM are fighting back They ve seen a major disruption in their industry
In his most recent note to shareholders the big bank CEO took a wimpy swing at these industry newcomers hyping their supposed security risks Meanwhile a bit of smart sleuthing by The New York Times shows that at the same time Dimon is bashing the newfound competition his company is working on a similar app of its own
Our point though is not to measure the competitive landscape Those things tend to work themselves out Our point instead is to remind you there is no excuse to not pursue financial liberty
No cash to invest Not anymore
Don t trust your own smarts Not anymore
Sick of high fees Nope even that excuse is gone
You have a couple of choices You can use these apps to build your own financial liberty or you can share them with younger generations dare I say help a youngster buy his gun Better yet do both
Either way you re out of excuses |
MS | Oil prices extend gains on dollar slide talk of oil producer meeting | By Henning Gloystein SINGAPORE Reuters Crude oil futures extended gains from the previous session on Thursday as a weaker dollar and unconfirmed talk of producers potentially meeting to discuss output cuts lifted the market despite record U S stocks due to overproduction Traders said that the liquidation of a 600 million leveraged fund bet on falling prices was also in part responsible for the jump in prices But despite the rise analysts said prices would remain low in 2016 and 2017 as global demand slows and inventories swell U S crude futures were trading at 32 81 per barrel at 0749 GMT on Thursday up 53 cents from the previous session s close when they rallied 8 percent from below 30 per barrel Brent crude was up 48 cents at 35 52 per barrel Analysts said prices had recovered on a sliding dollar and from ongoing yet unconfirmed talk of a potential meeting of oil producers to cut output in support of prices which have fallen around 70 percent since mid 2014 But the main feature of recent oil trading has been volatility with price swings of more than 10 percent within two trading sessions frequently occurring since mid January The weaker U S dollar provided some interim support to the commodity complex but volatility in crude oil remains extreme Climbing U S crude stocks remain an ongoing threat to further price weakness ANZ bank said U S crude inventories climbed 7 8 million barrels in the week to Jan 29 to a record 502 7 million barrels compared with analyst expectations for an increase of 4 8 million barrels U S gasoline inventories rose to a record high of 254 4 million barrels Analysts remain largely bearish in their outlook pointing towards persistent oversupply and slowing demand Morgan Stanley N MS on Thursday lowered its average 2016 Brent price forecast to 30 per barrel down from 49 previously The bank only expects an average price of 40 per barrel in 2017 as oversupply persists With demand slowing rebalancing may not occur until mid 2017 or later it said adding that global supply should grow in 2016 despite low prices Morgan Stanley also said that an emerging willingness of producers to forward hedge at prices not much above 40 per barrel was also capping prices National Australia Bank NAB said on Thursday that it expected oil prices to recover mildly to 40 per barrel by end 2016 and 50 per barrel by end 17
ANZ bank said it saw oil and iron ore markets as the commodities most susceptible to further weakness |
MS | Crude oil prices steady in thin Asian trading ahead of Lunar New Year | By Henning Gloystein SINGAPORE Reuters Crude oil futures were steady in lacklustre trading on Friday as Asian liquidity faded ahead of the Lunar New Year holiday across large parts of the region International benchmark Brent crude futures LCOc1 were trading at 34 41 per barrel at 0539 GMT a notch below their last settlement while U S West Texas Intermediate WTI crude futures CLc1 were up 6 cents at 31 78 a barrel Traders said liquidity was low due to the Lunar New Year holiday which will last for most of next week Oil prices have been extremely volatile since the start of the year and in particular this week as a string of bullish indicators like a slump in the dollar DXY and potential talks on output cuts clashed with bearish reports of record U S crude inventories higher output and a slowing global economy Investment bank Jefferies said on Friday that U S crude prices had traded within a 19 percent band over the last week and with inter day moves approaching 11 percent We expect that volatility could remain elevated especially on upward moves from short covering net length in WTI is at its lowest level since 08 01 2013 implying a large short position Jefferies said BMI Research a unit of rating agency Fitch Group said that bloated crude inventories in the U S pose rising risk to WTI and that a continued build in storage over the coming six to eight weeks could collapse the price of WTI driving a sharp reopening of the spread to Brent U S crude inventories climbed 7 8 million barrels in the week to Jan 29 to 502 7 million barrels Gasoline inventories rose to a record high soaring 5 9 million barrels to 254 4 million barrels Brimming storage is contributing to an overall bearish market outlook as long as major producers don t reach an agreement on output with China s economic slowdown now showing signs of spreading across the world Commodities brokerage Marex Spectron said that the macroeconomic environment is bearish Global industrial production manufacturing and automotive demand indices all point towards weakening demand
Rebalancing will take longer keeping prices low We see the low price regime persisting until 2Q17 Morgan Stanley N MS said |
MS | Oil prices slide supply overhang in focus | By Ahmad Ghaddar LONDON Reuters Crude oil prices fell on Monday because of lingering concerns over a supply overhang and after a Saudi Venezuela meeting showed few signs that steps would be taken to boost prices Global benchmark Brent futures LCOc1 were down 43 cents at 33 63 at 9 43 a m ET while U S crude futures CLc1 lost 66 cents to 30 23 Both contracts had lost over 1 a barrel earlier during the session There s still a lot of concerns about the state of the crude oil stocks in the United States said Olivier Jakob oil analyst at Petromatrix Weekly U S crude and gasoline inventories hit record highs data from the Energy Information Administration EIA showed last week The latest weekly stock data is expected to be released on Wednesday Morgan Stanley N MS warned on Monday that a global supply overhang was unlikely to start clearing before 2017 We see limited upside for Brent and range bound pricing over the next 12 months as the supply overhang is worked off the bank said However investors in Brent crude now hold more futures and options contracts that bet on the price rising than at any time since the InterContinental Exchange s records began in 2011 data from the exchange showed on Monday Money managers raised their net long position in Brent crude futures and options by 31 346 contracts to 292 300 lots in the week to Feb 2 No tangible signs emerged from a meeting on Sunday between Saudi Arabia s oil minister Ali al Naimi and his Venezuelan counterpart that OPEC and non OPEC suppliers were ready to meet to discuss the price slump It was a successful meeting and conducted in a positive atmosphere Saudi news agency SPA cited Naimi as saying Venezuela s oil minister Eulogio Del Pino who is on a tour of oil producers to lobby for action to prop up prices said his meeting with Naimi was productive The chances of a deal are slim now but will increase if prices stay around 30 a barrel which they will if Iran and Iraq come through on their intended volumes PVM Oil Associates analyst David Hufton said in a note on Monday
In a sign Tehran is determined to claw back lost market share after the lifting of sanctions Iranian Oil Minister Bijan Zanganeh was quoted by the ministry s news agency SHANA on Saturday as saying that France s Total PA TOTF had agreed to buy 160 000 barrels per day bpd of Iranian crude for delivery in Europe |
MS | Morgan Stanley to pay 3 2 billion to settle financial crisis era charges | By Sarah N Lynch WASHINGTON Reuters Morgan Stanley N MS will pay about 3 2 billion to settle charges that it misled investors in residential mortgage backed securities that later soured during the financial crisis federal and state officials said Thursday The case stems from an investigation by the Residential Mortgage Backed Securities Group a joint federal and state task force unveiled in 2012 by President Barack Obama that serves to probe potential misconduct from the financial crisis Of the 3 2 billion to be paid 2 6 billion will go toward resolving claims brought by the U S Justice Department Another 550 million meanwhile will go to New York and another 22 5 million will settle a case with Illinois Thursday s case against the bank alleges that Morgan Stanley painted a rosy picture to investors about the quality of the residential mortgages it had securitized even though the loans had material defects We are pleased to have finalized these settlements involving legacy residential mortgage backed securities matters a Morgan Stanley spokesman said The firm has previously reserved for all amounts related to these settlements he added The Justice Department said that as part of the accord Morgan Stanley acknowledged that it failed to disclose information to prospective investors about the quality of the mortgages The Justice Department and the New York Attorney General s Office provided details about some of the internal communications at the bank in which the quality of the underlying mortgages were openly discussed In one May 2006 email for instance an employee who headed a team that was conducting due diligence on the value of the securities asked another colleague please do not mention the slightly higher risk tolerance in these communications We are running under the radar and do not want to document these types of things the person added
In a statement New York Attorney General Eric Schneiderman said the deal marks another victory in our efforts to help New Yorkers rebuild in the wake of the financial devastation caused by major banks |
MS | Strong U S consumer spending counters recession fears | By Lucia Mutikani
WASHINGTON Reuters U S consumer spending regained momentum in January as households ramped up purchases of a variety of goods in a hopeful sign that economic growth was picking up after slowing to a crawl at the end of 2015
But the outlook for consumer spending was tempered by another report on Friday showing sentiment among households ebbed in early February Still the increase in consumer spending last month underscored the economy s resilience and challenged the view that a recession was looming
The markets may have decided that the U S is headed for recession but obviously no one told U S consumers said Paul Ashworth chief economist at Capital Economics in Toronto
The Commerce Department said retail sales excluding automobiles gasoline building materials and food services increased 0 6 percent last month after an unrevised 0 3 percent decline in December
These so called core retail sales correspond most closely with the consumer spending component of gross domestic product Economists had forecast core retail sales increasing 0 3 percent last month
U S stocks which had been aggressively sold this week on concerns the economy was heading into recession rallied on the data Market sentiment was also buoyed by a rebound in oil prices from 12 year lows
Prices for U S Treasury debt fell while the dollar DXY rose against a basket of currencies
Though signs of firming consumer spending are likely to be welcomed by Federal Reserve officials the stock market turmoil and tame inflation environment make it unlikely the U S central bank will raise interest rates next month Rate hike prospects for the rest of the year have also diminished
The Fed raised its short term interest rate in December the first increase in nearly a decade
From the Fed s perspective any further evidence of the U S economy weathering the market turmoil at the start of the year is confirmation the Fed should continue to focus on the longer run and ignore short term disruptions said Lindsey Piegza chief economist at Stifel Fixed Income in Chicago
Consumer spending accounts for more than two thirds of U S economic activity and is being supported by a tightening labor market which is starting to lift wages Savings which hit a three year high in 2015 are seen boosting future spending
Q1 GDP ESTIMATES RISE
Growth in consumer spending moderated in the fourth quarter That together with weak export growth due to the strong dollar efforts by businesses to sell inventory and cuts in capital goods spending by energy firms restrained GDP growth to a 0 7 percent annual pace
However weak reports on inventories factory orders and construction spending suggest the economy grew at about a 0 2 percent rate in the last three months of 2015
In the wake of the retail sales report forecasting firm Macroeconomic Advisers raised its first quarter GDP growth estimate by one tenth of a percentage point to a 2 percent annual rate and economists at Morgan Stanley N MS lifted their forecast to a rate of 1 5 percent from 1 2 percent
A separate report showed the University of Michigan s consumer sentiment index fell to a reading of 90 7 in early February from 92 in January as households worried about the economic outlook
Consumers however remained upbeat about their personal financial situation and anticipated that low inflation would boost their purchasing power Consumers expect inflation to average 2 4 percent over the next five years down from 2 7 percent in the January survey and the lowest reading since the question was added to the monthly survey in 1990
The Fed closely watches the consumer survey measures of inflation expectations and while today s data is only the preliminary report it does increase the risk that the Fed s next hike is delayed beyond our current June call said Michael Feroli an economist at JPMorgan N JPM in New York
Inflation which is currently running below the Fed s 2 percent target could remain benign The Labor Department reported on Friday that import prices dropped 1 1 percent in January after a similar decrease in December Import prices have declined in 17 of the last 19 months reflecting the robust dollar and plunging oil prices
While lower oil prices have translated into cheaper gasoline boosting household discretionary spending they are also weighing on sales at service stations
In January a 3 1 percent drop in receipts at service stations restricted the gain in overall retail sales to 0 2 percent Retail sales for December were revised to show a 0 2 percent rise instead of the previously reported 0 1 percent dip |
JPM | Wall Street is set up for an abnormal earnings season | Wall Street analysts made the smallest cuts to fourth quarter 2017 earnings for any quarter since 2010 according to FactSet
Analysts across sectors are counting on a strong earnings season raising the bar that companies have to clear in the coming weeks
Q4 was the last reporting season before the new tax law kicked in meaning that it s especially important
Wall Street analysts have set the bar high for corporate America when it starts reporting earnings later this week Or at least their expectations aren t as low as they usually are
In the fourth quarter analysts who forecast earnings metrics for the S P 500 companies they cover made the smallest cuts to their estimates for any quarter since 2010 according to FactSet
They lowered the bottom up earnings per share estimate by 0 3 to 34 90 from 35 That s smaller than the average quarterly decline during the past year 3 1 and during the past five years 4 2 FactSet s data showed
The overall estimate was not skewed by one or two sectors in which analysts are uniquely bullish John Butters a senior earnings analyst at FactSet noted that analysts in seven out of the 10 S P 500 sectors made cuts that were smaller than the five year average
However a big contribution to the S P 500 s fourth quarter earnings growth should come from the energy sector as it continues to rebound from the oil crash of 2014 Credit Suisse SIX CSGN estimates 126 earnings per share growth from Q4 2015 which dwarfs second place Materials by about 100 percentage points
Wall Street s confidence means that companies may have a higher bar to beat in the coming weeks Every quarter there s a familiar pattern expectations for earnings growth plunge into the reporting season Companies end up beating these lowered expectations giving investors more reason to bid up their share prices
And across Wall Street analysts are counting on earnings growth to keep this bull market going for longer
The last apples to apples comparison
That aside this earnings season marks the end of an era
That s because the fourth quarter was the last one before the most drastic changes to the US tax code in three decades
Given recent tax changes 4Q17 provides the last apples to apples comparison for company results under the prior regime and will therefore be of particular importance said Jonathan Golub the chief US equity strategist at Credit Suisse in a note on Monday
Over the next couple of weeks analysts will be paying attention to guidance around each company s new effective tax rate as they make their final estimates for this year Golub said Additionally they d be listening out for details from companies on how they plan to spend capital returned from outside the US
The fourth quarter earnings season unofficially kicks off on Friday when JPMorgan NYSE JPM and Wells Fargo NYSE WFC announce their results |
JPM | U S Stocks Rise on Tech Gains as Dollar Advances Markets Wrap | Bloomberg U S stocks turned higher in afternoon trading with technology shares bolstering major indexes as investors continue to price in the impact of tax cuts before corporate earnings start later in the week The dollar strengthened after three straight weekly declines
The S P 500 Index shrugged off early sluggishness to extend its rally to start the year to five days The Nasdaq indexes pushed higher as semiconductors advanced European equities added to the biggest weekly advance since April and markets in Tokyo were closed for a holiday Bloomberg s dollar index climbed the most in three weeks Oil held above 61 a barrel and a measure of financial market stress sank to its lowest level since 2014
U S equities are in the longest winning streak since early November as investors continue to price in the benefits of cuts to corporate taxes passed late last year Major wall street banks from JPMorgan NYSE JPM Chased Co to Wells Fargo NYSE WFC Co kick off earnings later this week with the impact of the tax cuts in focus With risk assets globally enjoying a strong start to 2018 outlooks from leading companies may dictate the next move for equity markets
In Europe data showed confidence in the euro area continued its advance at the end of 2017 but Germany s continued struggle to form a government restrained the euro The pound fell and U K stocks were flat after weak economic data and reports that Prime Minister Theresa May is considering creating a position for a minister in charge of contingency planning for a no deal Brexit South Korea s won reversed gains as authorities said they would take action to stem one sided moves in the currency The comments came a day before the nation is to hold its first high level talks with North Korea since 2015
Here are some of the other main events to watch for this week
U S inflation data will probably show price pressures remain muted giving hawks little reason to argue for faster tightening
San Francisco Fed President John Williams and head of the New York Fed Bill Dudley are among policy makers scheduled to speak
