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JPM | Junk bond spreads tighten to two month low | via Bloomberg s Gowri GurumurthyIgnoring macro fears like upped rhetoric between the leaders of the U S and North Korea and Iranian unrest junk bonds are rallying to start the year Maybe at work is the continued rise of oil now nearing 61 per barrel Energy accounts for 14 of the Bloomberg Barclays LON BARC high yield index JPMorgan NYSE JPM notes retail funds have seen inflows topping 500M this week ETFs HYG JNK DHY HIX EAD PHT HYT HYLD JQC ACP ANGL CIK MCI DSU SJB KIO NHS CIF ARDC IVH GGM AIF MPV FHY PHF JSDNow read |
C | UK s Equiniti to buy Wells Fargo s share registration unit for 227 million | Reuters Britain s Equiniti Group Plc said it would buy Wells Fargo NYSE WFC Co s share registration business for 227 million as it looks to enter the United States the largest and most active share registration market Wells Fargo said it would focus on areas of its business that are essential for growth The Wells Fargo Share Registration Services WFSS business will add to its earnings in the first full year of ownership Equiniti a share registration and investor services company said on Wednesday WFSS provides shareowner services including stock transfer agent corporate action and investment plan services to more than 1 200 companies across the United States Greenhill Co International LLP was Equinity s lead financial adviser with Citigroup NYSE C Global Markets Ltd as joint adviser
Wells Fargo Securities was financial adviser to Wells Fargo with Wachtell Lipton Rosen Katz serving as legal counsel |
C | European shares poised for quiet end to strong week earnings loom | LONDON Reuters European shares were poised for their best week in more than two months as investors piled back into equities on signs that the world s major central banks would likely not tighten monetary policy as quickly as some had feared The move on indexes on Friday was more muted as investors hunkered down ahead of earnings reports from major US banks including JPMorgan N JPM and Citigroup N C later in the day The pan European STOXX 600 STOXX index rose 0 1 percent while euro zone bluechips STOXX50E were little changed Firmer metals prices underpinned gains on mining stocks Miners SXPP were led higher by steel firms ArcelorMittal AS MT Outokumpu HE OUT1V and Norsk Hydro OL NHY which rose after U S President Donald Trump said that he was considering quotas and tariffs on Chinese steel dumping While a rise in bond yields has hit rate sensitive sectors such as utilities SX6P banking stocks SX7P have instead benefited and the sector was roughly flat as Swedish lender SEB ST SEBa jumped 2 4 percent after its second quarter profit topped forecasts Swedish construction group Skanksa ST SKAb was the worst performer on the STOXX 600 down more than 4 percent after it warned that its second quarter profit would be hit by project writedowns in the U S and Britain European earnings get underway in earnest only later this month Overall analyst are calling for about 9 percent year on year earnings growth for top European firms compared to about 8 percent for the U S according to Thomson Reuters I B E S |
C | Cautious Fed sends stocks to record highs dollar dips | By Jemima Kelly LONDON Reuters Global stocks scaled record highs on Friday capping their best week in over two months as the dollar stayed close to nine month lows with bets on a gradual U S Federal Reserve rate hike path and hopes for a strong earnings season boosting risk appetite After a scare at the end of last month when stock markets skidded on the view that the era of easy money might be coming to an end across the globe investors have been soothed by a run of more dovish comments from central bankers Dallas Fed President Robert Kaplan on Thursday advocated a go slow approach to further tightening after two hikes so far this year saying he first wants to see more evidence that inflation is heading back up to the Fed s 2 percent goal Fed Chair Janet Yellen also said on Thursday that the central bank s further rate hikes could be gradual given persistently low inflation despite an improving economy European shares were poised for their best week since late April as investors piled back into equities though moves on indexes on Friday were muted as investors hunkered down ahead of earnings reports from major U S banks including JPMorgan N JPM and Citigroup N C later in the day The pan European STOXX 600 STOXX index inched up 0 1 percent adding to earlier gains on stock markets in Asia that took MSCI s world stock index to an all time high The Fed comments add to our conviction that no further Fed hike should be expected for the rest of the year which should prove reassuring for markets concerned about excessive tightening risk globally Mizuho s head of euro rates strategy Peter Chatwell said in London CARRY TRADES IN FAVOR The signals from the Fed drove the dollar to a nine month low against its broad index DXY on Thursday and it stayed close to that trough inching down 0 1 percent on the day The yen meanwhile was on the back foot against high yielding currencies such as the Australian dollar JPYAUD as the VIX index VIX a gauge of asset volatility drifted lower and provided a boost to carry trades FRX The latest comments from Yellen and others suggest that interest rates will rise very gently and that is supportive for high yielding currencies for now said Viraj Patel an FX strategist at ING Bank in London The recent caution from central bankers has also taken the sting out of a sell off in the bond market which had been gathering steam over the past few weeks in the euro zone on rising expectations that the European Central Bank is set to wind down its asset purchase program GVD EUR The bloc s benchmark German 10 year yield fell some 3 basis points when European trading started on Friday to 0 50 percent moving away from an 18 month high hit earlier this week of 0 583 percent Earlier Japan s Nikkei N225 added 0 2 percent poised for a weekly rise of just over 1 percent MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS advanced 0 3 percent to its highest level in two years Wall Street had also edged higher on Thursday DJI SPX IXIC though it was set for a slightly weaker open ahead of key earnings reports The U S profit reporting season looks likely to be a key market driver over the next couple of weeks Ric Spooner chief market analyst at CMC Markets in Sydney wrote in a note Full valuations suggest that the market is yet again going into this reporting season anticipating results to outperform consensus analyst expectations The euro was up 0 1 percent at 1 1410 and was set to end the week flat The ECB is likely to signal in September that its bond buying scheme will be wound down gradually next year but President Mario Draghi could give the next clue on the plans in late August the Wall Street Journal said on Thursday The Canadian dollar remained near its strongest in over a year after the Bank of Canada this week raised interest rates for the first time since 2010 with further tightening expected this year In commodities oil markets edged lower amid high fuel inventories and improving industry efficiency but remained on track for a solid weekly gain O R Brent crude futures LCOc1 the international benchmark for oil prices were down 19 cents or 0 4 percent at 48 23 per barrel Gold was steady at 1 217 32 an ounce heading for a half percent gain for the week
For Reuters Live Markets blog on European and UK stock markets see reuters realtime verb Open url |