China producer and consumer prices data are due Wednesday while a reading on the country s money supply is expected in coming days
Terminal users can read more in our markets blog
These are the main moves in markets
Stocks
The S P 500 Index rose 0 1 percent to a record 2 746 95 as of 1 53 p m in New York It jumped 2 6 percent last week
The Nasdaq Composite Index rose 0 3 percent and the Dow Jones Industrial Average was little changed
The MSCI All Country World Index added 0 1 percent for a fifth straight gain
The MSCI Emerging Market Index gained 0 4 percent to the highest in almost seven years
Currencies
The euro sank 0 5 percent to 1 196472 in the largest decrease in almost six weeks
The Bloomberg Dollar Spot Index jumped 0 3 percent the biggest increase in more than three weeks
The British pound fell 0 2 percent to 1 3546
Bonds
The yield on 10 year Treasuries was flat at 2 48 percent
Germany s 10 year yield fell one basis point to 0 43 percent
Commodities
Gold futures fell 0 2 percent to 1 319 90 an ounce
West Texas Intermediate crude rose 0 4 percent to 61 68 a barrel
Copper advanced less than 0 05 percent to 3 23 a pound |
C | PayPal to partner with JPMorgan | Reuters PayPal Inc O PYPL said on Thursday it would partner with JPMorgan Chase Co N JPM allowing the bank s customers to link their Chase Pay and PayPal accounts The companies said Chase customers will be able to use their reward points to make purchases via PayPal PayPal will also be able to process payments on ChaseNet JPMorgan s payment network The payment processor also expanded its partnership with Citigroup Inc N C allowing Citi customers to use reward points with merchants that accept PayPal effective 2018 |
C | Citigroup Deutsche Bank beef up Frankfurt presence in Brexit response | LONDON FRANKFURT Reuters Two global banks Citigroup N C and Deutsche Bank DE DBKGn are beefing up their presence in Frankfurt to deal with the impact of Britain leaving the European Union U S bank Citigroup said on Thursday that it may need to create 150 new jobs in the EU as it confirmed it would headquarter its EU trading operations in Frankfurt Deutsche Bank Chief Executive Officer John Cryan said in a video published on Thursday that the German lender expected to add new jobs in Frankfurt where it will replicate a structure that is interchangeable with its London operations and evolve as Brexit negotiations unfold Details of banks Brexit arrangements are starting to emerge following a July 14 deadline for them to submit details of their contingency plans to the Bank of England It s important not to wait until the 11th hour and 59th minute Cryan said in the video to staff outlining Deutsche s Brexit planning strategy Citi is one of several banks opting to build up a subsidiary in Frankfurt so that its trading operations in the EU can continue without too much disruption when Britain leaves the bloc in March 2019 Frankfurt is our first choice for headquartering our EU broker dealer based on the existing infrastructure and the people and expertise we already have on the ground Jim Cowles the bank s head of Europe Middle East and Africa EMEA said in a memo to staff He added that the bank also planned to build up its private banking treasury and trade and investment banking businesses in the EU while the bank s London office would remain its EMEA headquarters This would be done by increasing over time our footprint in other key EU cities including Amsterdam Dublin Luxembourg Madrid and Paris Banks have indicated that while they may pick one EU center to be their main regional subsidiary in the bloc they are likely to spread their operations across several countries JPMorgan CEO Jamie Dimon said on July 11 that his bank would probably use Frankfurt as the legal domicile of its European operations after Brexit but that jobs may be put elsewhere as well Deutsche Bank employs about 9 000 people in Britain and expects London to remain vital to the bank as one of the world s two most important financial hubs It currently books most of its business through London But the Frankfurt based bank with a London branch is planning for a hard Brexit that would entail a loss of so called passporting rights between Britain and the EU Cryan termed it a reasonable worst case scenario The bank s plans to replicate its London booking operations in Frankfurt will initially mean added jobs to Frankfurt though it could later result in jobs moving to Frankfurt from London depending on how Brexit negotiations play out Cryan said We build replicate infrastructure in Frankfurt and over time if we end up because of the actual Brexit rebooking everything into Germany Frankfurt then there will be roles in London that get eliminated or moved Cryan said People may not but the role would move to Frankfurt he said without mentioning the number of people or roles
Bank of England Governor Mark Carney warned in April that EU banks wholesale branches in Britain may have to convert into subsidiaries after Brexit which would require banks like Deutsche Bank to put a lot more capital into its London operations |
C | Citigroup Hits Two Factor Support Level Expect A Bounce To 64 | Shares of Citigroup NYSE C tagged an epic pivot support form 2015 on Thursday as well as the weekly 200 moving average This two factor support puts the likelihood of a bounce at 85 in the coming month At a current price of 58 85 investors can expect a bounce back to 64 00 in that time frame |
JPM | Gold ETFs To Continue Their Bull Run Here s Why | Gold has been on investors radar since the start of the year given that the bullion has made a spectacular comeback after being shunned for three years After hitting the 15 month high of 1 300 per ounce on May 2 the precious metal lost its momentum to trade around 1 275 per ounce currently Notably the yellow metal has risen about 20 so far this year
Given this many investors are concerned about the continuation of the bull run in gold For them we have highlighted some strong reasons to remain invested in gold and gold ETFs or buy on pullbacks Global Worries
The global stock market has been flooded with bouts of volatility and uncertainty This is especially true against the backdrop of the oil price drama and the China led downturn Though the Chinese economy showed some signs of a rebound in March fears of a slowdown resurfaced with the latest round of downbeat data and rising debt Additionally the growth momentum in the U S has slowed down lately and investors faith in central banks ability to boost growth across the globe has faded read
Further the International Monetary Fund IMF once again cut its global growth forecast to 3 2 from the earlier projection of 3 4 citing that the ill effects of persistent slowdown in China and lower oil prices have spilled over into emerging markets such as Brazil The agency also highlighted economic weakness in developed countries like Japan Europe and the U S that could lead to poor stock performance across the globe
Added to the woes is Britain s possible exit from the European Union and U S election in November that will continue to roil the global markets in the second half The feeble macro environment will continue to raise demand for the yellow metal as a store of value and hedge against market turmoil Fed s Cautious Stance
Given the global growth worries and increased market volatility the Fed is not in a hurry to raise interest rates anytime soon Though the greenback has shown some strength lately lower interest rates will continue to weigh on the dollar against the basket of currencies raising the appeal for gold Even if the Fed raises rates it will follow a slower path and pull the rates higher to 0 875 from the current 0 500 This is much lower than the December expectation of 1 375 Negative Interest Rates
Most central banks across the world such as Japan Sweden Switzerland Denmark and Europe adopted negative interest rates in order to restore growth and ease fears of deflation The strategy has raised concerns over the profitability of banks and increased their chances of default This is because negative interest rates are discouraging investors to deposit their money in banks as this could eat away some fraction of their money initially leaving them with less than what they had invested This has boosted demand for gold bullion and pushed the prices higher The trend is likely to persist throughout the year as more countries will resort to this strategy to stimulate economic growth read Historical Underperformance of Stocks in Summer
As per the old adage Sell in May and Go Away the U S stock market has a long history of weak performance during the summer months May to October According to the study from the S P 500 delivered an average of just 0 85 gains from May to October in comparison to the average gains of 6 3 in the November April period over the past 20 years This seasonality might keep investors away from the stock market during the six month period and encourage them to invest in the safe haven avenues like gold read
Bullish Gold Outlook
A number of experts and researchers believe that gold has the potential to move higher in the coming months According to the bullishness in the precious metal remains intact with 10 15 more returns from the current levels If the gold breaches the 1 300 per ounce level it will be as high as around 1 500 per ounce
Investment banks such as JPMorgan RBC Capital Markets and BNP Paribas PA BNPP expect gold to hit 1 400 per ounce this year Further hedge fund managers boosted their bullish bets on gold to the highest level since 2011 according to In particular is bullish on gold and bearish on the stock market How to Play
Given the huge optimism and intense buying pressure on gold investors have a long list of options in the ETF world to tap the metal s rally Gold ETFs
While there are many product that are directly linked to the spot gold price or futures we have highlighted the three most popular ETFs These have gained over 19 in the year to date timeframe and have a favorable Zacks ETF Rank of 3 or Hold rating with a Medium risk outlook SPDR Gold Trust ETF This is the largest and most popular ETF in the gold space with AUM of 33 9 billion and average daily volume of around 9 6 million shares The fund tracks the price of gold bullion measured in U S dollars and kept in London under the custody of HSBC Bank USA Expense ratio comes in at 0 40 read
iShares Gold Trust This ETF offers exposure to the day to day movement of the price of gold bullion and is backed by physical gold under the custody of JP Morgan Chase NYSE JPM Bank in London It has AUM of 8 billion and trades in solid volume of more than 8 million shares a day on average The ETF charges 25 bps in annual fees
ETFS Physical Swiss Gold Shares This product also tracks the price of gold bullion and is backed by physical bullion under the custody of JPMorgan Chase Bank It has amassed 1 0 billion in its asset base and trades in lower volume of 41 000 shares per day The product has an expense ratio of 0 39 Leveraged Gold ETFs
Investors who are bullish on gold may consider a near term long on the precious metal with the following ETFs depending on their risk appetite 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 It charges 95 bps in fees a year and has amassed 95 4 million in its asset base Volume is light at about 42 000 shares per day The ETF has gained 39 9 so far this year PowerShares DB Gold Double Long ETN This ETN seeks to deliver twice the return of the daily performance of the DBIQ Optimum Yield Gold Index Excess Return charging 75 bps in fees per year It has accumulated 137 1 million in its asset base so far and trades in an average daily volume of 75 000 shares The ETN is up 47 this year read
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 86 4 million while charging a higher fee of 1 35 annually However the note trades in a solid volume of over 595 000 shares a day on average and has surged 63 4 in the year to date timeframe |
JPM | 3 Numbers Brexit Fears Likely To Keep Boe Dovish Today | EU industrial output should post a softer decline in March after February s retreat
A UK rate hike is off the table ahead of next month s Brexit vote
Brexit worries will dominate the BoE decisions and chatter
US jobless claims are projected to slide after two weekly increases
A busy day of economic news awaits including the monthly report on Eurozone industrial output for March In addition the Bank of England publishes a monetary announcement and new minutes from its last policy meeting Meanwhile today s weekly numbers on US jobless claims will draw close attention as the market looks for more context in the wake of last week s disappointing employment report for April A degree of healing is expected for Europe s industrial sector in today s March report Although output is expected to ease again in the closing month of the first quarter the crowd s looking for a kinder gentler retreat
The worrisome US trend in initial jobless claims is likely to ease in today s release giving optimists an excuse to view the soft NFP figure as a temporary setback Photo iStock
Econoday com s consensus forecast sees output dipping by just 0 1 in March a substantially lighter decline vs the February s 0 8 tumble But the recent slowdown will still take a toll on the year over year comparison Production is projected to be flat in March vs the year earlier level a sharp reversal from annual gains in January and February
A less threatening profile generally for today s figures is a reasonable guesstimate based on the previously published data for the main economies in March Three of the big four Eurozone nations posted firmer data albeit via a mix of smaller monthly declines France and Germany and a flat performance Italy Only Spain dispatched a genuine rebound with a solid increase in production for March according to Eurostat data Nonetheless the collective picture is one of improvement if only in relative terms
Meantime sentiment in the manufacturing sector suggests that growth will perk up in the second quarter Markit s purchasing managers index for the Eurozone ticked up in April to 51 7 That s still soft relative to last year s readings but the fact that the PMI is inching higher and holding above the neutral 50 mark implies that manufacturing output will continue to print in the positive column
The PMI survey is signalling an anaemic annual rate of growth of manufacturing production of just less than 1 which is half the pace seen in the months leading up to the recent slowdown Markit s chief economist last week
That s a clue for expecting that second quarter growth for the Eurozone will decelerate vs Q1 s relatively strong 0 6 GDP increase as a quarter over quarter rate But unless we learn otherwise in today s industrial report the near term outlook for growth albeit softer growth remains intact
With the economic uncertainty over next month s Brexit vote looming it was already likely that the Bank of England wouldn t announce an interest rate hike today The mounting evidence that UK growth is slowing surely seals the deal to stay dovish until the referendum on Britain s role in the European Union is resolved
GDP for the three months through April dipped to 0 3 vs the previous three month period down slightly from last month s forecast the National Institute of Economic and Social Research projected in a report yesterday UK economic growth continues to be subdued compared with the rates we saw at the end of last year a spokesman for NIESR Some of this slowdown is undoubtedly a result of heightened uncertainty around the impending EU referendum and so is likely to be temporary should the UK decide to remain in the EU after June 23rd
Maybe so but the ongoing outlook for softer growth will keep the BoE away from squeezing policy Meantime Brexit worries will dominate the central bank s decisions and chatter BoE Governor Carney will make it clear that the Bank is well prepared for the possibility of Brexit possibly outlining contingency plans to help calm the markets but the Bank s baseline for its forecasts is that the UK will vote to remain in the EU Roubini Global Economics in a note to clients from earlier this week
Today s update offers deeper perspective on interpreting last week s disappointing rise in US payrolls for April The initial reaction the 160 000 increase in nonfarm employment well below the 215 000 advance in the previous month is a sign of trouble for the labour market But the upward bias in this week s monthly release for job gains in March inspired some analysts to argue that the trend still looks encouraging
The data generally remain upbeat and it does not look like there has been any material weakening in the health of the labour market lately a JPMorgan NYSE JPM economist Reuters on Tuesday
Today s weekly release on new filings for unemployment benefits will provide fresh guidance on evaluating the wisdom of remaining optimistic From the vantage of the forecasters the news is on track for some improvement After running sharply higher in the last two updates new claims reached a five week high in the final week of April and posted a modest year over year increase for the first time in a month
But the worrisome trend is set to ease according to Econoday com s consensus forecast Claims are projected to fall by 7 000 to 267 000 seasonally adjusted In that case the optimists will have another excuse to view last week s surprisingly soft payrolls report for April as nothing more than a temporary setback
Disclosure Originally published at Saxo Bank TradingFloor com |
MS | TE Connectivity to buy Creganna Medical Group for 895 million | Reuters Swiss based communication equipment maker TE Connectivity Ltd N TEL said it would buy medical device maker Creganna Medical Group for 895 million expanding in the fast growing business of supplying equipment for minimally invasive procedures Ireland based Creganna Medical makes products such as cardiac stents balloon catheters and laparoscopic devices used in cardiovascular neurovascular and other life saving treatments and procedures Minimally invasive procedures involve using devices such as catheters to make tiny incisions instead of creating large openings on the body TE bought another catheter systems maker AdvancedCath for 190 million in February 2015 TE said the deal is expected to add 3 cents per share to earnings in the first full year after the deal closes probably in the third quarter of 2016 Creganna Medical will be part of TE s industrial solutions business which mainly includes communication equipment used in aerospace defense oil and gas markets Morgan Stanley Co LLC N MS was TE s financial adviser while Davis Polk Wardwell LLP was the outside counsel |
JPM | Take Five World markets themes for the week ahead | By Marc Jones LONDON Reuters Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them 1 PARTY ON World stocks started the year with their best week in over a year and while it s tempting to say same old same old as markets smash another host of milestones and records you still have to take a step back and assess what s happening There are some who will dismiss this as another bout of mindless bubble blowing and insist it will all end in tears Perhaps it will But the more sober assessment is that we are going through the first boom in the world economy in over a decade Global industrial output raced higher at more than a 5 percent annualized rate last month and more than 4 percent for the fourth quarter as a whole The G10 economic surprise index which nets positive over negative hits and misses on incoming data continues to hover close to its most positive readings in almost 8 years There will be harder data on industrial output for Q4 next week as well as trade data readings from China and tech soundings in Asia from the likes of Samsung KS 005930 Inflation focused central banks that have fueled all this with their record cheap money will be looking at the rising price of oil meanwhile Graphic The new year party for world markets 2 YEARNING FOR EARNINGS Perhaps one reason for the latest run up in stocks the Q4 earnings season comes back onto the radar with the big U S financials kicking off at the end of the week JPMorgan Chase NYSE JPM and rival Wells Fargo NYSE WFC launch the earnings season with reports before the opening bell on Friday Even despite the record low financial market volatility that s crimping trading revenues deal making has been super brisk over recent months and overall fee income from banks around the world rose some 16 percent last year to a record level of more than 100 billion according to Thomson Reuters data The numbers should be good Blended year on year Q4 earnings growth for the S P 500 overall is expected to be 11 9 percent according to Thomson Reuters I B E S estimates up from 8 5 percent in Q3 Excluding the energy sector which benefits from weak year earlier comparisons it is seen at 9 5 percent Data which runs since 1994 shows that in a typical quarter 64 percent of companies beat estimates and 21 percent miss estimates Over the past four quarters however 72 percent have beaten the Street estimates and only 19 percent have missed them Graphic U S earnings estimates 3 SOLVING A PROBLEM LIKE KOREA Officials from North and South Korea will meet on Tuesday for their first official talks in more than two years Agreeing to the meeting represents a turnaround by Kim Jong Un s regime which has focused in the past 12 months on developing its nuclear arsenal amid bellicose exchanges with U S President Donald Trump raising alarm across the world The meeting is expected to focus on the North potentially sending athletes to the Winter Olympics to be held in the South in February as well as on some other inter Korean relations according to Seoul Every word and gesture will be scrutinized by geopolitical analysts as they try to judge if this really is a re emerging detente between the two nations not to mention the reaction from Trump s twitter account Graphic North South Korea Lines of communication IMG 4 BOOM BOOM AND A blizzard of data is expected to show China s economy ended a strong 2017 on a slightly softer note However activity has remained more resilient than expected despite a crackdown on industrial pollution overzealous lending and a cooling property market The week kicks off with forex reserves data and a bunch of inflation numbers before the focus will switch to trade figures out on Friday Exports are expected to have jumped more than 9 percent in December after soaring unexpectedly 12 3 percent in November thanks to sustained strength in global demand A slight pullback in December industrial growth producer inflation and investment would all reinforce consensus views that the world s second largest economy will slow only marginally in 2018 A more marked loss of momentum may put fears of a sharper slowdown back on the table unsettle the yuan and possibly stall the government s push to reduce rising debt Graphic China Economic Snapshot Trade 5 HELLAS ANGEL It may be the depths of winter with storms tearing across the euro zone but the political and economic skies are almost cloudless all of a sudden On Sunday Angela Merkel will begin trying to re form a grand coalition an effort that could rumble on for a few months and campaigning for Italy s uncertain election in March is also getting underway but the rest of the bloc looks buoyant Perhaps the most eye catching thing is that crisis posterchild Greece s borrowing costs hit their lowest in 12 years on Friday on expectations that the country could conclude its euro zone IMF bailout package later this year That would cap a slowly strengthening recovery eight years after Greece lurched on the brink of defaulting on its debt and risked being kicked out of the single currency bloc Graphic Searing returns on Greek and Portuguese debt |
JPM | U S company plans funds that double bitcoin price moves | By Trevor Hunnicutt NEW YORK Reuters U S fund managers are ramping up efforts to tap into the fever surrounding digital assets and the latest planned bitcoin products could deliver some head turning and stomach churning price movements if they come to market The new idea is to build leveraged and inverse funds that would rise or fall twice as fast as the price of bitcoin on a given day Direxion Asset Management LLC plans to list such products on Intercontinental Exchange Inc s NYSE Arca exchange if U S securities regulators give the nod according to a filing by the exchange this week In the filing the exchange said the listing will enhance competition among market participants to the benefit of investors and the marketplace Bitcoin is a virtual asset that can be used to move money around the world quickly and with relative anonymity without the need for a central authority such as a bank or government Bitcoin is one of the wildest trades in the market today delivering sharp gains and losses that defy explanation Trading has been expensive and difficult with brokerages offering limited access and specialist websites like Coinbase reporting regular outages Top voices on markets from economist Robert Shiller to JPMorgan Chase Co NYSE JPM CEO Jamie Dimon have warned people off buying bitcoin Yet asset managers have been racing to design more than 10 proposals for bitcoin funds that are currently before U S regulators New ETFs could make access to bitcoin easier and in the case of the Direxion product mean bigger stakes for investors with a 25 percent gain or loss on one day doubled to 50 percent So far the U S Securities and Exchange Commission has declined or put on hold all the proposals A spokesman representing Direxion declined to comment on the latest filing as did a representative from NYSE Bitcoin gained nearly 12 percent on Friday to 16 928 on the Bitstamp exchange |
C | Telenor Weir Group and miners lead European shares to three week high | By Kit Rees
LONDON Reuters European shares nudged higher on Monday though trading was characterized by thin volumes as a busy few weeks of earnings reports from top regional and U S firms gets underway
The pan European STOXX 600 index rose 0 2 percent to touch a three week high while the blue chips struggled and turned negative to trade 0 2 percent lower
Last week European indices enjoyed their strongest week in more than two months as investors quickly bought the dip spurred by central banks turning slightly hawkish
Second quarter results season kicked off in the U S last Friday with numbers from Citigroup NYSE C and JPMorgan NYSE JPM
Analysts are expecting earnings to grow 9 percent year on year for European firms compared with 8 percent for the U S according to Thomson Reuters I B E S
British engineer Weir Group LON WEIR was the biggest STOXX riser surging nearly 10 percent after increasing its forecasts for its oil and gas units thanks to strong North American drilling activity
The extent of the Oil Gas upgrades are significant obviously and shows how volatile this end market can be This time it s going in the group s favor and they are very much benefiting from it analysts at Jefferies said in a note
Updates from some Nordic firms spurred some sizeable moves too with shares in Norway s Telenor jumping more than 8 percent The telecoms firm raised its outlook for 2017 earnings margins after its operating results beat expectations
On the downside shares in Swedish medical technology firm Getinge dropped 7 2 percent after its second quarter core profits lagged forecasts
While the majority of sectors were in positive territory basic resources were the biggest gainers up 1 3 percent with miners Anglo American LON AAL Glencore LON GLEN and Antofagasta LON ANTO leading the charge higher after the price of copper hit a three and a half month high following strong Chinese GDP figures the world s biggest consumer of metals MET L
Volatile trading continued for trouble UK midcap construction services firm Carillion which appointed EY to help with its strategic review The stock which has lost two third of its value over the past week rose 14 5 percent
Analysts pointed to the news that Carillion had been named as one of the firms to work on building a new high speed rail network in Britain along with Balfour Beatty whose shares gained 3 4 percent
It is very reassuring to see that the government is still comfortable awarding Carillion contracts so that s definitely a good thing Rachel Winter senior investment manager at Killik Co said
There are still some major concerns around the company and for me the main one is the pension deficit At the moment the size of the pension deficit is about three times the market cap of the company Killik s Winter added |
C | Volkswagen considers options for transmissions maker Renk sources | By Arno Schuetze and Edward Taylor FRANKFURT Reuters Volkswagen DE VOWG p is considering options for majority owned transmissions maker Renk F ZARG as the German carmaker streamlines operations to help fund an overhaul following its emissions scandal people close to the matter said Volkswagen VW is working with Citi N C to decide on the future of Renk which may result in a sale of the maker of transmissions and bearings used in ships to wind turbines the sources said If a formal decision to sell Renk is taken an auction could be kicked off as early as this autumn and the company could be valued at 600 800 million euros 687 916 million they added VW and Citi declined to comment VW is reining in spending including cutting thousands of jobs at its core passenger car brand to help pay for a multibillion euro shift to embrace electric cars and new mobility services It has already launched a sale of motorcycle brand Ducati Renk is 76 percent owned by VW unit MAN DE MANG and had 390 million euros in equity and 214 million in cash according to its 2016 annual report Last year Renk posted profit before taxes of 65 million euros and earnings before interest tax depreciation and amortization of about 80 million euros on sales of 496 million Bidders are expected to value the business at about 8 9 times its expected core earnings a slight discount to peers such as Timken N TKR Rexnord N RXN and Allison Transmission N ALSN which trade at 9 10 times Renk may be worth 10 times But a buyer will need to offer minority shareholders a small premium That could mean that Volkswagen will get slightly less for its stake one of the people said Renk is expected to attract interest from private equity groups such as KKR CVC Cinven Carlyle and Advent the sources said Separately some Renk peers are expected to look at the asset However Renk s exposure to the defense industry will make it hard for non NATO buyers to acquire Renk the sources said Japanese groups such as Sumitomo Heavy T 6302 Kawasaki T 3045 or Mitsubishi T 7011 may take a look But U S groups like Rexnord or Timken who would mainly be interested in the non defense related products are unlikely buyers another person close to the matter said
Renk founded in 1873 currently employs 2 200 staff VW has said repeatedly in the past that it wanted to keep the business |
C | London forex traders plead not guilty to U S rigging charges | By Jonathan Stempel NEW YORK Reuters Three former London based traders pleaded not guilty on Monday to U S charges they conspired to rig prices in the roughly 5 trillion foreign exchange market Chris Ashton Rohan Ramchandani and Richard Usher who worked at Barclays Plc L BARC Citigroup Inc N C and JPMorgan Chase Co N JPM respectively entered their pleas through their lawyers before U S District Judge Richard Berman in Manhattan The defendants were charged in January and agreed last month to appear in Manhattan rather than fight extradition Bail has been set at 200 000 for Ashton 1 million for Ramchandani and 650 000 for Usher each partially secured by cash The defendants plan to jointly seek dismissal of the case U S prosecutors accuse them of scheming with other traders to share sensitive client order information through phone calls and an electronic chat room known as the Cartel to suppress competition Ashton was Barclays global head of spot currency trading Ramchandani was Citigroup s head of G 10 spot currency trading and Usher had a similar role at JPMorgan according to court papers Ramchandani and Usher were involved in the conspiracy from roughly December 2007 to January 2013 and Ashton from December 2011 to January 2013 according to the indictment The case followed worldwide probes that resulted in about 10 billion in fines for several large banks and the firing of dozens of traders Britain s Serious Fraud Office decided in March 2016 to close its own criminal probe saying it lacked a realistic prospect of obtaining convictions Three other traders have also been implicated in the U S probe In January former Barclays trader Jason Katz pleaded guilty to conspiring to fix currency prices becoming the first person to admit wrongdoing His sentencing is scheduled for Jan 5 2018 U S prosecutors also charged two one time HSBC Holdings Plc L HSBA foreign exchange executives last July with fraudulently trading ahead of a client s 3 5 billion currency trade One of the executives Mark Johnson pleaded not guilty to wire fraud and conspiracy charges and faces a Sept 18 trial The other Stuart Scott was arrested by British authorities last month and has denied wrongdoing The case is U S v Usher et al U S District Court Southern District of New York No 17 cr 00019 |
C | Feds Telegraph Hesitancy OPEC Supply Cut | Markets Feds Trump and APEC summit
Oil in focus
Baker Hughes rig count
Oil the week that was
Gold Markets
Palladium Markets
Currency Markets
G 10 EUR JPY AUD GBP
Asia Yuan Rupee Ringgit
Crypto
The Feds telegraph hesitancy OPEC supply cut and a cacophony of deafening US China alarm bells
UK political drama will continue to rock and roil markets while the emergence of a distinctly dovish tone from the Fed knocked the USD off its pedestal going into weeks end The week ahead will be cut short by the Thanksgiving holiday in the US And while this adds up to less trading days those fewer hours will be chock full of political drama while a drop in liquidity density will add to the chop For no other reason than year end self preservation the markets risk profile will continue to drop as political risk continues to permeate virtually every pocket of the globe As such traders will be in risk reduction mode suggesting a high level of indifference will creep into the playing field as year end musings leak into the equation And without question traders and Fed watchers will take a keener interest in upcoming financial reports to flesh out any indications of a US economic reversal
A pause in US interest rates could offer a reprieve to equity investors However when the Federal Reserve shift course it should send out early warning signals that something is amiss with their economic projections A Fed pause during a hiking cycle is a very strong canary in a coal mine type of signal and could eventually lead a more profound correction lower in US equity markets if the US economy does sputter
Market banter around US President Trump Chinese Premier Xi s G20 meeting will ratchet up several decibels this week Frankly my sceptical radar is flashing red as we re unlikely to see concrete progress from the one on one talk Presidents Trumps pep talk on Friday I think will have a great relationship with China Furthermore China would like to make a deal and have sent a list of things its willing to do on trade While the list is pretty complete but four or five things have been left off Still the US may not have to impose further tariffs on China which firmed the G 10 commodity block of currencies and the EM gamut
At the APEC summit on Papua New Guinea the US and China were back swapping brickbat Taking a direct shot at China s global expansion ambitions Vice President Pence said we do not offer constricting belt or one road referring to China s belt and road initiative While directly criticising China for offering up loans to countries that can not possibly service the debt This view seemed to be echoed by both Australia and Japan who will join the US in partnering to help struggling countries build infrastructure If weeks talks are a preamble of where we re heading for the Trump Xi meeting things could turn sideways quickly as the US is taking a multi prong approach to Chain with is not only focusing on Trade but are now warning countries about China s global expansionary ambitions But the coup de gras from Pence was America will not change course until China changes its ways Indeed a cacophony of deafening alarm bells suggests these two distinctly differing ideologies remain miles apart
On the US domestic front USMCA deal or Mueller investigation will likely add a bit of spice to the mix Trump is not agitated about the Special Counsel He says he s finished writing his answers to Mueller but hasn t submitted them yet And look for White House revolving door to starting spinning again as the President is happy with almost all of the White House cabinet
Oil in focus
Oil traders remain intently focused on support levels into the month end and OPEC headlines
Oil prices rose on Friday on hope OPEC and partners will act to reverse bearish sentiment but from a technical set up bear mode remains intact with downside WTI target falling between the 52 54 levels HEDGE FUNDS ratio of long to short positions in the six major petroleum contracts fell to 3 09 1 on Nov 13 the lowest since July 2017 and down from a recent high of 12 44 on Sep 25 Reuters However on the back of OPEC indicating that they are considering even more substantial production cuts to counteract fading global demand And coupled with WTI spreads trying to spring back to life the Prompt price curves have remain relatively flat and there s a growing sense that the markets are shifting back into a more neutral tack Indeed prices may have dropped sufficiently enough and while allowing of global growth could weigh on global demand and dent bullish sentiment Still the International Energy Agency suggest global demand will continue to grow at 1 4 million bpd in 2019 compared to 1 3 million bpd in 2018 However ultimately the markets bullish radar is still waiting for OPEC to deliver a sizeable cut number with a commencement time attached before aggressively jumping back into the fray
Baker Hughes
From Reuters Global Oil Forum Oil rigs 2 to 888 150y y Gas rigs 1 to 194 Horz rigs 4 to 939 GoM 1 N Dak unch Penn 1 Texas 3 Oil Gas by Basin Permian 1 Eagle Ford 3 Williston unch Niobrara unch Haynesville unch Utica 2
Oil the week that was
The EIA showed crude stocks in the U S building by 10 27mm bbls vs APIs 8 8mm primarily led by stock increases at the Gulf Coast as runs in the region were lower by 267k bpd w w Lower imports could not thwart overall builds as exports were notably lower last week by 355k bpd Stocks at Cushing were higher by 1 17mm bbls as the pace of builds at the hub slowed with higher refinery demand helping to thwart increased inflows with Sunrise ramping up
Gold Market
Spurred on by the weaker dollar Gold continues to glitter as investors flock to safe haven assets driven by the uncertainty in the UK and the ongoing US China trade war With the Fed taking a dovish u turn this shift could provide a strong underbelly of support for gold prices into year end
Palladium Market