C | Global stocks mostly tread water U S data ahead | Investing com Global stocks mostly at an end week standstill after Fed Chair Janet Yellen s testimony 178 Nikkei 225 edged up 0 09 as yen traded mostly flat against the dollar Europe mostly flat DAX up 0 03 CAC 40 up 0 23 on Bastille Day Euro firm above 1 14 mark as ECB expected to announce tapering plans in September FTSE 100 off 0 08 Sterling holds above 1 29 as BoE tightening talk persists U S stock index futures flat as Wall St steady overnight CPI retail sales data on tap Banks in focus as NYSE JPMorgan NYSE Citi NYSE Wells Fargo report earnings Dollar index edges lower after Yellen takes cautious approach to U S tightening Oil lower ahead of Baker Hughes rig count Gold edges higher U S Treasury yields little changed |
C | Citigroup C Dips More Than Broader Markets What You Should Know | In the latest trading session Citigroup C closed at 67 78 marking a 0 7 move from the previous day This change lagged the S P 500 s 0 25 loss on the day At the same time the Dow added 0 04 and the tech heavy Nasdaq lost 0 53
Coming into today shares of the U S bank had lost 2 42 in the past month In that same time the Finance sector lost 1 43 while the S P 500 lost 2 35
Investors will be hoping for strength from C as it approaches its next earnings release which 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 our latest consensus estimate is calling for revenue of 17 95 billion up 4 05 from the prior year quarter
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
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 With this in mind we can consider positive estimate revisions a sign of optimism about the company s business outlook
Research indicates that these estimate revisions are directly correlated with near term share price momentum 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 1 45 higher within the past month C is holding a Zacks Rank of 2 Buy right now
Valuation is also important so investors should note that C has a Forward P E ratio of 10 21 right now For comparison its industry has an average Forward P E of 11 69 which means C is trading at a discount to the group
We can also see that C currently has a PEG ratio of 0 9 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 Banks Major Regional stocks are on average holding a PEG ratio of 1 23 based on yesterday s closing prices
The Banks Major Regional industry is part of the Finance sector This industry currently has a Zacks Industry Rank of 92 which puts it in the top 36 of all 250 industries
The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
To follow C in the coming trading sessions be sure to utilize Zacks com |
JPM | JPMorgan Chase Stock Rises On Respectable Earnings | JP Morgan Chase NYSE JPM stock rose 4 on Wednesday after it released better than expected earnings for its first quarter of fiscal year 2016 JP Morgan is often the first bank to release earnings so many analysts use JP Morgan s financial figures to set expectations for other major U S banks
Net revenue posted for the quarter is 24 08 billion up from 23 75 billion in the previous quarter The net income is also higher at 5 52 billion compared with 5 43 billion before Overall earnings rose to 1 35 per share compared with 1 32 per share in the last quarter However compared to the previous year the EPS this time has actually slipped by 7 But despite a decrease in year over year earnings the bank was still able to beat its earnings and revenue estimates which was ultimately what Wall St was looking for
One factor that negatively affected the quarterly earnings is the exposure to the struggling energy sector Oil and gas companies have found it difficult to pay back the loans they own the banks due to lower revenue from falling oil prices Provision to total credit loss at practically doubled to 1 8 billion for the quarter as oppose to 959 million from a year ago However since last month it would appear that the price of crude has somewhat stabilized at around 40 per barrel so this should help both the energy sector as well as banks going forward
Jamie Dimon Chairman and CEO commented on the financial results in the earnings press release We delivered solid results this quarter with strong underlying drivers The consumer businesses continue to grow loans and deposits impressively attracting deposits faster than the industry The U S consumer remains healthy and consumer credit trends are favorable
While challenging markets impacted the industry we maintained our leadership positions and market share in the Corporate Investment Bank and Asset Management reflecting the strength of our platform Even in a challenging environment clients continue to turn to us in the global markets and we saw positive net long term asset flows in Asset Management We are one of the most trusted financial institutions in the world delivering consistently for our clients communities and shareholders We plan to increase capital return in the first half of 2016 as the board approved an incremental 1 9 billion in share buybacks As we build for the future we are continuously innovating and investing to succeed We are strengthening the Firm to withstand any environment and to maintain scale and profitability through the cycle Jamie Dimon Chairman and CEO of JP Morgan Chase Co
Although the CEO of the company appear to be optimistic about the future many people are not convinced that the economy is as favorable as Jamie Dimon believes Earlier this week JP Morgan announced job cuts of 5 in its Asia wealth management sector From a macro perspective there have been reports suggesting that consumers are reining in spending as the U S economy slows The U S Commerce Department says consumer spending edged up only 0 1 in February The agency also revised the spending figure for January down to less than 0 1 Peter Boockvar chief market analyst with research firm The Lindsey Group recently said that spending was disappointing when we include the downward revision to January Even the International Monetary Fund has by 0 2 from 2 6 to 2 4 for 2016
There are certainly a lot of headwinds for the banking sector and even for the economy as a whole But despite weaker capital markets and non performing investment banking the latest earnings reported by JPM were enough to at least gain investors confidence and help raise the stock price up As a long term investment JPM has not been a bad option Over the past five and ten year periods the stock has returned about 32 and 46 respectively not factoring in the 2 85 annual dividend JP Morgan starts off the bank earnings season and sets a respectable benchmark for other financial institutions to follow |
JPM | SPX Closes At Lower High Euro Begins Pullback | VIX challenged its weekly mid Cycle resistance at 16 06 closing beneath it It appears to be on an aggressive buy signal NYSE sell signal while closing above mid Cycle resistance may confirm the signal
ZeroHedge And CSFB s Fear Barometer just hit an all time high
As CS Mandy Xu notes typically an increase in the CSFB is caused by a combination of higher put demand and lower call demand Interestingly this time the entire move was driven by the call side The derivatives market is assigning less than 1 probability the market will rise by 10 in the next three months vs 17 probability it will fall by 10
SPX closes at a lower high
The SPX rallied again last week but was not able to better the November 3 high of 2116 48 A reversal beneath the trendline may constitute a sell signal on the SPX Trendlines are important support areas that often attract then repel the markets Earnings season kicks into high gear next week SPX average earnings are expected to decline another 7 4 year over year in the first quarter after a 7 decline in the fourth quarter