Palladium hit an all time high this week as projected Chinese auto industry demand will outstrip supply in what Citigroup Inc NYSE C calls extreme tightness in supplies Keep in mind this is all part and parcel to China green policy and China s new auto emissions standards are likely to boost demand While this many sounds counterintuitive with both China and US car sales falling however talks of a 50 tax cut on cars in China could revive the sagging markets The big question is if we will see Palladium prices cross Gold or whether speculators jump on the wagon So far this rally has been driven by industrial demand while speculators reluctant to jump back into the mix given the rise in electric cars which do not need catalytic converters which account for around 75 of palladium demand
Currency markets
The USD failed miserably this week and it s unlikely the market will be soft hearted on the dollar bulls heading into year end
The de escalation of trade war rhetoric on the back of China offering up trade concessions saw a swift reversal on USD haven hedges in EM Asia particularly against the Yuan But the DXY hit the skids falling from 96 90 towards 96 40 on a speech from Vice Chair Clarida who in a coordinated fashion and following in the footsteps of Chair Powell s cautious tone from Wednesday also emphasised global growth concerns Which in the market s opinion effectively walked back one of the more hawkish elements of Fed policy If the This is far too coordinated as the Fed is telegraphing hesitancy with Powell Clarida Evans and Kaplan raising concerns about 2019 If the Fed does raise interest rates in December it could be a one and done for a while
Fanning the dollar demise both China and Japan the two biggest foreign U S creditors cut their U S Treasury holdings further in September If US China trade war continues to go sideways its possible could more also reduce US Bond holdings While I m keeping a close eye on future developments at this stage of the game I suspect this is just prudent policy to effectively acquire USD as part of an intervention smoothing procedure to prevent the Yaun from weakening too quickly as the economy slows which will trigger capital outflow Given that China foreign exchange reserves have been declining this makes sense to ensure reserves stay above the US 3 trillion mark
G 10
EUR USD rallied to 1 1420 10 on broader USD with the first sign of Fed hesitancy reducing the odds of a December rate hike and as traders start to price in the reality of a Fed pause in 2019 we could see the EURO push much higher into years end on any tier one US economic wobble In fact I suspect the USD will be more reactive to weaker data that it will be strong data suggesting that skew is in play for the greenback given the markets propensity to unwind risk into years end
USD JPY ends the week back below 113 00 on the more widespread USD sentiment in what could be the beginning of a protracted move to 110 overlaid with a lower trajectory for US interest rates and shaky equity markets
AUD USD ended the week above 0 7300 after bouncing off decent support at 7175 The strong Australian jobs report coupled with a rallying cry from President Trump on the trade war with China has not only triggered a reversal on China proxy trade but is garnering a lot of attention from A bulls as the AUD has been a direct beneficiary of greenback s demise globally Last weeks beat on the domestic jobs report has an excellent vibe about it and coupled with a resurgent commodity market the outlook looks much rosier for the Australian Dollar but the omnipresent US China spat has a tendency to rear its ugly head as it did at the APEC summit So the AUDUSD to trading off last weeks closing highs but still trading above 7300 at the open
GBP USD ended the week on a slightly positive note as Brexit developments led to minor recovery for Sterling on Friday but there is a considerable element of risk this week The Pound hovered in a 1 2800 80 range over the NY session but remains tentatively bid no dips But it s unlikely that the markets long sterling position pain threshold will weather another deep dive into the low 1 2700 s So it wouldn t take much more of a spot decline to drive a deeper flush out in positions and a move below the 52 week low of 1 2662 But in reality is anyone s guess where Cable settles with Brexiteers reportedly trying to re write the deal all the while May s future lies in the balance
Asia FX
Trade war detente is picking building momentum but with high expectation come incredible disappointment as the risk reward appears to be shaded towards a letdown
However trading activity in the local currency markets has been decidedly mixed with the North Asia underperforming South Asia where carry trades enjoyed a solid week on the back of lower oil prices and monetary policy tightening
Yuan
Regardless of improving trade war sentiment current account depletion and policy divergence between the Fed and Pboc suggest USDCNH will continue to march higher in the months ahead Suggesting that dips will keep being favoured even though Jay Powell walked back some of the more hawkish elements of Fed policy I think the Feds are very much in the data dependent camp and will raise in December but Feds early warning signals about an economic slowdown in 2019 does bring an element risk behind this view However unless there is a complete thawing in trade tension a push higher to 7 USDCNH remains on the card
Rupee While the collapse in oil prices has benefited the INR the long term path of least resistance remains to skew higher although near term view remains exceptionally cautious due to falling oil prices
Ringgit
Malaysia has come out with a pair of weak Q3 figures a below potential GDP figure and another dip in the current account surplus all of which supports a weaker glide path for the Ringgit in months ahead Perhaps the only saving grace for the Ringgit could be a large scale improvement on global risk sentiment which could support a local bond market rally and see an increase in foreign inflow
Crypto
Bitcoin Bulls Wonder Where s the Bottom as Volatility Returns
Bitcoin advocates are asking how low will we go from here as the world s largest cryptocurrency continued to slump following its most significant one day loss in eight months
The digital token fell as much as 6 3 per cent to 5 202 having plunged through a critical resistance level Wednesday after a period of relative tranquillity Many of Bitcoin s closest peers also slid Thursday while Bitcoin Cash which splits today into two coins was down as much as 15 per cent
I remain incredibly bearish on BTC with as the 1000 level looking as likely as 10 000 But this is from a long standing and unwavering view that regulators and the banking system will continue to push back against the rise of virtual markets and will undoubtedly burst crypto s ballon as the 5000 cliff edge is approaching fast
But not too surprisingly chipmakers tanked this week on a probable loss of demand as crypto mining collapses which is sending out warning signal of trouble to come These stocks act as good proxy exposure into Bitcoin while avoiding the liquidity crunches associated with underlying crypto movements
Original post |
C | Citigroup C Outpaces Stock Market Gains What You Should Know | Citigroup C closed at 62 87 in the latest trading session marking a 0 54 move from the prior day This change outpaced the S P 500 s 0 3 gain on the day Meanwhile the Dow 0 and the Nasdaq a tech heavy index added 0 92
Heading into today shares of the U S bank had lost 4 87 over the past month lagging the Finance sector s loss of 1 61 and the S P 500 s loss of 4 37 in that time
Investors will be hoping for strength from C as it approaches its next earnings release which is expected to be January 15 2019 In that report analysts expect C to post earnings of 1 65 per share This would mark year over year growth of 28 91 Meanwhile our latest consensus estimate is calling for revenue of 17 95 billion up 4 05 from the prior year quarter
Looking at the full year our Zacks Consensus Estimates suggest analysts are expecting earnings of 6 69 per share and revenue of 73 73 billion These totals would mark changes of 25 52 and 3 19 respectively from last year
It is also important to note the recent changes to analyst estimates for C Recent revisions tend to reflect the latest near term business trends As a result we can interpret positive estimate revisions as a good sign for 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 a Zacks Rank 3 Hold
Looking at its valuation C is holding a Forward P E ratio of 9 35 Its industry sports an average Forward P E of 11 34 so we one might conclude that C is trading at a discount comparatively
Investors should also note that C has a PEG ratio of 0 82 right now This metric is used similarly to the famous P E ratio but the PEG ratio also takes into account the stock s expected earnings growth rate The Banks Major Regional industry currently had an average PEG ratio of 1 16 as of yesterday s close
The Banks Major Regional industry is part of the Finance sector This industry currently has a Zacks Industry Rank of 97 which puts it in the top 38 of all 250 industries
The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
Make sure to utilize Zacks Com to follow all of these stock moving metrics and more in the coming trading sessions |
JPM | 8 Key Things To Know About Saudi Aramco s Upcoming IPO | Investors will soon have the opportunity to buy into the ultimate oil company Saudi Aramco
Saudi Arabia recently announced its National Transformation Plan called Vision 2030 It lays out several plans for the country s economy Among these is the upcoming IPO of a portion small of Aramco Hidden in the news stories interviews and documents are some important new details for investors
1 Who will be able to invest
Shares in Aramco will be listed on the Saudi stock exchange Tadawul but funds will also be established to facilitate investment from foreign individuals and entities It appears that the Saudis are encouraging foreign investment to increase liquidity
2 What will be offered in the IPO
No more than 5 of Aramco will likely be offered with the exact percentage to be determined by how much cash the Saudis are looking to raise at the time of the IPO It seems that shares in Aramco itself will be offered but Aramco is to be converted into a holding company for all of Saudi Arabia s energy assets This holding company will consist of Saudi Arabia s assets in oil reserves refineries petrochemical plants alternative energy initiatives transportation and distribution mechanisms and research and development operations
3 Will there be big dividends
Right now the Kingdom funds its government largely through Aramco s profits essentially taking regular and large dividends Saudi Arabia will need to continue to do this with the portion of the company it continues to own It is possible that the class of shares the Kingdom will offer to outsiders will not include such high dividends However if it does offer dividends similar to the type enjoyed by the Kingdom investors should look for the value of the IPO to be unbelievably high
4 What will Aramco do with the money raised from the IPO
Typically money raised in an IPO is mostly reinvested in the company However Saudi Arabia says it intends to use the cash to fund in part its new Public Investment Fund PIF The relationship between the PIF and Aramco has not been made clear If in fact IPO money is taken out of Aramco and put into a different investment vehicle investors may become concerned about where their investment is going On the other hand perhaps this unconventional practice should not cause concern because the IPO will account for such a small part of Aramco
5 What will the relationship be between Aramco and the PIF
The Saudis have said little about this topic at this point but there are several possibilities
a Saudi owned shares of Aramco will come under the PIF This situation is unlikely because the PIF is supposed to control 2 trillion and Aramco alone would make its value about 10 trillion
b The PIF will be a subsidiary of Aramco This would simplify the process of passing IPO funds form Aramco to the PIF but would mean that outside investors would have claim to a small portion of the PIF
c Aramco and the PIF remain separate entities In this case either Aramco or the PIF could invest in the other
Remember that when it comes to business operations in Saudi Arabia the royal family has absolute control and can do as it wants Traditionally however the Saudis have always followed Western business practices to ensure confidence in their companies and country
6 Who is advising Saudi Arabia on the IPO
The Saudis have chosen JPMorgan NYSE JPM and M Klein Co as advisors but the banks underwriting the listing have not been decided
7 When will the IPO occur
The Saudis have not announced a timeline but mention 2017 as a desired target
8 Is it safe for foreigners to invest in Saudi Arabia
Investors looking to foreign countries generally want to see political stability economic stability and rule of law
Politically Saudi Arabia s hard line approach to terrorism makes it by far the most politically stable state in the Middle East Saudi Arabia s harsh treatment of political dissent has been very successful at stopping radical religious uprisings and terrorist activities
Saudi Arabia s economy is underwritten by huge oil reserves Even though Saudi Arabia has been spending some of its cash reserves over the last two years while low oil prices cause it to run a deficit the Kingdom still maintains huge coffers Saudi Arabia has a good credit rating even though it was recently downgraded and the ultimate collateral ownership of the second largest known oil reserves in the world
In terms of rule of law Saudi Arabia has always sought to maintain a general order of legal stability in business operations Almost alone among major oil producing nations Saudi Arabia chose to nationalize its oil industry by legally purchasing shares in the foreign company Aramco over a period of time
Most other countries Iran and Mexico are good examples took their oil industries through edict legislation or force As far back as the 1950s the Saudis have shown a deep understanding of foreign financial procedures and tax structures oftentimes better even than the Western companies with which they were negotiating because it was in their interests Prospective investors in Aramco should have a large degree of confidence in the rule of business law in Saudi Arabia |
MS | Foursquare CEO steps down company raises 45 million in funding | Reuters Foursquare s chief executive Dennis Crowley is stepping down and will be succeeded by Jeff Glueck the company s current chief operating officer Foursquare which makes apps that helps users find restaurants and stores and check into them also raised 45 million in funding Glueck said in a blog post on Medium This series E funding round was led by Union Square N SQ Ventures with participation from Morgan Stanley N MS as well as previous investors including DFJ Growth Andreessen Horowitz and Spark Capital The company expects this latest funding will aid its plans to fill 30 new positions in sales engineering and other functions according to Glueck s blog post Foursquare planned a funding round in December between 20 million and 40 million with one new investor valuing the company at 250 million Crowley who is now stepping down as the chief executive of the company will become executive chairman The company also named Steven Rosenblatt chief revenue officer as the president and promoted Kinjil Mathur to chief marketing officer and Jonathan Crowley to vice president product Foursquare has been the subject of takeover speculation with Yahoo Inc O YHOO being reported more than once as a potential buyer The company raised 35 million in a fundraising round in 2013 valuing the company at 650 million |
MS | Morgan Stanley jumps 4 in pre market trade after upbeat Q4 earnings | Investing com Wall Street investment bank Morgan Stanley N MS reported stronger than expected fourth quarter earnings and revenue ahead of Tuesday s opening bell sending its shares 4 higher in pre market trade
Morgan Stanley said adjusted earnings per share came in at 43 cents in the October December quarter beating expectations for earnings of 33 cents per share
Net income was 908 million or 39 cents per diluted share compared with net losses of 1 6 billion or 91 cents per diluted share for the same period a year ago
The bank s fourth quarter adjusted revenue totaled 7 7 billion above forecasts for revenue of 7 63 billion but down 1 4 from revenue of 7 8 billion a year ago
Wealth Management net revenues were 3 8 billion and pre tax margin was 20 Investment Management reported net revenues of 621 million with assets under management or supervision of 406 billion
Fixed Income Commodities sales and trading net revenues of 550 million decreased from 599 million a year ago reflecting challenging market conditions and lower results in securitized products
James P Gorman Chairman and Chief Executive Officer said A strong overall performance in the first half of the year was impacted by difficult market conditions in the second half that dampened trading activity
Immediately after the earnings announcement Morgan Stanley shares rallied 93 cents or 3 63 in trading prior to the opening bell to hit 26 88 from a closing price of 25 95 on Friday
Meanwhile the outlook for U S equity markets was upbeat The Dow futures pointed to a gain of 1 6 the S P 500 futures tacked on 1 65 while the Nasdaq 100 futures jumped 1 7 |
MS | Market tailspin hastens the economic shock it fears | By Mike Dolan
LONDON Reuters One of the biggest worries about this month s sudden seizure in world markets is how puzzled investors have been left by it and how many are just wishing it away as a temporary blip
History suggests governments and central banks would do well to sit up and take notice but with policy coordination at its lowest ebb in decades a coherent response is unlikely
With almost 6 trillion wiped off the value of global stock markets since the start of the year and another 25 percent off already low oil prices there is a real risk investor anxiety itself will be the catalyst for a world recession
And when market turbulence starts to crystallize the very problem investors are worried about what wonks call a negative feedback loop then these rare but dangerous spirals in confidence are notoriously difficult to halt
By any measure we are in historic territory
Over the past 28 years or 336 months only 12 months have seen bigger losses in the MSCI World stock index than January 2016 Over half of those were associated with major market crises including the Lehman Brothers bust of 2008 09 the dot com implosion of 2001 02 and the emerging markets crash of the late 1990s
Lowering the International Monetary Fund s 2016 world growth forecast by another 0 2 percentage points to 3 4 percent this week IMF chief economist Maurice Obstfeld said markets were reacting very strongly to bits of evidence in a volatile risk averse climate but one where little fundamental had changed
His predecessor Olivier Blanchard now writing for Washington s Peterson Institute sympathises with that view but warned against ignoring the seizure in markets
How much should we worry This is where economics stops giving an answer Blanchard said
If the stock market slump lasts longer or gets worse it can become self fulfilling Low stock prices lasting for long lead to lower consumption lower demand and potentially to a recession
U S bank Morgan Stanley N MS said on Tuesday it now sees a 20 percent chance of a 2016 world recession as defined by sub 2 5 percent growth rate that is needed to keep pace with population gains
FEAR ITSELF
But why all the new year panic Most economists blame a confluence of events rather than any sudden shock
China s deepening slowdown pressure to devalue its yuan and its increasingly perplexing currency policy are all potential game changers but have been building for months
So too has the collapse in oil prices and other commodities now more than 18 months old albeit a seemingly bottomless slide that is feeding off the China concerns
These were joined last month by the first rise in U S interest rates in a decade which by bolstering the already pumped up U S dollar has arguably exaggerated both the oil price fall and China s yuan conundrum and capital flight
Add to that potent mix the currency commodity and interest rate pressures on emerging countries from Russia and Brazil to South Africa and the Gulf an unwinding of these countries sovereign investments overseas and investor flight from the equity and bonds of energy and mining companies
Everyone can see a spiral forming but few see where it ends The threat of a major re set of global market valuations amid high volatility is enough for many conservative investors to go to ground until it all plays out
The now famous sell mostly everything note issued by Britain s RBS L RBS last week was not a mere throwaway It focused on the risk of markets snowballing as world trade and credit growth struggle currency wars go up a gear and China and oil feed off each other A 10 20 percent stock reversal was its best guess
The world is in trouble it said
If so where s the cavalry
By consensus there appears to be about as much chance of a confidence boosting grand economic policy agreement this year as there is of oil prices returning to 100 a barrel
Coincidentally China chairs the G20 group of world economic powers this year Finance chiefs meet in Shanghai next month
But internal dilemmas mean global coordination is likely to be low on Beijing s priority list
The U S Federal Reserve also paid little heed to international concerns when hiking rates last month while Saudi Arabia has shown scant consideration for other oil exporters as it plays out a crude price war to protect market share against U S shale producers
Germany has been at loggerheads with much of the rest of the euro zone and G7 partners for years over fiscal policy and austerity
Harvard economist Jeffrey Frenkel notes that global economic cooperation has been stymied by international differences and domestic political divisions on policy as well as growing disagreement between economists on how to model the world
When two players sit down at the board they are unlikely to have a satisfactory game if one of them thinks they are playing checkers and the other thinks they are playing chess he wrote in a paper this month |
JPM | JPMorgan Boosts China 2018 GDP Outlook to 6 7 on Global Demand | Bloomberg JPMorgan Chase Co NYSE JPM has lifted its 2018 economic growth forecast for China to 6 7 percent from the consensus 6 5 percent on the back of improving global demand The outlook puts the U S bank among the more bullish forecasts for the world s No 2 economy
While the domestic policy outlook going into 2018 has been broadly tracking our expectations the global growth outlook has turned more upbeat lately economists led by Hong Kong based Haibin Zhu wrote in a note
The upgrade comes amid evidence of accelerating demand for Chinese exports An official factory gauge showed new manufacturing export orders climbed to a six month high of 51 9 in December from 50 8 the previous month
Still heightened trade tensions between the U S and China remain a worry
While an all out trade war is unlikely we think the risk of miscalculation by either side resulting in an escalatory and broadened trade dispute is significant JPMorgan s economists wrote |
JPM | Alexandria Real Estate down 2 2 on share sale | The company is offering 6M shares of common stock with underwriter BofA JPMorgan NYSE JPM Citi greeenshoe of up to 900K shares Source Press ReleaseARE 2 2 after hoursNow read |
JPM | Fed Puts Positive Spin on Wall Street s Trusty Recession Signal | Bloomberg Is an inverted yield curve the same old trusty recession signal Wall Street has come to lean on over the decades or is it just part of the Federal Reserve s plan to avoid one next time around
Fed officials are split on the question according to a record of their December policy meeting published Wednesday The account revealed a lengthy discussion about the recent shrinking of the spread between short and long term market interest rates
In the past when short term rates have risen above long term rates a recession has often been not far behind The spread between two year and 10 year U S Treasury note yields has collapsed to the lowest since October 2007 when the country was heading into the deepest contraction since the Great Depression
While some policy makers are worried the yield curve may be sending the same message again others think it may be different this time One piece of evidence in support of the more benign interpretation of the flattening yield curve Fed officials own projections of appropriate policy show that it may invert in 2020 when they expect to raise short term rates above their longer run neutral levels to cool down an overheating economy
The Yield Curve Is Flatter Remind Me Why I Care QuickTake Q A
During the Dec 12 13 meeting of the rate setting Federal Open Market Committee at which officials lifted the policy rate by a quarter point to a range of 1 25 percent to 1 5 percent some were concerned that an inverted yield curve hadn t lost its predictive power as a recession warning according to the minutes
However a couple of other participants viewed the flattening of the yield curve as an expected consequence of increases in the committee s target range for the federal funds rate and judged that a yield curve inversion under such circumstances would not necessarily foreshadow or cause an economic downturn
The minutes went on saying it was also noted that contacts in the financial sector generally did not express concern about the recent flattening of the term structure
Projections released at the meeting by the 16 policy makers on the FOMC showed a median forecast that the target range for rates would be 3 percent to 3 25 percent by the end of 2020 before bringing them back down to a neutral level of 2 75 percent sometime thereafter
That implies the Fed s actions might invert the yield curve and market prices are starting to line up with such a scenario Forward rates derived from swaps linked to the Fed s benchmark overnight rate are already close to inverting between three and four years out right where the FOMC s projections imply they could if all goes according to plan
The logic of the projections goes like this By 2020 the unemployment rate will be so far below its neutral level that it will start putting upward pressure on inflation which means Fed officials will need to have tight policy with rates above their estimate of neutral to keep the inflation at bay Eventually if the forecasts pan out they would then bring rates back down to the neutral level once the unemployment rate rises back to what they see as a more sustainable non inflationary level
That interpretation is a far cry from the old wisdom about yield curve inversions They have tended to precede recessions because in the past as the economic outlook deteriorated investors would increasingly bet that the Fed s next move would be to switch from rate hikes to rate cuts The big difference now is Fed officials own projections They only began publishing them in 2012 and they potentially offer investors a less alarming way to think about why the yield curve might invert
A few Fed officials have voiced concern over the flatter yield curve including Minneapolis Fed President Neel Kashkari who cited it directly in his dissent against the December rate hike alongside worries about low inflation
Still the December minutes don t suggest that worry is widely shared on the FOMC said Michael Feroli chief U S economist at JPMorgan Chase Co NYSE JPM in New York He also pointed to the notion that Fed efforts to be more transparent about future policy helps reduce interest rate volatility which in turn shrinks term premia which measures the return an investor demands for holding bonds of longer maturities
Some people are saying this time may be different perhaps because term premia at least recently have been lower and that is going to inherently lead to a flatter curve he said |
C | Top 5 things to know in the market on Friday | Investing com Here are the top five things you need to know in financial markets on Friday July 14
1 Bank earnings in spotlight as Q2 earnings season kicks off
The unofficial start of the second quarter Q2 earnings season will begin on Friday with JP Morgan s NYSE JPM report scheduled for approximately 7 00AM ET 11 00GMT
With only 26 of the S P 500 firms having reported so far the JP Morgan will be the first Dow component to release earnings on Friday in what will be a big day for bank shares
Wells Fargo NYSE WFC and Citigroup NYSE C will also step up to the plate ahead of the open with their own earnings releases at approximately 8 00AM ET 12 00GMT
2 Inflation data not expected to remove Fed s cautious stance
Remarks from Federal Reserve Fed chair Janet Yellen in her testimony to Congress this week suggested that the central bank still planned on tightening monetary policy only gradually over concerns about readings of subdued inflation
June inflation figures will be released at 8 30AM ET 12 30GMT Friday Market analysts expect consumer prices to ease up 0 1 while core inflation is forecast to increase 0 2
On a yearly base core CPI is projected to climb 1 7 Core prices are viewed by the Federal Reserve as a better gauge of longer term inflationary pressure because they exclude the volatile food and energy categories The central bank usually tries to aim for 2 core inflation or less
Rising inflation would be a catalyst to push the Fed toward raising interest rates
Markets remain skeptical that the central bank will undertake a further hike this year putting the odds at only around 41 according to Investing com s Fed Rate Monitor Tool
3 Consumer data in focus
Market participants will also keep a close eye on consumer data on Friday as spending represents roughly 70 of the U S economy
The Commerce Department will publish data on June retail sales alongside the inflation figures at 8 30AM ET 12 30GMT The consensus forecast is that the report will show retail sales rose 0 1 last month Core sales are forecast to inch up 0 2
Rising retail sales over time correlate with stronger economic growth while weaker sales signal a declining economy
Then at 10 00AM ET 14 00GMT the University of Michigan will release its preliminary reading of consumer sentiment for July
4 Global stocks tread water near record highs
Global stocks treaded water on Friday holding near record highs and capping their best week in over two months with bets on a gradual Fed rate hike path and hopes for a strong earnings season boosting risk appetite
U S stock futures pointed to a slightly lower open on Wall Street as market players were cautious ahead of bank earnings and a slew of data At 5 50AM ET 9 50GMT the blue chip Dow futures slipped 0 05 S P 500 futures lost 0 10 while the Nasdaq 100 futures dropped 0 06
European shares were poised for their best week since late April though investors showed caution ahead of key references At 5 52AM ET 9 52GMT the European benchmark Euro Stoxx 50 inched up 0 04 while Germany s DAX slipped 0 09 London s FTSE 100 led decliners among major stock market indices falling around 0 3 as a stronger pound put pressure on exporters and investors opted to take profit at the end of a positive week
Earlier Asian stocks also showed muted trade with Japan s Nikkei ending up just 0 09 and China s Shanghai Composite closing 0 13 higher
5 Oil on track for weekly gains of 5
Oil continued its rally for a fifth straight day on Friday heading for weekly gains of nearly 5
Supporting bullish sentiment in crude this week U S crude inventories registered a larger than expected draw and investors cheered data pointing to an increase in demand for oil from China as imports increased 13 8 to 8 55m bpd during the first six months of the year compared to the same period a year ago
That outweighed the bearish news that OPEC compliance on the agreement to extend production cuts with non OPEC members led by Russia by 1 8 million barrels per day through March 2018 hit 78 its lowest level in six months
U S crude oil futures gained 0 56 to 46 34 at 5 54AM ET 9 54GMT while Brent oil traded up 0 58 to 48 70
Market participants will keep an eye on increasing U S shale production when Baker Hughes releases its most recent weekly rig count data later on Friday
The energy services company said last week that U S drillers had added seven oil rigs marking a 24th week of increases out of the last 25 |
C | U S stock index futures lower ahead U S data | Investing com U S stock index futures edged lower Friday ahead of the latest batch of data The Dow futures was off 0 04 at 6 15 ET TheDJI closed up 0 10 overnight The S P 500 futures fell 0 09 The tech heavy Nasdaq 100 futures shed 0 04 The dollar index lower after Fed Chair Janet Yellen s cautious testimony to Congress Yellen told the Senate Thursday it would be a challenge for the U S economy to achieve annual 3 growth CPI retail sales and consumer sentiment are due out during the session Oil remained on track for weekly gains ahead of the latest Baker Hughes rig count NYSE JPMorgan NYSE Citi NYSE Wells Fargo report earnings before the opening bell |
C | U S stock futures cautious with eyes on bank earnings data deluge | Investing com Wall Street futures pointed to a flat to lower open on Friday as the Dow looked set to take a pause at record highs while investors kept an eye on bank earnings and a wave of data scheduled for release later in the day
The blue chip Dow futures dropped 3 points or 0 01 at 7 13AM ET 11 13GMT the S P 500 futures slipped 1 point or 0 05 while the tech heavy Nasdaq 100 futures gave up 1 point or 0 02
The unofficial start of the second quarter Q2 earnings season began on an upbeat note on Friday as JP Morgan NYSE JPM reported results that beat consensus estimates
However after initially trading up more than 1 shares erased gains trading down 0 25 by 7 14AM ET 11 14GMT in pre market trade on Friday
Wells Fargo NYSE WFC and Citigroup NYSE C will also step up to the plate ahead of the open with their own earnings releases at approximately 8 00AM ET 12 00GMT
In economic data June inflation figures will be released at 8 30AM ET 12 30GMT Friday Market analysts expect consumer prices to ease up 0 1 while core inflation is forecast to increase 0 2
On a yearly base core CPI is projected to climb 1 7 Core prices are viewed by the Federal Reserve as a better gauge of longer term inflationary pressure because they exclude the volatile food and energy categories The central bank usually tries to aim for 2 core inflation or less
Rising inflation would be a catalyst to push the Fed toward raising interest rates
Remarks from Federal Reserve Fed chair Janet Yellen in her testimony to Congress earlier this week suggested that the central bank still planned on tightening monetary policy only gradually over concerns about readings of subdued inflation
Markets remain skeptical that the central bank will undertake a further hike this year putting the odds at only around 41 according to Investing com s Fed Rate Monitor Tool
Market participants will also keep a close eye on consumer data on Friday as spending represents roughly 70 of the U S economy
The Commerce Department will publish data on June retail sales alongside the inflation figures at 8 30AM ET 12 30GMT The consensus forecast is that the report will show retail sales rose 0 1 last month Core sales are forecast to inch up 0 2
Rising retail sales over time correlate with stronger economic growth while weaker sales signal a declining economy
Then at 10 00AM ET 14 00GMT the University of Michigan will release its preliminary reading of consumer sentiment for July
Also on the economic docket June industrial production will be released at 9 15AM ET 13 15GMT
Meanwhile oil continued its rally for a fifth straight day on Friday heading for weekly gains of around 5
Supporting bullish sentiment in crude this week U S crude inventories registered a larger than expected draw and investors cheered data pointing to an increase in demand for oil from China as imports increased 13 8 to 8 55m bpd during the first six months of the year compared to the same period a year ago
That outweighed the bearish news that OPEC compliance on the agreement to extend production cuts with non OPEC members led by Russia by 1 8 million barrels per day through March 2018 hit 78 its lowest level in six months
U S crude futures gained 0 87 to 46 48 by 7 15AM ET 11 15GMT while Brent oil traded up 0 95 to 48 88
Market participants will keep an eye on increasing U S shale production when Baker Hughes releases its most recent weekly rig count data later on Friday
The energy services company said last week that U S drillers had added seven oil rigs marking a 24th week of increases out of the last 25 |
C | Citigroup profit beats on smaller drop in trading revenue | Reuters Citigroup Inc N C reported a quarterly profit that beat analysts estimates as trading revenue held up better than the company s forecast and loans grew The lender said markets revenue declined about 7 percent in the second quarter from a year earlier smaller than the 12 percent drop Chief Financial Officer John Gerspach had projected at a conference two weeks before the end of the quarter Client trading surged a year earlier around UK s Brexit vote The fourth biggest U S bank by assets said on Friday net income fell 3 2 percent to 3 87 billion in the second quarter ended June 30 Earnings per share was 1 28 topping analysts average estimate of 1 21 according to Thomson Reuters I B E S JPMorgan Chase Co N JPM the biggest U S bank by assets also reported a better than expected rise in quarterly profit earlier on Friday helped by higher interest rates and loan growth that cushioned a decline in trading Citigroup s total revenue rose 2 percent to 17 90 billion and beat estimates of 17 37 billion Fixed income trading revenue fell 6 percent while equity trading revenue dropped 11 percent Loans at the end of the period were up about 2 percent from a year earlier as well from the end of March indicating a new momentum for lending Operating expenses rose 1 3 percent to 10 51 billion But the ratio of expenses to revenue remained at 59 percent Tangible book value per share increased 6 percent to 67 32 Citigroup s shares were nearly flat in premarket trading Up to Thursday s close the stock had gained 12 8 percent this year The shares have climbed toward their tangible book value since mid April largely in anticipation of the company being allowed by the Federal Reserve to use excess capital to buy back stock Citigroup got the go ahead on June to repurchase up to 15 6 billion of common stock over the next year nearly twice as much as the year before as well as double its quarterly dividend to 32 cents per share bringing total payouts to 18 9 billion for the period
Wells Fargo Co N WFC the third biggest U S bank by assets also reported on Friday |