WSJ The financial sector joined the stocks rally this week
After a terrible start to the year bank stocks received a much needed boost after several of the largest U S banks reported earnings that beat lowered expectations
The strong performance by banks led stocks higher for the week with the S P 500 closing with weekly gains of about 1 6
The KBW Nasdaq Bank Index rose 7 this week
On Friday stocks retreated slightly The Dow Jones Industrial Average fell about 29 points or 0 2 to 17897 The S P 500 declined 0 1 and the Nasdaq Composite shed 0 2
NDX could not close its gap
NDX probed higher this week but was not able to close an important gap at 4592 88 left on December 31 This is a sign of technical weakness in the NDX Weekly Long term support is at at 4421 88 Should it decline beneath that level NDX maybe on a sell signal
ZeroHedge As one veteran trader told us this massive short squeeze came out of nowhere seemingly driven by oil headline induced algo momentum ignition Goldman s Most Shorted stocks are up a stunning 6 in the last 2 days the biggest 2 day surge since Oct 2015 as Credit Suisse SIX CSGN noted earlier there is a lot of pain being felt out there on the short side
High Yield Bond Index goes even higher
The High Yield Index rallied nearly 20 in the last 86 days This may be the most spectacular rally in High Yield bonds on record But the rally is also being met with surging issuance of new debt to match the demand See below
MarketRealist Deals and flows analysis in the high yield bond markets
High yield bond issuance surged last week and hit its highest level in 2016 yet due to continued growth in volume According to data from S P Capital IQ LCD dollar denominated high yield debt amounting to 10 9 billion was issued in the week ended April 8 Last week s issuance was not only the highest year to date but also the largest since March 20 2015 In the previous week high yield issuance stood at 8 2 billion The number of transactions rose to eight last week from six in the previous week
Last week brought the total US dollar denominated issuance of high yield debt to 49 0 billion in 2016 year to date or YTD This is lower by 54 compared to the corresponding period of 2015
The euro begins a pullback
The euro has begun a pullback that may last into the coming week The low may challenge Long term support at 110 84 before reversing higher
Bloomberg Implied volatility in the euro hasn t kept pace with a surge in a similar measure for the pound even as some investors look to hedge risks linked to a potential U K exit from the European Union using euro dollar options There is scope for the gap to narrow as euro area political risks resurface Bloomberg strategist Vassilis Karamanis writes
Three month pound dollar implied volatility has exceeded 16 percent hitting levels unseen in six years while a six month gauge reached 14 53 percent peak on April 7 The spread between six month pound dollar volatility and a similar euro dollar measure widened to a record of almost 4 percentage points on April 13
EuroStoxx breaks through 3000 00
After a month of struggle against Intermediate term support EuroStoxx broke above 3000 00 last week However considering how late in the Cycle the rally began it may only be a retracement attempt rather than a surge to new highs A decline beneath weekly Short term support at 2986 38 reinstates the sell signal
ZeroHedge A year ago today European equities hit their highest levels ever But as Bloomberg reports the euphoria about Mario Draghi s stimulus program didn t last and trader skepticism is now rampant The Stoxx Europe 600 Index has lost 17 since its record and investors who piled in last year are now unwinding bets at the fastest rate since 2013 as analysts predict an earnings contraction The trading pattern looks familiar a fast run to just over 400 on the gauge then disaster
The yen meets its Pennant objectives
The yen has achieved its Bullish Pennant targets It appears to be in a pullback that may test nearby supports in a potentially sharp retracement The target area may be as low as the Lip of the Cup with Handle formation While the Cup with Handle target may seem far fetched the Cycle Top at 100 95 may be attainable should the rally continue
Bloomberg Hedge funds and other large speculators have never been more bullish on the yen
Positions that benefit from gains by Japan s currency exceeded those that benefit from from losses by a net 66 190 contracts in the week ended April 12 a report from the Commodity Futures Trading Commission showed Friday That s the most in data going back to 1992
The Nikkei bounces to intermediate term resistance
The Nikkei staged a bounce to Intermediate term resistance at 16910 45 This may only be a detour as the decline may resume shortly Should that occur the next support may be the Head Shoulders neckline followed by the Cycle Bottom at 13394 23
FoxBusiness Japanese stocks fell on Friday as investors took profits after a three day rally that added 1 159 points to the benchmark Nikkei index
The Nikkei share average slid 0 4 percent to 16 848 03 ending a three day rally that helped the benchmark index end the week about 6 5 percent higher
The impact of a strong earthquake centered on Japan s southern island of Kyushu was limited primarily to regional shares that could experience some direct impact Regional utility Saibu Gas Co Ltd T 9536 ended the day 2 7 percent lower
U S dollar decline takes a pause
USD met its short term targets last week and paused for a brief consolidation The Cycles Model suggests a short term bounce is due but the longer term decline may not be over perhaps lasting through mid May The ultimate target for USD may be the weekly mid Cycle support at 91 22
Reuters Speculators chopped bullish bets on the U S dollar for a sixth straight week pushing net longs to their lowest since late January 2009 according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday
The value of the dollar s net long position fell to 0 4 billion in the week ended April 12 from 2 15 billion the previous week The value of the dollar s net long position was the lowest since the week ended Jan 27 2009
Net long yen contracts rose to 66 190 the highest since Reuters records began in March 1995 and up from 60 073 the previous week Euro net short contracts fell to 52 051 their lowest in seven weeks
So far in 2016 the U S dollar index has fallen about 4 percent putting it on track for its worst yearly performance since 2009 The index which measures the greenback against a basket of six other major currencies gained more than 9 percent last year
USB remains above Short term support
The Long Bond appears to be maintaining its rally above weekly Short term support at 163 89 in a brief pullback USB appears to be due for its all time high in the next three weeks Bonds have not been this overpriced historically lowest yields in over 300 years
Reuters Investors on Thursday scooped up 12 billion of U S 30 year Treasury bonds as this week s price drop in government debt yields enticed bargain minded fund managers insurers and pension funds according to Treasury data
Brisk bidding revived appetite for Treasuries on the open market which pared earlier losses after the auction
The latest 30 year supply was the final part of the government s coupon bearing offerings this week It sold 24 billion of three year notes on Tuesday and 20 billion in 10 year debt on Wednesday
The ratio of bids to the amount of 30 year bond offered was 2 40 the highest since December and above the 2 33 at the prior 30 year bond auction in March
Gold may have completed a partial retracement