C | JPMorgan posts higher profit shares dip on net interest income view | By David Henry and Sweta Singh Reuters JPMorgan Chase Co N JPM reported a better than expected quarterly profit on Friday due to strong loan growth and higher interest rates but said net interest income for the year would be lower than expected sending its shares down about 2 percent The bank s borrowing business increased across residential mortgages business loans credit cards and even auto loans an area where some lenders have been pulling back However on a call with analysts Chief Financial Officer Marianne Lake said net interest income for the full year would increase by 4 billion rather than a 4 5 billion estimate given in April This is due to mortgage adjustments and a change in the alignment of interest rates Lake said Overall JPMorgan s net income rose 13 percent to 7 03 billion or 1 82 per share from 6 2 billion or 1 55 per share in the year ago quarter This was driven by JPMorgan s average core loan book which grew 8 percent in the second quarter compared with the same period a year earlier Higher interest rates helped JPMorgan earn more money on these loans Excluding a gain from a legal settlement the bank earned 1 71 per share topping the average analyst estimate of 1 58 according to Thomson Reuters I B E S The stock was down 1 7 percent at 91 55 in morning trade The Federal Reserve lifted interest rates for the second time this year in June Rising rates are usually good for banks allowing them to increase how much they charge for loans faster than they boost how much they pay for deposits Chief Financial Officer Marianne Lake called rate movements a tale of two cities in which Wall Street businesses change quickly but Main Street customers are not yet demanding more money for their deposits While there have been changes in the industry and CDs there s been nothing in checking or savings said Lake The bank expects the Fed to hike rates again in December she said As JPMorgan s loan book has expanded it has also set aside more money for borrowers who do not repay their debts In credit cards where it has been growing aggressively the bank built loan loss reserves by 252 million as the charge off rate ticked above 3 percent an increase from both the prior and year ago periods JPMorgan executives have told investors to expect credit card loss rates to go up as the company makes more loans On newer card accounts the bank sees charge off rates of about 4 5 percent Gordon Smith head of consumer banking said at an investor conference in June Trading revenue was a dark spot for JPMorgan as volatility hit multi year lows But executives across Wall Street have been warning investors to look for declines because the year ago quarter benefited from a surge in trading around the UK s Brexit vote JPMorgan s markets revenue dropped 14 percent to 3 22 billion mostly due to fixed income trading It was the first decline in five quarters
Wells Fargo Co N WFC and Citigroup Inc N C also reported results on Friday |
C | Citigroup C Down 3 8 Since Last Earnings Report Can It Rebound | It has been about a month since the last earnings report for Citigroup C Shares have lost about 3 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 its most recent earnings report in order to get a better handle on the important catalysts Citigroup Q3 Earnings Reflected Cost Control and High RevenuesDriven by expense management Citigroup delivered a positive earnings surprise of 4 8 in third quarter 2018 Earnings from continuing operations per share of 1 74 for the quarter handily outpaced the Zacks Consensus Estimate of 1 66 Also earnings climbed 22 5 year over year Net income came in at 4 6 billion or 1 73 per share compared with 4 1 billion or 1 42 reported in the prior year quarter Higher consumer banking equity markets and fixed income market revenues along with loan growth were recorded Though investment banking revenues disappointed as strong advisory business was more than offset by lower underwriting fees on low client activity reduced expenses and credit costs acted as tailwinds Citigroup s costs of credit for the Sep end quarter were down 1 year over year to 1 97 billion This fall largely underlines reduced net credit losses of 1 8 billion and a credit reserve build of 192 million Top Line Solid Expenses DropRevenues were almost stable year over year at 18 4 billion in the reported quarter Excluding the gain on sale of an asset management business in Mexico along with the foreign exchange translation impact revenues spiked 4 The reported figure was almost in line with the Zacks Consensus Estimate In the Institutional Clients Group ICG revenues came in at 9 2 billion in the quarter down 2 year over year Though fixed income revenues increased 9 equity markets were up 1 and securities services revenues climbed 11 lower investment banking revenues down 8 fully offset this rise Global Consumer Banking GCB revenues increased 2 year over year to 8 7 billion mainly driven by higher revenues in Latin America partly offset by decreased revenues in North America and Asia GCB Corporate Other revenues came in at 494 million slipping 5 from the prior year quarter The decline mainly underscores legacy assets runoff Operating expenses at Citigroup edged down 1 year over year to 10 3 billion Efficiency savings and the winding down of legacy assets muted the elevated volume related expenses and ongoing investments Strong Balance SheetAt the end of the quarter Citigroup s end of period assets was 1 93 trillion up 2 year over year The company s loans grew 3 year over year to 675 billion Deposits increased 4 year over year to 1 01 trillion Credit Quality ImprovesTotal non accrual assets decreased 19 year over year to 4 billion The company reported a dip of 15 in consumer non accrual loans to 2 4 billion In addition corporate non accrual loans of 1 5 billion plunged 25 from the year earlier period Citigroup s total allowance for loan losses was 12 3 billion at quarter end or 1 84 of total loans compared with 12 4 billion or 1 91 recorded in the year ago period Solid Capital PositionAt the end of the Jul Sep quarter Citigroup s Common Equity Tier 1 Capital ratio was 11 8 down from 13 in the year ago quarter The company s supplementary leverage ratio for the quarter came in at 6 5 down from 7 1 in the year earlier quarter As of Sep 30 2018 book value per share was 72 88 down 8 year over year and tangible book value per share was 61 91 down 10 from the comparable period last year Capital DeploymentDuring third quarter 2018 Citigroup repurchased about 75 million of common stock Notably the company returned around 6 4 billion to common shareholders as common stock repurchases and dividends OutlookManagement expects top line revenue growth in the range of 4 5 driven by consumer institutional corporate revenue growth along with increasing digitization in 2018 On a full year basis management expects core accrual net interest revenues to be near about 3 7 billion in 2018 However legacy asset related net interest revenues are expected to be further down by 500 million in 2018 due to winding down of the portfolio Additionally trading related net interest revenues will likely continue to face headwinds in a rising rate environment Management continues to expect the net interest revenue percentage to improve sequentially in the fourth quarter This improvement is expected to continue into further year over year increase in the NIR percentage in 2019 As the mix of interest earning balances continues to improve underlying growth is expected to accelerate in 2019 resulting in modest reported growth next year For 2018 management continues to expect reported revenues in Branded Cards to be roughly flat and remains on track to achieve 2 underlying growth in total revenues This underlying growth is expected to result in further growth in 2019 considering the Hilton and Visa NYSE V B gains recorded earlier this year Retail services revenue growth rate is likely to accelerate over the next few quarters highlighting the recent acquisition of the L L Bean card portfolio which added 1 5 billion of high quality receivables at second quarter end Citigroup expects NCL rate in the range of 300 basis points bps for 2018 and up to 325 bps over the medium term In retail services NCL rate is projected at 500 bps for 2018 and up to 525 bps over the medium term For the fourth quarter in ICG equity and fixed income market revenues are expected to decline due to seasonality on a sequential basis However revenues are likely to be higher on a year over year basis Investment banking revenue are anticipated to reflect the overall environment but given Citigroup s current backlog revenues are likely to be up both sequentially and year over year Further continued year over year growth in accrual businesses is expected including Treasury and Trade Solutions Securities Services Lending and the Private Bank In consumer in North America management expects to see somewhat better growth in the retail banking excluding mortgage as well as retail services In U S Branded Cards total revenues are expected continue to reflect the impact of the Hilton sale as well as partnership terms that went into effect earlier this year However the net interest revenue percentage should improve both sequentially and year over year and continued year over year revenue growth is expected in Asia and Mexico Cost of credit is likely to remain stable quarter over quarter Citigroup remains on track to achieve around 100 basis points of efficiency improvement in 2018 achieving 57 3 efficiency ratio for the full year Though revenues in fourth quarter are likely to experience some pressure sequentially given the normal seasonal decline in trading revenues expenses are also expected to decline modestly on lower compensation costs and better efficiency savings Furthermore management expects further 400 bps by 2020 reaching low 50s is by 2020 Nonetheless expense savings expectations have been increased to 2 8 billion by 2020 from the prior 2 5 billion aiding to achieve efficiency ratio target and giving flexibility for increased investments Tax rate is likely to be in the range of 24 to 25 Further tax rate has been anticipated to be less than 24 by 2020 from the previous target of 33 Management anticipates producing a return on tangible common equity of roughly 14 over time Additionally it targets at least a 10 5 ROTCE in 2018 including the tax reform impact with an expectation of exceeding the initial target of 10 12 as early as 2019 Further based on these expectations RoTCE of more than 13 5 by 2020 is expected up 250 bps from the original target Notably write down of DTA due to tax reform and better earnings projections reflects a 100 bps improvement
How Have Estimates Been Moving Since Then
In the past month investors have witnessed an upward trend in fresh estimates
VGM Scores
Currently Citigroup has an average Growth Score of C however its Momentum Score is doing a bit better with a B Charting a somewhat similar path the stock was allocated a grade of C on the value side putting it in the middle 20 for this investment strategy
Overall the stock has an aggregate VGM Score of C 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 It comes with little surprise Citigroup has a Zacks Rank 2 Buy We expect an above average return from the stock in the next few months |
C | USD Stutters And Sputters Into Weeks End As The Fed Telegraphs Hesitancy | The week ahead
UK political drama rocked the market while the emergence of a distinctly dovish tone from the Fed knocked the USD off its pedestal going into weeks end The week ahead will be cut short by the Thanksgiving holiday in the US And while this adds up to less trading days those fewer hours will be chock full of political drama For no other reason than year end self preservation the markets risk profile will continue to drop as political risk continues to permeate virtually every pocket of the globe As such traders will be in risk reduction mode suggesting a high level of indifference will creep into the playing field as year end musings leak into the equation
While a Fed pause could offer up a temporary relief for equity investors however I get more concerned that these early warning signals are a very useful canary in a coal mine suggesting we re quickly approaching an economic slow down which could trigger steeper declines in US equity markets Fed watchers will take a keener interest in upcoming financial reports to flesh out any indications of a US economic reversal
Without question the week will be dominated by Brexit and with lingering uncertainty over May s ability to put a viable deal into motion traders cannot rule out a vote of no confidence
Market banter around US President Trump Chinese Premier Xi s G20 meeting will ratchet up several decibels this week but frankly my sceptical radar is flashing red as we re unlikely to see concrete progress from the one on one talk Presidents Trumps pep talk on Friday I think will have a great relationship with China Furthermore China would like to make a deal and have sent a list of things its willing to do on trade While the list is pretty complete but four or five things have been left off Still the US may not have to impose further tariffs on China which firmed the G 10 commodity block of currencies and the EM gamut
On the US domestic front USMCA deal or Mueller investigation will likely add a bit of spice to the mix Trump is not agitated about the Special Counsel He says he s finished writing his answers to Mueller but hasn t submitted them yet And look for White House revolving door to starting spinning again as the President is happy with almost all of the White House cabinet
Currency markets
The USD failed miserably this week and it s unlikely the market will be soft hearted on the dollar bulls heading into year end
The de escalation of trade war rhetoric on the back of China offering up trade concessions saw a swift reversal on USD haven hedges in EM Asia particularly against the Yuan But the DXY hit the skids falling from 96 90 towards 96 40 on a speech from Vice Chair Clarida who in a coordinated fashion and following in the footsteps of Chair Powell s cautious tone from Wednesday also emphasised global growth concerns Which in the market s opinion effectively walked back one of the more hawkish elements of Fed policy If the This is far too coordinated as the Fed is telegraphing hesitancy with Powell Clarida Evans and Kaplan raising concerns about 2019 If the Fed does raise interest rates in December it could be a one and done for a while
Fanning the dollar demise both China and Japan the two biggest foreign U S creditors cut their U S Treasury holdings further in September If US China trade war continues to go sideways its possible could more also reduce US Bond holdings While I m keeping a close eye on future developments at this stage of the game I suspect this is just prudent policy to effectively acquire USD as part of an intervention smoothing procedure to prevent the Yaun from weakening too quickly as the economy slows which will trigger capital outflow Given that China foreign exchange reserves have been declining this makes sense to ensure reserves stay above the US 3 trillion mark
Bloomberg
EUR USD rallied to 1 1420 10 on broader USD sentiment as the markets begin to price in more positive expectations for the Italian government s revised budget while the first sign of Fed hesitancy has reduced the odds of a December rate hike and traders will start to price in the reality of a Fed pause in 2019 With the Fed telegraphing hesitancy we could see the EUR push higher into years end
USD JPY ends the week back below 113 00 on the more widespread USD sentiment in what could be the beginning of a protracted move to 110 overlaid with a lower trajectory for US interest rates and shaky equity markets
AUD USD ended the week above 0 7300 after bouncing off decent support at 7175 The strong Australian jobs report coupled with a rallying cry from President Trump on the trade war with China has not only triggered a reversal on China proxy trade but is garnering a lot of attention from A bulls as the AUD has been a direct beneficiary of greenback s demise globally Last weeks beat on the domestic jobs report has an excellent vibe about it
GBP USD ended the week on a slightly positive note as Brexit developments led to minor recovery for Sterling on Friday but there is a considerable element of risk this week The Pound hovered in a 1 2800 80 range over the NY session but remains tentatively bid no dips But it s unlikely that the markets long sterling position pain threshold will weather another deep dive into the low 1 2700 s So it wouldn t take much more of a spot decline to drive a deeper flush out in positions and a move below the 52 week low of 1 2662 But in reality is anyone s guess where Cable settles with Brexiteers reportedly trying to re write the deal all the while May s future lies in the balance
Asia FX
Trade war detente is picking building momentum but with high expectation come incredible disappointment as the risk reward appears to be shaded towards a letdown
But trading activity in the local currency markets has been decidedly mixed with the North Asia underperforming South Asia where carry trades enjoyed a solid week on the back of lower oil prices and monetary policy tightening
Yuan
Regardless of improving trade war sentiment current account depletion and policy divergence between the Fed and Pboc suggest USD CNH will continue to march higher in the months ahead Suggesting that dips will keep being favoured even though Jay Powell walked back some of the more hawkish elements of Fed policy I think the Feds are very much in the data dependent camp but Feds early warning signals about an economic slowdown in 2019 does bring an element risk behind this view
Rupee While the collapse in oil prices has benefited the INR the long term path of least resistance remains to skew higher although near term view remains exceptionally cautious due to falling oil prices
Ringgit
Malaysia has come out with a pair of weak Q3 figures a below potential GDP figure and another dip in the current account surplus all of which supports a weaker glide path for the Ringgit in months ahead Perhaps the only saving grace for the Ringgit could be a large scale improvement on global risk sentiment which could support a local bond market rally and see an increase in foreign inflow
Oil in focus
On the cross asset front traders remain keenly focused on support levels into the month end While Oil prices rose on Friday on hope OPEC and partners will act to reverse bearish sentiment but from a technical set up bear mode remains intact with downside WTI target falling between the 52 54 levels HEDGE FUNDS ratio of long to short positions in the six major petroleum contracts fell to 3 09 1 on Nov 13 the lowest since July 2017 and down from a recent high of 12 44 on Sep 25 Reuters However after the third straight day of gains on the back of OPEC indicating that they are considering even more substantial production cuts to counteract fading global demand And coupled with WTI spreads springing back to life there s a growing sense that the markets are shifting back into a more neutral tack I m in the camp that prices have dropped sufficiently and while the slow down in global demand could dent bullish sentiment Still the International Energy Agency suggest global demand will continue to grow at 1 4 million bpd in 2019 compared to 1 3 million bpd in 2018 But my bullish radar is still waiting for OPEC do deliver a sizeable cut number with a commencement time attached before aggressively jumping back into the fray
Baker Hughes Oil rigs 2 to 888 150y y Gas rigs 1 to 194 Horz rigs 4 to 939 GoM 1 N Dak unch Penn 1 Texas 3 Oil Gas by Basin Permian 1 Eagle Ford 3 Williston unch Niobrara unch Haynesville unch Utica 2
From Reuters Global Oil Forum
Oil the week that was
The EIA showed crude stocks in the U S building by 10 27mm bbls vs APIs 8 8mm primarily led by stock increases at the Gulf Coast as runs in the region were lower by 267k bpd w w Lower imports could not thwart overall builds as exports were notably lower last week by 355k bpd Stocks at Cushing were higher by 1 17mm bbls as the pace of builds at the hub slowed with higher refinery demand helping to thwart increased inflows with Sunrise ramping up
Gold Market