Gold retraced nearly 73 of its decline form 1287 80 but closed beneath short term support resistance at 1236 90 Despite the recent bounce higher a decline from here may constitute a sell signal Additional confirmation may come beneath mid cycle support at 1207 20 Investors are still treating gold as a buy the dip opportunity
MarketWatch Gold futures notched a gain Friday but posted their first weekly drop in the three weeks as a flight to haven assets dissipated somewhat and as a weekly gain in the dollar pressured the yellow metal
The U S ICE Dollar Index DXY 0 25 a gauge of the buck against a basket of six rival currencies gained 0 5 this week its first weekly gain in three weeks coinciding with moves for gold
In general I think that gold is starting to weaken because the fear factors that drove it higher at the start of the year are subsiding China s economy isn t collapsing and earnings so far haven t been as bad as feared Colin Cieszynski chief market strategist at CMC Markets told MarketWatch
Crude probed higher
Crude extended its rally to a 72 retracement of its decline from 50 92 It closed above Long term support at 41 44 A further decline from that level suggests the sell off may have begun The brief period of strength lined up with the final push higher in the Liquidity Cycle A decline beneath the next level of support at 38 50 may trigger a month long decline in crude
Reuters Money managers raised their bullish bets on U S crude in the week to April 12 after two straight weeks of cuts as market sentiment improved on hopes of an output freeze deal between the world s top producers data showed on Friday
All eyes in the oil market have been on an upcoming meeting among some of the world s biggest oil exporters including Saudi Arabia and Russia this weekend in Doha Qatar aimed at propping up weak prices
The managers of hedge funds and other investment firms that speculate on oil raised their combined futures and options position in New York and London by 27 635 contracts to 205 139 during the period the U S Commodity Futures Trading Commission CFTC data showed
Shanghai Index probes above mid Cycle resistance
The Shanghai Index probed above its weekly mid Cycle resistance at 3018 96 and Intermediate term resistance at 3031 53 This appears to complete the retracement A decline beneath Short term support at 2922 27 may confirm a sell signal in the Shanghai
ActingMan We have discussed China s debt and malinvestment problems in these pages extensively in the past most recently we have looked at various efforts to keep the yuan propped up In a way China is like the proverbial watched pot that never boils though Its problems are all well known and we have little doubt that they will increasingly find expression China s credit bubble is one of the many dangers hanging over the global economy s head so to speak
However as we are also fond of stressing it seems to us that many outside observers are making the mistake of underestimating the strong entrepreneurial spirit of China s people In addition there is a lot of focus on the many ways in which China s government is faking data to make things appear better than they are something it has in common with all other governments only it is more brazen about it but perhaps not enough focus on what is not known about China s economy
The Banking Index pays a surprise visit to the Head Shoulders neckline
In a final burst in the Liquidity Cycle BKX paid a brief visit to the Head Shoulders neckline at 66 75 The inability to hold that support may lead to a rather bearish reversal The anticipated low mentioned last week was made on April 7 The next significant low may be due in early May
ZeroHedge Yesterday the Federal Reserve released a 19 page letter that it and the FDIC had issued to Jamie Dimon the Chairman and CEO of JPMorgan Chase NYSE JPM on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed The letter carried frightening passages and large blocks of redacted material in critical areas instilling in any careful reader a sense of panic about the U S financial system
At the top of page 11 the Federal regulators reveal that they have identified a deficiency in JPMorgan s wind down plan which if not properly addressed could pose serious adverse effects to the financial stability of the United States Why didn t JPMorgan s Board of Directors or its legions of lawyers catch this
NYTimes For Chinese banks the decision to lend to companies like Bohai Steel was for years a no brainer Lenders took heart from its state backing which appeared as solid as the millions of tons of steel pipes that rolled off its production lines each year
That ironclad image is now tarnished Plunging demand and a worsening glut in production capacity have left Bohai Steel struggling to repay as much as 30 billion in debt Worried creditors more than 100 of them are locked in negotiations with the company and local officials
China s bad loans are on the rise as companies that borrowed heavily in headier times struggle against a slowing Chinese economy Underscoring the slowdown China said on Friday that growth in the first three months of this year fell to 6 7 percent a seven year low Growth might have been even slower had China not revved up lending during the quarter a solution that could add to debt problems later on
MishTalk Deutsche Bank DE DBKGn Admits Rigging Will Expose Other Riggers
Deutsche Bank has admitted it rigged both the gold market and the silver market ZeroHedge has the details in his report Deutsche Bank Agrees To Expose Other Manipulators
Many asked me to comment I am shocked
No In the wake of admissions of rigged LIBOR and rigged Euribor bank to bank interest rates in dollars and euros respectively one would really have to wonder What isn t rigged |
MS | Morgan Stanley names Kelleher president Fleming leaving bank memo | Reuters Morgan Stanley N MS has promoted its head of institutional securities Colm Kelleher to president prompting Greg Fleming the head of wealth management to leave the bank Kelleher will also take on Fleming s role overseeing wealth management according to a memo on Wednesday reviewed by Reuters In the memo Morgan s chief executive James Gorman said Fleming had decided to leave to pursue other opportunities In addition Shelley O Connor and Andy Saperstein have been appointed as the new co heads of Wealth Management reporting directly to Kelleher Fleming who joined Morgan Stanley in 2009 was widely seen as an heir apparent to Gorman He helped grow Morgan Stanley s wealth management arm into an operation that generated nearly half of the firm s revenue as it shifted away from trading to more stable earnings Fleming also steered the bank through its merger with Citigroup Inc s N C Smith Barney brokerage Fleming was president and chief operating officer at Merrill Lynch from June 2007 to early 2009 |
MS | Wall Street expects March hike China a wild card poll | By David Gaffen Reuters Wall Street s top banks say the Fed is likely to raise rates by March but subsequent rate increases will be slow particularly if China devalues its currency at a rapid rate in 2016 A Reuters poll of the primary dealers that deal directly with the Federal Reserve shows that 13 of 18 that responded expect a rate increase by the March meeting of the Federal Open Market Committee That is similar to the results from a poll immediately following the December rate increase which showed 13 of 19 believed the Fed would raise rates in March The median expectation for the federal funds rate by the end of 2016 was a range of 1 to 1 25 percent same as in early December the last time Reuters asked this question The Fed raised rates for the first time in nine years last month Of late several Fed officials including Vice Chair Stanley Fischer have said they can still see a number of interest rate increases by the end of the year The Fed s most recent forecasts project four interest rate increases by the close of 2016 Wall Street s outlook is different The primary dealers see three more interest rate hikes while trading in the federal funds rate suggests just two more bumps in the rate For poll results in full see nL1N14S1J6 The wild card however is China Nine primary dealers said there was at least some possibility that the Fed would have to slow its rate hiking pace if the yuan depreciates rapidly affecting global trade The country has let its currency fall in recent days as it struggles to make its exports more competitive and as it responds to weakened demand The onshore yuan has dropped 6 percent against the dollar since the middle of August Lately its decline has accelerated and markets worldwide have been caught in a downdraft in part a response to insecurity surrounding the actions of China s regulators to combat a selloff in their stock market and fears of capital flight accelerating A rapid appreciation of the dollar if sustained could cause too much uncertainty over the Fed s outlook for growth and inflation and would likely result in a shallower path for policy than the Fed previously envisioned said Ellen Zentner chief U S economist at Morgan Stanley N MS The U S equity market is set to close out one of the worst opening weeks of any year in its history but already some strategists are warning that the stock selloff has gone too far Friday s release of December non farm payrolls figures showed growth of 292 000 jobs for the month suggesting ongoing strength in the labor market
Dealers by and large still do not expect the Fed to start reducing its balance sheet before the end of the year Of the 17 that responded the median expectation was that it would be 12 months before the Fed will begin paring its balance sheet |
MS | China turmoil drags oil prices lower | Investing com Brent crude oil fell over 3 on Monday as China s economic slowdown dented the outlook for demand with traders placing record bets on even lower prices as they increasingly lose faith in a significant market recovery
Global benchmark Brent was at 33 18 per barrel at 11 46 GMT after falling to earlier lows of 32 84 and U S West Texas Intermediate crude was down 1 88 at 32 53
Monday s decline adds to last week s more than 10 drop in both Brent and WTI prices to start the year
Morgan Stanley N MS said on Monday that oil prices in the 20 per barrel region were possible especially if the dollar rises more against other currencies
Oil prices have already fallen over 70 since mid 2014 as soaring global production continues to outstrip demand |
MS | U S crude falls by 5 amid continuing economic woes in China | Investing com 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
On the New York Mercantile Exchange WTI crude for February delivery traded in a broad range between 30 89 and 33 20 a barrel before settling at 31 43 down 1 74 or 5 27 on the session 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 North Brent Sea futures also suffered their seventh consecutive loss on Monday Following a decline of approximately 30 last year brent futures have tumbled more than 5 a barrel in 2016
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 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
The U S Dollar Index which measures the strength of the greenback versus a basket of six other major currencies gained more than 0 25 to an intraday high of 98 91 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 |
JPM | Buybacks increasingly debt funded decreasingly accretive JPMorgan | A full 32 2 of buybacks last quarter were funded with debt according to JPMorgan NYSE JPM That s the highest in the post crisis cycle and up from about 10 in 2009 Unsurprisingly given the continued rise in stock prices each dollar of debt funded repurchases is worth less EPS accretion just 5 1 last quarter vs about 7 5 five years ago ETFs PKW SYLD TTFS SPYB TTACNow read |
JPM | Strong U S consumer business spending bolster growth picture | By Lucia Mutikani WASHINGTON Reuters U S consumer spending accelerated in November and shipments of key capital goods orders increased for the 10th straight month data showed on Friday the latest signs of strong momentum in the economy as the year winds down But the bullish growth picture was dimmed somewhat as the figures also showed household savings dropped last month to the lowest level in more than nine years Low savings could hurt consumer spending though economists are optimistic wage growth will pick up in the new year Economists see a modest lift to consumer spending from a 1 5 trillion tax cut package approved by the Republican controlled U S Congress this week in the largest overhaul of the U S tax code in 30 years Consumers are still out there spending but their purchases are being supplemented by low energy costs credit and a reduction in savings rather than organic income growth said Lindsey Piegza chief economist at Stifel Fixed Income in Chicago Without sustained improvement in wages consumers will struggle to maintain even today s moderate pace of consumption The Commerce Department said consumer spending which accounts for more than two thirds of U S economic activity rose 0 6 percent last month after gaining 0 2 percent in October Spending last month was buoyed by an increase in demand for motor vehicles recreational goods and utilities When adjusted for inflation consumer spending increased 0 4 percent in November from unchanged in the prior month Personal income rose 0 3 percent last month with wages increasing 0 4 percent As a result households dipped into their savings which fell to 426 2 billion the lowest level since August 2008 and down from 466 9 billion in October The saving rate dropped to a 10 year low of 2 9 percent from 3 2 percent in October In addition to savings consumer spending is being driven by record household wealth thanks to a booming stock market and rising home prices With the U S economy near full employment economists argue that the tax cuts will only provide a modest boost to growth President Donald Trump signed the tax legislation into law on Friday It slashes the corporate income tax rate to 21 percent from 35 percent and offers tax cuts for individuals The Trump administration argues that the tax cuts will boost both business and consumer spending But the individual income tax cuts are skewed toward higher income households which economists say have a low propensity to consume Economists also believe companies will use much of the windfall on stock buybacks and debt reduction The dollar was trading slightly higher against a basket of currencies while U S Treasury yields rose modestly Stocks on Wall Street slipped MKTS GLOB INFLATION TAME Despite the increase in spending monthly inflation remained benign in November The Federal Reserve s preferred inflation measure the personal consumption expenditures PCE price index excluding volatile food and energy prices rose 0 1 percent in November after gaining 0 2 percent in October The so called core PCE price index increased 1 5 percent in the 12 months through November picking up from 1 4 percent in October It has undershot the Fed s 2 percent target since mid 2012 and its progress could determine the pace at which the U S central bank raises interest rates next year The Fed increased borrowing costs three times this year and has forecast three rate hikes in 2018 There is little doubt that structural