Spurred on by the weaker dollar Gold continues to glitter as investors flock to safe haven assets driven by the uncertainty in the UK and the ongoing US China trade war With the Fed taking dovish this shift could provide a strong underbelly of support for gold prices into year end
Palladium Market
Palladium hit an all time high this week as projected Chinese auto industry demand will outstrip supply in what Citigroup Inc NYSE C calls extreme tightness in supplies Keep in mind this is all part and parcel to China green policy and China s new auto emissions standards are likely to boost demand
Crypto
Bitcoin Bulls Wonder Where s the Bottom as Volatility Returns
Bitcoin advocates are asking how low will we go from here as the world s largest cryptocurrency continued to slump following its most significant one day loss in eight months
The digital token fell as much as 6 3 per cent to 5 202 having plunged through a critical resistance level Wednesday after a period of relative tranquillity Many of Bitcoin s closest peers also slid Thursday while Bitcoin Cash which splits today into two coins was down as much as 15 per cent
I remain incredibly bearish on BTC with as the 1000 level looking as likely as 10 000 But this is from a long standing and unwavering view that regulators and the banking system will continue to push back against the rise of virtual markets and will undoubtedly burst crypto s ballon as the 5000 cliff edge is approaching fast
But not too surprisingly chipmakers tanked this week on a probable loss of demand as crypto mining collapses which is sending out warning signal of trouble to come These stocks act as good proxy exposure into Bitcoin while avoiding the liquidity crunches associated with underlying crypto movements
Original post |
JPM | Earnings Update Waiting To Exhale | After a punishing January and a mediocre February the first quarter of 2016 ended on a positive note With the exception of some international markets March was a very nice rebound month across the board The rising tide of optimism or maybe just less pessimism impacted domestic equity and fixed income markets and by quarter end the Standard Poor s 500 had risen 1 35 and the S P U S Aggregate Bond index increased by 2 51 March s strong positive return of 6 78 for the S P 500 Index was broad with all ten economic sectors participating led by Energy stocks 9 31 as oil prices rose and investors anticipated a positive outcome for oil producers at this Sunday s OPEC meeting
Market volatility continues into April up 1 one day and down 1 the next although as of today we are ahead for the month and the year We have seen recent improvement in some of the economic data the Institute for Supply Management s Services index 54 5 and Manufacturing index 51 8 both returned to expansion last month ISM Manufacturing finally showed signs of life increasing for the first time in six months New orders production and backlog orders rose as manufacturers and customers inventories contracted
Employment also showed progress with more people joining the workforce and wage growth finally rising The Bureau of Labor Statistics U6 unemployment measure declined from a seasonally adjusted 10 9 March 2015 to 9 8 for March 2016 U 6 is a broader measure than the official U3 rate of 5 as it includes short term discouraged workers During particularly onerous unemployment periods the spread between the official unemployment rate and U6 widens In 2010 following the Great recession this spread rose to 7 4 U3 was 10 6 and U6 was at 18 The spread has recently contracted to 4 8 versus March of last year when it stood at a 5 4 differential Janet Yellen s dovish stance has also impacted stock prices and bond prices as tightening expectations waned
Although the progress on the economic front is comforting we also continue to see the antithesis Global growth forecasts have been pared down again and adding to these concerns China and Hong Kong have had their ratings cut by Standard and Poor s The rating agency pointed to increasing economic and financial risks to the mainland government s creditworthiness In the US consumer spending is lackluster and the latest consumer sentiment figure from the University of Michigan showed a slight decline Reflecting the slow growth in corporate profits a WSJ analysis of CEO compensation in 2015 determined that the median pay for the heads of approximately 300 large companies actually declined by 3 8 the worst showing since 2008
Economists have cut first quarter 2016 GDP to approximately 1 following an uninspiring 1 4 in the previous quarter Energy prices are higher possibly stifling the much heralded yet deferred increase in consumer spending from lower pump prices Alternately the increase could provide some relief to the sickly energy sector and related manufacturing and financial companies April is an important month for the energy companies since it is one of the semi annual months that banks determine the oil price base used to value reserves A lower oil price base will influence the willingness of banks to extend capital
First quarter earnings season has officially begun with the large banks reporting last week to generally favorable reviews Keep in mind that the bar has been lowered for the banks and all the economic sectors for that matter and beating estimates is not the same as expansion JPMorgan NYSE JPM for instance beat analysts estimates handily even as their bottom line continued to deteriorate It is a harsh environment for the banks with low interest rates a hostile and ever changing regulatory environment and growing credit concerns largely in the energy sector Valuations in the financial industry are low but it is hard to find a catalyst in the short run for revenue growth and cost cutting can only take you so far
Looking ahead to the rest of earnings season we expect to see a lot of reports like last week with companies beating lowered estimates but overall earnings continuing to contract Barring unforeseen developments outside of announcements those companies that can beat on earnings should have favorable price movement but beware of guidance Outlooks from CEOs and CFOs will be in the spotlight as earnings growth is widely expected to resume in the second half of the year
The year over year expected 8 decline in first quarter earnings is large although actual earnings will likely be a bit better than that It will still probably not be enough to reverse Corporate America s profit slump We will be looking for improvements in corporate rhetoric those green shoots that we need to start seeing and perhaps higher oil and a slightly weaker dollar can assist
We ll be looking for companies with positive revenue growth increasing backlog orders and innovative products companies with cash who are investing for growth Assuming continued slow growth companies exhibiting those characteristics should be worth a premium
Core portfolio positions in stable companies that generate positive cash flows and return a good portion of these to shareholders in the form of dividends and buybacks should be monitored closely for balance sheet deterioration It is easy to get too comfortable with long held positions Much of corporate America has been slowly but surely adding leverage even as growth wanes and the business cycle ages Earnings season is a good time to conduct in depth reviews and make sure you really know what you own |
JPM | Brexit Stock Picks Playing The Referendum | It has begun Campaigning for the Brexit remain or leave vote has officially started and has opened up a huge door for fortunes to be made or lost While the incumbent UK government has spent hardworking tax payers money on their nationwide remain campaign so much for democracy Donald Trump s lookalike Mr Boris Johnson has thrown the race wide open backing the leave campaign Clearly politics are in play here and we ll let the supposed elite Etonians battle it on the school playground In the mean time the rest of us hardworking folk need to get down to business and figure out how we re going to play the crazy volatility that s potentially in store for us in the coming months When Is The Referendum And What Will It Mean The referendum is set for 23 June and even though most of the FTSE 100 bosses believe Britain is better off in the EU the overall market has been brushing it off rallying from a low of 5500 in Feb to a high of 6410 as I write in April Whilst the British Pound has crashed on the uncertainty investors are still trying to figure out what the ramifications will be for UK businesses We re in very uncertain times and it really is a leap into the unknown
Typically all global stock markets are quite highly correlated meaning they generally move up or down together FTSE DAX Dow etc unless there is a significant event on the horizon which there is now The word on the street from a few special brokers is that this correlation is about to break down a very rare occurrence In fact the correlation has only broken four times in sixteen years the year 2000 dot com burst the foot and mouth crisis of 2001 the terrorist attacks in London in 2005 and the Scottish independence vote of 2014 Why Is It Important Everything will be affected as Europe is the UK s largest trading partner so a vote does pose many questions and problems Trading barriers immigration visas investments tax debts the list goes on and on In fact nearly 14 of the revenue from 300 of the UK s largest companies come from the EU And while many believe that a vote to leave would stop immigration it is immigration that has helped contribute over 5 to UK GDP since 2004 I m sure immigration will be a hot topic for the leave campaign as it s a sensitive issue for many Brits In fact expect many pain points to be attacked in the coming months How Should We Play This AFTER the event Let s face it we don t know which way the vote will go or the market However the market will be moving in accordance with every new poll released so expect a volatile time ahead We can also use the current market action to forecast the likely effect after the votes are counted If the UK choose to stay in the EU it s probable the British pound and UK stocks will rally on the news as uncertainty and fear will be lifted from investors minds If they choose to exit the EU then it s probably that the British Pound and UK stocks will fall hard on the news as uncertainty and the fear of the unknown remains So that s a great play AFTER the event How about before
BEFORE The Event
Regardless of whether the UK leave the EU or not there are some companies whose fundamentals still remain positive and have zero exposure to the EU in terms of revenue It s true that most stocks will get caught in all the volatility but some will recover quickly and stay resilient during all the turmoil up to June
Seven Hot Markets That Have Potential For Explosive Moves
Hot Stock No1 Ashtead Group LON AHT
Fundamentals Ashtead group are an international equipment rental company with networks in the UK and US and build the stuff we need no matter what s happening in the economy Founded in 1947 and with 2015 revenue coming in just over 2billion it makes our list as it has zero exposure to revenue in the EU Analysts including JPMorgan NYSE JPM and Barclays NYSE BCS are bullish on the stock with 11 others issuing a Buy rating and an average price of 12 36 4 analysts issued a Hold rating and 2 a Sell rating All good so far let s have a look at the technicals for more info
Technicals
Hot Stock No2 Centrica LON CNA Plc OTC CPYYY Fundamentals Centrica is a huge energy and services company better known for their British Gas brand With revenues in 2015 of over 27billion it makes our hot list due to the recent bottom in energy prices the defensive nature of the stock if the economy crumbles and it s less than 1 exposure to EU revenues It s also made interesting moves into renewable energy making it a strong long term prospect Let s have a look at the technicals for more info Technicals
Hot Stock No3 EasyJet PLC LON EZJ Fundamentals The nations loved or hated low cost airline operates over 700 routes in 32 countries It s probably the share price will drift lower or sideways until June as nearly 41 of their revenue comes from the EU A potential leave vote could have some serious ramifications for Easyjet However if a remain vote ensues it s probable the share price could rally aggressively as any fears or uncertainty would be lifted and would turn to the strong growth prospects of this budge airline Let s have a look at the technicals for more info Technicals
You may agree or disagree but as long as you can sleep at night without thinking about your trades or investments then that s a job well done
The above analysis combines a top down approach from the macro fundamental picture to the technical analysis of a price chart In our combined twenty five year experience we have found this to be a very powerful combination
Happy trading |
JPM | BoJ Corners 33 Of Bond Market | All Japanese bonds have a yield under 0 3 as of April 19
Yield on the 40 year bond fell to a record low 0 29
Yield on the 30 year bond hit a record low 0 285
Japan s two year bond yield hit a record low minus 0 265 percent
Please consider
Japan s 40 year bond yield fell to a record low meaning all the nation s sovereign bonds yield less than 0 3 percent as investors rush for securities with positive income
The yield on the 1 4 percent government note maturing in March 2055 fell to 0 29 percent in Tokyo Wednesday from 0 415 percent on Friday when the bond had last traded according to Japan Bond Trading Co The decline spread to other longer dated maturities pushing 30 and 20 year yields to record lows of 0 285 percent and 0 245 percent respectively Japan s two year yield also reached a record minus 0 265 percent
Bond buying operations for these zones by the Bank of Japan are also tightening market conditions as negative rates have pushed investors seeking positive yields into longer dated debt Yields on bonds with maturities as long as 10 years have gone negative since the BOJ announced in January that it would start charging lenders on some of their excess reserves held with the central bank
No Choice
With yields up to 10 years sinking below zero investors will look at zones on the curve with plus yields said Makoto Yamashita a strategist for Japanese interest rates at Deutsche Bank DE DBKGn AG s securities unit in Tokyo The 20 year auction scheduled for Thursday is expected to meet healthy demand he said There are investors who have no choice but to buy
Strong demand for these bonds is strengthening downward pressure on their yields said Takafumi Yamawaki the chief rates strategist in Tokyo at JPMorgan Chase Co NYSE JPM There is also speculation among some overseas investors of additional easing by the BOJ he said
Bank of Japan Corners 33 of Bond Market
Bloomberg reports
For Japan s bond investors it seems the bigger the debt burden the better
Yields on some of Japan s longest sovereign notes dropped to records as ruling party lawmaker Kozo Yamamoto floated on Thursday the idea of borrowing an extra 20 trillion yen 182 billion to fund earthquake relief and bolster a struggling economy With most of the nation s bonds offering negative yields and the Bank of Japan cornering a third of the market as part of its unprecedented stimulus strategists say the government with the world s biggest debt pile will have no trouble selling more as investors hunt any notes that can be traded and offer a return
Japanese debt yields have slid to record lows as the BOJ buys nearly all the government notes newly issued to the market All benchmark yields up to 10 years are below zero and the 30 year yield dropped to an all time low of 0 265 percent on Thursday while the 40 year rate fell to a record 0 29 percent a day earlier
An auction of 1 1 trillion yen of 20 year JGBs on Thursday drew the strongest demand since November in a sign that investors are still keen to acquire Japanese notes with positive yields
Yamamoto of the Liberal Democratic Party who had been calling for a 10 trillion yen fiscal package before temblors struck Japan s southwest also said Thursday that he personally thinks the BOJ should boost monetary stimulus The central bank s policy board next meets for two days through April 28
Desperate Measures Needed
Try as it might Japan has failed to trash its currency
Proof is obvious negative rates on 10 year bonds and 40 year bonds yielding a mere 0 29 percent
Abenomics has failed |
MS | NYMEX crude falls in Asia as supply woes grow API estimates ahead | Investing com Crude oil continued a downward trajectory in Asia on Tuesday with a downbeat outlook for a near term rebound
On the New York Mercantile Exchange WTI crude for February delivery fell 0 24 to 31 30 a barrel
Ahead the American Petroleum Institute will release its estimates of crue and refined product stocks in the U S at the end of last week This will be followed on Wednesday with more closely watched figures from the U S Department of Energy
Overnight U S crude futures fell sharply by more than 5 on Monday as widespread concerns related to the slumping China economy pulled prices down to fresh 12 year lows
With the dramatic losses U S crude futures closed lower for the seventh straight session Since closing 2015 slightly above 37 a barrel the front month contract for WTI crude has tumbled approximately 12
On the Intercontinental Exchange ICE Brent crude for March delivery wavered between 31 55 and 33 77 a barrel before closing at 31 88 down 2 03 or 5 98 on the day
On Monday the People s Bank of China PBOC attempted to calm markets by setting the daily fix for the yuan against the dollar dramatically higher in comparison with its level at last week s close Although the Chinese currency surged against the dollar in offshore trade Chinese equities continued to plunge extending severe losses from the opening week of the year
The PBOC set the yuan s midpoint at 6 5626 per dollar on Monday substantially higher than last Thursday s level when it experienced its worst one day decline in five months Over the course of a trading day the PBOC intervenes to prevent the exchange rate from drifting 2 above or below the midpoint The PBOC devalued the yuan 1 6 last week after lowering it by nearly 5 against the dollar in 2015 in an effort to stimulate its economy by boosting exports At 10 5 million barrels per day China consumes more oil than any other nation in the world besides the U S
The latest oil sell off has exacerbated concerns that crude prices could fall as low as 20 a barrel in the short term future Analysts from Morgan Stanley N N MS warned that stronger devaluations in the yuan could cause energy prices to spiral even further
Elsewhere investors digested reports of an attack at a mall in Baghdad where gunmen reportedly set off a car bomb at the entrance killing at least 10 The mall is located in eastern Baghdad an area predominantly occupied by Shiite Muslims Gold s appeal as a safe haven asset has accelerated since a Shiite cleric and 46 others were executed in Saudi Arabia on Jan 2 triggering the latest round of sectarian discord in the region Oil prices are sensitive to heightened geopolitical risks in the Middle East where more than 30 of crude oil in the world is produced
Also on Monday European Union foreign policy chief Federica Mogherini said while an exact date has not been set for lifting economic sanctions against Iran a decision could come soon Iran is expected to increase its exports by as much as 500 000 barrels per day when the multi year sanctions against the Gulf state are lifted by Western powers The move is viewed as bearish for energy prices which have slumped by more than 70 in the last 18 months as global supply has severely outpaced demand |
MS | Shares in Asia drop with slightly weaker yuan parity on Tuesday | Investing com Asian shares fell on Tuesday with investors still nervous about the pace of China s economic growth and what that may mean for global markets