shifts including increased global competition the growth in online retailing and new technologies that enable consumers to find the best price instantly and at little cost are playing a role in holding down prices said Mark Vitner a senior economist at Wells Fargo NYSE WFC Securities in Charlotte North Carolina In a second report on Friday the Commerce Department said shipments of non defense capital goods orders excluding aircraft a closely watched proxy for business spending rose 0 3 percent after surging 1 3 percent in October Core capital goods shipments are used to calculate equipment spending in the government s gross domestic product measurement They have risen every month since February the longest stretch since the series started in 1992 The increase in core capital goods shipments over the last two months suggested a strong pace of increase in business spending on equipment in the fourth quarter Business investment in equipment rose at its fastest pace in three years in the third quarter but the momentum could be slowing Core capital goods orders slipped 0 1 percent last month after rising 0 8 percent in October Real equipment spending has been on a very strong run in recent quarters but the recent cooling in the orders data signals that there could be some softening to come said Daniel Silver an economist at JPMorgan NYSE JPM in New York
In a third report the Commerce Department said new home sales jumped 17 5 percent to a seasonally adjusted annual rate of 733 000 units last month That was the highest level since July 2007 New home sales surged 26 6 percent from a year ago |
C | The Week Ahead 5 Things to Watch on the Economic Calendar | Investing com Global financial markets will focus on Federal Reserve Chair Janet Yellen s testimony to both houses of Congress in the coming week as they continue to mull the possible end of monetary stimulus from central banks around the globe
Investors will also keep an eye out on a few U S economic reports with Friday s inflation data in the spotlight for further clues on the timing of the next Fed rate hike
In the U K market participants will be looking ahead to the monthly jobs report for further hints on the strength of the economy and the likelihood of the Bank of England raising interest rates this year
Elsewhere China is to release monthly trade and inflation data amid recent signs of cooling in the world s second largest economy
In addition traders will be awaiting a rate announcement from the Bank of Canada with markets leaning toward expecting the first rate hike in nearly seven years
Ahead of the coming week Investing com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets
1 Fed Chair Janet Yellen Testifies
Federal Reserve Chair Janet Yellen is set to deliver her semi annual monetary policy testimony on the economy before Senate and House committees in Washington DC
Yellen is scheduled to testify on the economy before the Senate Banking Committee at 10 00AM ET 1400GMT Wednesday On Thursday she will appear in front the House Financial Services Committee also at 10AM ET
Text of the testimony will be released 90 minutes before she starts speaking
Her comments will be monitored closely for any new insight on the timing of the next U S rate hike and clues on how the central bank plans to pare back its massive balance sheet
Besides Yellen there are also a number of Fed speakers in the coming week with San Francisco Fed Chief John Williams Fed Governor Lael Brainard Kansas City Fed President Esther George Chicago Fed President Charles Evans and Dallas Fed Chief Robert Kaplan all on the agenda
The latest minutes from the Federal Open Market Committee s policy discussions showed a lack of consensus among policymakers over the outlook for inflation and how it could impact on the future pace of interest rate increases
Several officials also wanted to announce a start to the process of reducing the Fed s large portfolio of Treasury bonds and mortgage backed securities by the end of August but others preferred to wait until later in the year
The Fed hiked rates at its June meeting and stuck to its forecast for one more rate hike this year but the subdued inflation outlook has since raised doubts over whether the U S central bank will be able to stick to its planned tightening path
Futures traders are pricing in less than a 15 chance of a hike at the Fed s September meeting according to Investing com s Fed Rate Monitor Tool Odds of a December increase was seen at around 45
2 U S Inflation Data
The Commerce Department will publish June inflation figures at 8 30AM ET 1230GMT 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
At the same time Friday the Commerce Department will publish data on June retail sales 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 Consumer spending accounts for as much as 70 of U S economic growth
Besides the inflation and retail sales reports this week s calendar also features U S data on JOLTS job openings producer prices initial jobless claims industrial production as well as preliminary Michigan consumer sentiment
This week also marks the start of the second quarter earnings season in the U S with major U S banks JPMorgan Chase NYSE JPM Citigroup NYSE C and Wells Fargo NYSE WFC all reporting Friday
3 U K Employment Report
The U K Office for National Statistics will publish the monthly jobs report at 0830GMT 4 30AM ET on Wednesday The claimant count change is expected to rise by 10 400 in May with the jobless rate holding steady at 4 6 Wage growth including bonuses is forecast to rise 1 8
Market participants will also pay close attention to comments from Bank of England Chief Economist Andy Haldane and BOE Deputy Governor Ben Broadbent who are both scheduled to speak Tuesday morning
There has been a significant shift in rhetoric toward higher interest rates from BOE policymakers during the past two weeks despite the uncertainty of Britain starting to negotiate its way out of the European Union They are prompted by a surge in inflation caused in large part from a plunge in sterling after the Brexit vote
4 China Trade Figures
China is to release June trade figures at around 0300GMT on Thursday The report is expected to show that the country s trade surplus widened to 42 4 billion last month from a surplus of 40 8 billion in May
Exports are forecast to have climbed 9 0 in June from a year earlier following a jump of 8 7 a month ago while imports are expected to rise 13 1 after increasing 14 8 in May
Additionally on Monday the Asian nation will publish data on June consumer and producer price inflation The reports are expected to show that consumer prices rose 1 5 last month while producer prices are forecast to increase by 5 5
Analysts expect China s economy to cool in coming months after a strong first quarter with recent factory activity data also indicating a gradual slowdown is underway
5 Bank of Canada Rate Decision
The Bank of Canada s latest interest rate decision is due at 10 00AM ET 1400GMT on Wednesday with most experts expecting the central bank to raise its benchmark rate by 25 basis points to 0 75
Speculation that the BOC was preparing to raise its key interest rate ramped up earlier this month after Governor Stephen Poloz said that low interest rates appeared to have done their job
Stay up to date on all of this week s economic events by visiting |
C | Oil could hit 60 before year end Barron s citing Citi analyst | Reuters Accelerating world oil demand and reduced supply from the Organization of the Petroleum Exporting Countries OPEC could push crude prices up to 60 a barrel before the end of the year according to a report from Barron s The report cites research from Citigroup NYSE C senior energy analyst Eric Lee who previously called for a bear market in oil when the price was above 100 The decline in recent weeks to a low of just over 44 for Brent crude LCOc1 the international benchmark has made Lee a short term bull Barron s notes Lee projects demand of 97 3 million barrels a day in 2017 a record high up from 96 million in 2016 driven largely by emerging market countries such as China and India Simultaneously reduction in supply from OPEC of about 0 7 million barrels a day versus the 2016 average should drive the price up before the end of the fourth quarter A decline in global oil inventories began after the first quarter and Lee projects that it will continue at an accelerated rate through the end of this year Oil prices settled nearly 3 percent lower on Friday as rising U S production and an increase in OPEC exports to a 2017 high cast doubt on efforts by producers to curb a persistent glut O R On Friday Reuters data showed that OPEC production is now at the highest level of the year Matt Smith director of commodity research at Clipperdata said OPEC exports were 2 million barrels per day bpd higher last month than in June 2016 despite the extension of OPEC s 1 8 million bpd production cut Lee notes that oil speculators ignored details of OPEC s agreement which ordered cuts to begin at the end of 2016 rather than when the accord was announced That allowed participants to ramp up production during negotiations which meant the cuts were struck from a higher base As for supply from the United States Lee says continued pumping by producers will keep prices from skyrocketing back towards 100 a barrel but their presence is unlikely to prevent an upward move in oil for the remainder of the year
Following the jump to 60 Lee expects prices to remain flat heading into 2018 as the supply side catches up with demand Barring major political disruptions from petroleum producing nations he expects the price of crude probably will not rise much above 60 |
C | Buyout firm Apollo to buy golf course operator ClubCorp for 1 1 billion | By Greg Roumeliotis Reuters Private equity firm Apollo Global Management LLC N APO said on Sunday it had agreed to acquire ClubCorp Holdings Inc N MYCC one of the largest owners and operators of private golf and country clubs in the United States for 1 1 billion The deal comes three months after ClubCorp announced the retirement of is CEO Eric Affeldt and said it had decided not to pursue a strategic transaction after efforts to explore a sale did not result in any offer for the entire company However the Dallas based company had kept the strategic review committee of its board of directors in place and had yet to announce Affeldt s successor It has struggled to turn a profit as its strategy of boosting its golf club memberships through promotions refurbishments and acquisitions has proved costly Apollo said it will pay 17 12 per share in cash for ClubCorp a 30 7 percent premium over its closing price on Friday but less than the 12 month high of 17 50 the shares reached in February on investor expectations that a sale process first reported by Reuters in January would be successful ClubCorp also declared on Sunday a one time dividend of 13 cents per share to be paid later this month It said the sale to Apollo is expected to close in the fourth quarter of 2017 Founded in 1957 ClubCorp operates more than 200 properties including golf and country clubs business clubs and sports clubs across the United States Mexico and China serving more than 430 000 members In May the company reached a settlement with activist investor FrontFour Capital Group LLC to add two independent directors to its board FrontFour had called for exploring several options including a sale ClubCorp has been a serial acquirer in the golf course industry buying dozens of courses in the last three years It has sought to buy locally owned golf courses and refurbish them by adding or improving amenities such as up scale dining and event rooms KSL Capital another private equity firm acquired ClubCorp for 1 8 billion in October 2006 and took it public in 2013
Jefferies LLC and Wells Fargo NYSE WFC acted as financial advisers ClubCorp and Simpson Thacher Bartlett LLP is its legal counsel Citigroup NYSE C is acting as lead financial adviser to Apollo with RBC Capital Markets LLC Barclays LON BARC Credit Suisse SIX CSGN and Deutsche Bank DE DBKGn also advising Paul Weiss Rifkind Wharton Garrison LLP is Apollo s legal counsel |
C | Banks begin London exodus as hopes of transitional deal fade | By Andrew MacAskill and Anjuli Davies LONDON Reuters Britain may have left it too late to convince major banks that it can strike a deal to soften the impact of Brexit before they start shifting jobs from London Top executives at five of the largest banks in the capital told Reuters a staggered deal on leaving the European Union is only likely to be agreed late on in talks with Brussels meaning they have already begun relocating staff And a more conciliatory government tone towards business having largely refrained from engaging with corporate leaders about Brexit ahead of last month s election may be too late The timeframe for when we wanted a transitional deal has already passed an executive at one global bank said adding it had taken a decision to move hundreds of roles to continental Europe regardless of what the government does Finance minister Philip Hammond said last week that Britain should push for a transitional deal to help businesses while the government held its first high level meeting with corporate leaders in months to discuss Brexit But James Bardrick the UK head of U S bank Citi N C said the government has been too slow to get any early deals with Europe and banks will have to be ready by September 2018 There s been a lot of talk and not a lot of action for a long time I am anxious it is all a bit late Bardrick said Executives say the timetable to relocate staff and operations is tighter than it looks because it could take longer than eighteen months to set up new buildings get licenses hire or relocate staff and build up the capital of EU divisions The chairman of one of Britain s largest banks told Reuters he recently resisted pressure from staff to enact his company s contingency plan but he will probably have to give the go ahead by the end of the summer Every single day I have people coming into my office asking me to press the button on contingency plans he said CARNEY ULTIMATUM Bank of England Governor Mark Carney has also previously said that banks will have to begin relocating activities to other countries by September Carney has asked banks to show by Friday how they can avoid their customers being abruptly cut off after Brexit which bankers say may inadvertently speed up the departure of jobs from Britain The Department for Exiting the European Union did not immediately respond to a request for comment The British government is yet to ask for a transitional deal and any plans are likely to face opposition from eurosceptic British lawmakers who view it as delaying exiting the EU Executives are pessimistic about Britain getting a bridging period until late in the talks if at all because they say it must first agree with the EU its exit terms notably the rights of expatriate citizens and any money it owes An executive at a large British bank said many Britons are not prepared to pay an exit bill which is likely to lead to a protracted row that will delay agreement on other measures Only then can Britain move on to discuss a future deal and possible transitional arrangements and any deal is likely to be complicated because Prime Minister Theresa May has rejected the authority of the European Court of Justice Jobs are moving out of the City by the day Even by the turn of the year a transition agreement will be too late James Palmer a senior partner at law firm Herbert Smith Freehills said many banks have accelerated plans to relocate parts of their businesses after the inconclusive results of last month s general election because it has increased the likelihood that Britain walks away without a deal Therefore getting a transition committed now is absolutely fundamental Palmer said adding that if politicians did not take this on board they will have failed and will have failure on their tombstones as their legacies