The Nikkei 225 slumped 2 12 while the S P ASX 200 dipped 0 28 and the Shnaghai Composite eased 0 26 in volatile trade after a weaker yuan fixing
The yuan s central parity rate against the U S dollar was set at 6 5628 Tuesday slightly weaker than Monday s 6 5626 level set by the People s Bank of China
As well China s main economic body the NDRC said it expects that GDP rose around 7 in 2015 in line with target
On Monday the People s Bank of China PBOC attempted to soothe markets by setting the daily fix for the yuan against the dollar dramatically higher in comparison with its level at last week s close While the Chinese currency surged against the dollar in offshore trade Chinese equities continued to plunge extending severe losses from the opening week of the year
The PBOC devalued the yuan 1 6 last week after lowering it by nearly 5 against the dollar in 2015 in an effort to stimulate its economy by boosting exports Weak manufacturing and service sector data for December exacerbated fears that the world s second largest economy finished last year with the slowest GDP growth in nearly a quarter century
Investors await the release of China trade data on Wednesday for further indications on the strength of the Chinese economy The monthly trade report for December is expected to show that the country s trade surplus narrowed to 53 0 billion from 54 1 billion in November In addition Chinese exports last month are expected to slump 8 0 on a yearly basis while economists expect imports to plummet 11 5 after falling nearly 9 a month earlier
On July 21 2005 China freed the yuan from its longstanding peg to the dollar in favor of a managed float with reference to a basket of currencies From March 17 2014 the yuan is allowed to move 2 either side of the daily fixing against the dollar
Overnight U S stocks were mixed on Monday amid a last minute rally by the Dow Jones Industrial Average even as crude futures plunged to fresh 12 year lows pulling down energy stocks on the major indices
U S crude futures tumbled more than 5 in Monday s session at one point dipping below 31 a barrel as longstanding concerns related to slowing economic growth in China continued to fester With the dramatic one day fall crude futures extended a seven day losing streak dating back to the start of the year It coincided with an investor note by Morgan Stanley N N MS which warned that crude prices could stumble even further if the yuan continues to be devalued
The Dow Jones Industrial Average gained 52 12 or 0 32 to 16 398 57 while the NASDAQ Composite index fell 5 64 or 0 12 to 4 637 99 due in part to severe losses among biotech stocks The NASDAQ closed lower for the eighth consecutive session The S P 500 Composite index meanwhile added 1 64 or 0 09 to 1 923 67 as six of 10 sectors closed in the green Stocks in the Consumer Goods Telecommunications and Utilities sectors led each gaining more than 0 50 on the session
The major indices are coming off their worst annual start in 25 years as a slowdown in China and a continual downturn in energy prices has weighed on equity markets worldwide |
MS | U S crude crashes below 30 a barrel ahead of API inventory report | Investing com U S crude futures erased gains from earlier in the session on Tuesday to drop to fresh 12 year lows ahead of the release of the American Petroleum Institute s weekly inventory report
On the New York Mercantile Exchange WTI crude for February delivery traded in a broad range between 29 96 and 32 19 a barrel before settling at 30 41 down 1 00 or 3 17 on the session With the sharp losses U S crude futures fell below 30 a barrel for the first time since December 2003 The front month contract for U S crude has slumped more than 10 since the first of the year amid widespread economic concerns in China and heightened geopolitical instability in the Middle East
On the Intercontinental Exchange ICE brent crude for March delivery wavered between 30 55 and 32 67 a barrel before settling at 30 91 down 0 97 or 3 04 on the day Much like its U S counterpart North Sea brent has tumbled more than 7 a barrel in 2016 extending dramatic losses from the previous year A number of analysts worry that the downturn will persist as demand in China remains soft in the face of slowing economic growth
Investors await the release of the API s weekly stockpile report after the close of trading on Tuesday for further indications on domestic supply levels in the U S Meanwhile Wednesday s government report from the Department of Energy could show that U S crude inventories rose by 2 5 million barrels for the week ending on January 8 A week earlier crude stockpiles fell by 5 1 million barrels significantly below forecasts for a build of 500 000 barrels While a considerable draw has generally provided upside pressure for crude prices in recent months inventories are typically drawn down in the final weeks of the year as companies look to avoid year end tax burdens
The latest oil sell off has led to mounting concerns that crude prices could fall even further in the short term future On Monday analysts at several prominent firms lowered their yearly forecasts for oil prices in 2016 while Standard Chartered L STAN predicted that crude futures could fall as low as 10 a barrel Analysts from Morgan Stanley N MS also warned that stronger devaluations in the yuan could prevent crude prices from rebounding
It came as speculators increased short positions of WTI crude by almost 10 from the previous week on January 5 to a record high of 182 562 according to data compiled by the U S Commodity Futures Trading Commission At the same time investors cut their long positions or bets that prices will spike to fewer than 50 000 the data showed
Elsewhere investors digested news of a suicide bombing in Istanbul on Tuesday morning of which Turkey officials linked to a group represented by the Islamic State At least eight German citizens were killed in the blast in a popular tourist area near the Blue Mosque a Turkish government official told CNN Energy prices are sensitive to reports of increased geopolitical tensions near the Middle East home to roughly 30 of the world s daily crude production
The U S Dollar Index which measures the strength of the greenback versus a basket of six other major currencies gained more than 0 3 to an intraday high of 99 34 The index remains near 12 month highs from December when it eclipsed 100 00
Dollar denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates |
MS | NYMEX crude slumps in Asia on API refined products build | Investing com Crude oil prices slumped in Asia on Wednesday as U S refined product inventories rose sharply last week according to industry estimates
The American Petroleum Institute said crude stocks fell by 3 9 million barrels last week while distillate supplies gained 3 7 million barrels and gasoline inventories jumped 7 million barrels
On the New York Mercantile Exchange WTI crude for February delivery slumped 1 02 to 30 69 a barrel
Ahead China reports December exports imports and the trade balance for December year on year Exports are seen down 8 imports are seen to have declined 11 5 and the trade balance is expected at a 53 billion surplus
Meanwhile Wednesday s government report from the Department of Energy could show that U S crude inventories rose by 2 5 million barrels for the week ending on January 8
A week earlier crude stockpiles fell by 5 1 million barrels significantly below forecasts for a build of 500 000 barrels While a considerable draw has generally provided upside pressure for crude prices in recent months inventories are typically drawn down in the final weeks of the year as companies look to avoid year end tax burdens
Overnight U S crude futures erased gains from earlier in the session on Tuesday to drop to fresh 12 year lows ahead of the release of the American Petroleum Institute s weekly inventory report
With the sharp losses U S crude futures fell below 30 a barrel for the first time since December 2003 The front month contract for U S crude has slumped more than 10 since the first of the year amid widespread economic concerns in China and heightened geopolitical instability in the Middle East
On the Intercontinental Exchange ICE Brent crude for March delivery wavered between 30 55 and 32 67 a barrel before settling at 30 91 down 0 97 or 3 04 on the day
The latest oil sell off has led to mounting concerns that crude prices could fall even further in the short term future On Monday analysts at several prominent firms lowered their yearly forecasts for oil prices in 2016 while Standard Chartered L L STAN predicted that crude futures could fall as low as 10 a barrel Analysts from Morgan Stanley N N MS also warned that stronger devaluations in the yuan could prevent crude prices from rebounding
It came as speculators increased short positions of WTI crude by almost 10 from the previous week on January 5 to a record high of 182 562 according to data compiled by the U S Commodity Futures Trading Commission At the same time investors cut their long positions or bets that prices will spike to fewer than 50 000 the data showed
Elsewhere investors digested news of a suicide bombing in Istanbul on Tuesday morning of which Turkey officials linked to a group represented by the Islamic State At least eight German citizens were killed in the blast in a popular tourist area near the Blue Mosque a Turkish government official told CNN Energy prices are sensitive to reports of increased geopolitical tensions near the Middle East home to roughly 30 of the world s daily crude production |
MS | NYMEX crude rebounds in Asia after China exports show a gain | Investing com Crude oil staged a rebound in Asia after a surprise increase in China s December wxports brushing off earlier bearish supply data by a U S industry group
The American Petroleum Institute said crude stocks fell by 3 9 million barrels last week while distillate supplies gained 3 7 million barrels and gasoline inventories jumped 7 million barrels
On the New York Mercantile Exchange WTI crude for February delivery gained 0 64 to 30 70 a barrel reversing an earlier loss after trade data from China came in
China reported December exports rose 1 4 far outpacing an expected 8 0 drop and the first gain in six months while imports fell 7 6 less than the 11 5 drop seen
The trade balance came in at 60 09 billion wider than the expected 53 billion surplus
As well China s exports rose in December for the first gain in six months initial figures in yuan terms showed Wednesday Data from the General Administration of Customs showed a gain of 2 3 for exports in December compared with a year earlier in yuan terms Imports fell 4 0 in December in yuan terms
In 2015 exports fell 1 8 and imports declined 13 2 with a trade surplus of RMB3 69 trillion expanding 56 7 from 2014
As well the yuan s central parity rate against the U S dollar was set at 6 5630 Wednesday slightly weaker than Tuesday s 6 5628 the People s Bank of China said
Meanwhile Wednesday s government report from the Department of Energy could show that U S crude inventories rose by 2 5 million barrels for the week ending on January 8
A week earlier crude stockpiles fell by 5 1 million barrels significantly below forecasts for a build of 500 000 barrels While a considerable draw has generally provided upside pressure for crude prices in recent months inventories are typically drawn down in the final weeks of the year as companies look to avoid year end tax burdens
Overnight U S crude futures erased gains from earlier in the session on Tuesday to drop to fresh 12 year lows ahead of the release of the American Petroleum Institute s weekly inventory report
With the sharp losses U S crude futures fell below 30 a barrel for the first time since December 2003 The front month contract for U S crude has slumped more than 10 since the first of the year amid widespread economic concerns in China and heightened geopolitical instability in the Middle East On the Intercontinental Exchange ICE Brent crude for March delivery wavered between 30 55 and 32 67 a barrel before settling at 30 91 down 0 97 or 3 04 on the day
The latest oil sell off has led to mounting concerns that crude prices could fall even further in the short term future On Monday analysts at several prominent firms lowered their yearly forecasts for oil prices in 2016 while Standard Chartered L L STAN predicted that crude futures could fall as low as 10 a barrel Analysts from Morgan Stanley N N MS also warned that stronger devaluations in the yuan could prevent crude prices from rebounding
It came as speculators increased short positions of WTI crude by almost 10 from the previous week on January 5 to a record high of 182 562 according to data compiled by the U S Commodity Futures Trading Commission At the same time investors cut their long positions or bets that prices will spike to fewer than 50 000 the data showed
Elsewhere investors digested news of a suicide bombing in Istanbul on Tuesday morning of which Turkey officials linked to a group represented by the Islamic State At least eight German citizens were killed in the blast in a popular tourist area near the Blue Mosque a Turkish government official told CNN Energy prices are sensitive to reports of increased geopolitical tensions near the Middle East home to roughly 30 of the world s daily crude production |
MS | Brent hits near 12 year low as market wrestles with weak demand | By Jessica Resnick Ault NEW YORK Reuters Brent crude ended 2 percent lower on Wednesday after falling below 30 a barrel for the first time since April 2004 as a growing stocks of oil in the United States stoked market fears about demand Both Brent and U S crude futures saw highs early in the day of more than 1 above Tuesday s closing price on upbeat Chinese economic data earlier in the session But U S government data showing builds in crude gasoline and diesel supplies augmented fears that demand will stagnate as global markets contend with oversupply Concerns about U S economic uncertainty also amplified the declines the Standard and Poors 500 index dipped below 1900 for the first time since early October N Brent LCOc1 fell to a new 12 year low at 29 96 a barrel before settling at 30 31 a barrel down 55 cents or 1 8 percent U S crude CLc1 settled at 30 48 up 4 cents or 0 1 percent after dropping as low as 30 10 On Tuesday it dropped as low as 29 93 which was last seen in December 2003 Brent which normally trades at a premium to U S crude flipped into a discount just after 2 00 p m EST 1900 GMT as it tested and broke beneath the 30 level Data showing that crude inventories rose 234 000 barrels last week much less than expectations was overshadowed by reported builds of 8 4 million barrels in gasoline and over 6 million in distillates which includes diesel and heating oil EIA S Overall it s a bearish report I think today s inventory report is all about products The long awaited massive decline in crude production is not starting again said Dominic Chirichella senior partner at Energy Management Institute in New York This was a second week of huge builds in refined fuel with gasoline surging the most since 1993 in the previous week Last week s build was massive and this week s was much larger than the seasonal norm said John Saucer Vice President at Mobius Risk Group in Houston The dynamics of supply have shifted as diesel stockpiles have surged past year ago levels indicating a products surplus Saucer added Analysts at Morgan Stanley N MS also warned that a rise in demand for crude could be lower than previously expected Any slowing in the rate of demand growth could delay the timing of rebalancing and ultimately a price recovery they said in a research note The potential for the calling of an emergency OPEC meeting also weakened on Wednesday when Iran s oil minister was quoted as saying he had not received any request for such a gathering
Nigeria s oil minister said on Tuesday that a couple of OPEC members had asked for an emergency meeting |
JPM | JPMorgan pays 2 8 million fine over improper safeguards for customers | By Jonathan Stempel NEW YORK Reuters JPMorgan Chase Co N JPM will pay 2 8 million to settle charges that a broker dealer unit lacked sufficient controls to safeguard customer securities from several countries over more than eight years a U S regulator said on Wednesday The Financial Industry Regulatory Authority said JPMorgan Clearing Corp created hundreds of millions of dollars of deficits by violating U S rules designed to thwart the improper commingling of assets Such rules are intended to avoid delays in returning customer securities or the inability to make customers whole when broker dealers fail FINRA said the violations occurred from March 2008 to June 2016 and stemmed in part from defective electronic systems that JPMorgan inherited from Bear Stearns Cos the investment bank it bought in May 2008 in a government arranged fire sale JPMorgan did not admit or deny wrongdoing in agreeing to settle Brian Marchiony a spokesman for the New York based bank in an email said there were no findings that any client accounts were harmed According to settlement papers JPMorgan failed to properly segregate customer securities from its own assets because of systematic coding and design flaws and a lack of supervision FINRA cited as examples how the improper safeguarding of Italian securities for nearly two years and Nigerian securities for four years created respective deficits of 146 million and 120 million
The fine reflected JPMorgan s extraordinary cooperation in addressing the violations and its practice of setting aside excess deposits to protect customers from losses FINRA said |
JPM | South Korea December inflation speeds up as global oil prices rise | By Cynthia Kim SEOUL Reuters South Korea s annual inflation accelerated in December to its fastest in three months as rising global oil prices lifted the cost of petrochemical and other industrial products but with few implications seen for monetary policy Statistics Korea said the consumer price index rose 1 5 percent in December from a year ago in line with the expectations seen in a Reuters survey Park Seok gil an economist at JP Morgan Chase NYSE JPM Co said the current inflation level was unlikely to prompt any changes in monetary policy soon Inflation at 1 3 percent in November was probably a downside surprise and consumer prices will continue to gain towards the Bank of Korea s 2 percent target Park said A Statistics Korea official said consumer prices were largely stable in December with the 1 8 percent on year gain in service prices unchanged from November Inflation stayed below the BOK s target level for most of this year but the central bank sees inflation approaching the target as oil prices rise and the global economy recovers The month on month gain was 0 3 percent slightly above the poll s forecast of a 0 2 percent rise Petroleum prices jumped 7 5 percent in December from a year earlier Statistics Korea said raising prices for petrochemical and other industrial goods for local consumers Global oil prices remained near 2 1 2 year high this week on strong demand for oil in China and increased U S refining activity that drew more crude from inventories The BOK raised interest rates last month for the first time in more than six years to 1 50 percent yet tempered market expectations for further hikes by raising concerns about the job market and other uncertainties Core CPI which excludes oil and agricultural products rose 1 5 percent from a year ago accelerating from 1 2 percent in November and marking the fastest gain since September when it rose 1 6 percent Inflation for the whole of 2017 was 1 9 percent |
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