For graphic on potential London finance job moves click |
C | Square Pops on Citi Upgrade But Market Cycles Point Lower | Square NYSE SQ traded 4 higher on Tuesday morning after Citigroup NYSE C upgraded the mobile payment company from neutral to a buy rating However our analysis of the stock s market cycles indicate that downside risk will persist before it is able to move higher again Analyst Peter Christiansen recommended that his clients buy SQ raising his price target from 67 to 90 which represents a 20 premium from yesterday s closing price Noting the strength of Square s ecosystem and user growth Christiansen points out that SQ s recent weakness is largely due to the departure of former CFO Sarah Friar who took a position as CEO of startup Nextdoor Given Square s category leadership and high profile we believe it is well suited to attract a talented CFO to help lead the company in its next phase explained Christiansen Looking at the the market cycles for SQ we believe Citi is wrong with respect to the timing of its call Our view is that the likely scenario is for more downside risk as the stock is still in the declining phase of its current cycle As such we see SQ taking a trip back to 63 by year end For more from Slim or to learn about cycle analysis check out the askSlim Market Week show every Friday on our |
JPM | Gold s Enchanted April | Are we in the midst of an Enchanted April No not the absorbing 1992 Miramax film some might characterize as a so called chick movie wherein the exquisite cinematography all around Italy s Riviera Ligureis nothing short of stunning Rather we re referring to the notion put forth on occasion out there by the PMS Precious Metals Scrutineers that April is considered a seasonally good performance month for gold And with the yellow metal having settled out the week yesterday Friday at 1240 given all the numerous expectations for price to instead drop sub 1200 so as to at least test the 1190s this month s enchantment is perhaps keeping Gold somewhat levitated so far anyway as we re only one week along April s way But at the end of the day per the below display it may be tis only the good Aprils past that are memorable in the minds of Gold Bulls whilst the balance are forgotten cudda beens To wit here are gold s percentage changes for every April since the turn of the millennium and as you can see post the All Time High year of 2011 Aprils since have been duds to downers
Course what s not reflected in the above graphic is thus far this April and really since late March gold has being getting grabbed up time and again on relatively lackluster selling In fact through these first 14 weeks already of 2016 Gold on a points basis has had but three double digit down weeks and six double digit up weeks Still technically tis been the 1240 1280 resistance zone that has expectedly held Gold in check despite price presently being up year to date 16 9 and continuing to be far and away the strongest of our eight markets that comprise BEGOS Bond Euro Swiss Gold Silver Copper Oil S P as we herein saw per their standings through Q1 one week ago Yet similar to the mise en sc neof the above referenced film gold too these last few weeks seems somewhat frozen in time This is personified in the following two panel chart On the left we ve gold s EDTR expected daily trading range as charted from one year ago to date the plunging line of late is indicative of the narrowing daily trading range On the right is our familiar chart of gold s daily bars for the past three months to date the most recent bars are simply bunching and or basing sufficiently so that our Baby Blues the day by day consistency measure of the ongoing 21 day linear regression trend have begun to curl back up
Now for a bit of a surprise in next turning to gold s weekly bars wherein we see price continuing to tickle the underbelly of that 1240 1280 resistance zone Note too that the squeeze of the ascending parabolic blue dots is practically up to 1200 itself in a week s time barring Gold first tripping the 1199 level they ll be around 1210 Therefore Gold can try to evade them by re entrapping itself up in the murk of the resistance zone else eventually fall prey to them within a week or two But take a good close look at this graphic for what therein has just perceptively changed
I see it mmb The dashed line is not going down
Not only is that linear regression trend line not going down Squire rather tis rising for the first time since 19 September 2014 81 weeks ago when gold whilst down at that point year over year had put in enough up thrust en route to actually post a positive trend line Now the teeter totter is at long pun intended last rising on the Bulls side And given the general decline in price across the left side of the above chart versus the increase on the right should gold not plunge over the ensuing weeks months look for this trend line to take on more upside steepness Doth turn the tide
As for the economic tide there was little input this past week for the Economic Barometer You can below see the rightmost up kink which belies the decline in factory orders and the deepening trade deficit Said negative data was more than mitigated by the improving Institute for Supply Management ISM services reading growth in consumer credit a working off of wholesale inventory levels and reduced first time claims for unemployment benefits Life is good
As to just howgood will be further revealed in the new week the incoming data to include that on inflation retail sales manufacturing in the great state of New York sentiment as figured by the academicians at The University of Michigan and amongst it all the Federal Reserve Bank s Tan Tome come Wednesday
Deeper still in the economic midst Thursday found Janet Yellen on the dais alongside former FedHeads Pauly Benny and a streamed in Ally the current Fed Chair defending her Open Market Committee s decision to up their FedFunds target rate to 0 5 this past 16 December Better still we were told that we can calm our fears over recession But again don t tell that to Christine Lagarde the Managing Director of the International Monetary Fund is in encore encouraging economic reform in the expectation of declining IMF forecasts on the horizon Or as a CNN piece queried this past week Has the Fed messed up Moreover as Gold s ole pal Al Edwards of Soci t G n rale PA SOGN chimed in too on Thursday a StateSide recession is imminent By the above Econ Baro twould appear we ve already been in recession since at least last October not that tis the first time tis been pointed out
Then there are the usual keep em pumped pieces out there such as one from the Dow Jones wires last Monday entitled 4 Reasons Dow Headed Toward 20 000 By the End of the Year Twill be a hoot to see that unfold should the S P 500 2048 at yesterday s close reach our target for the year in the low 1400s And for those of you who ve not stopped by the website s S P Moneyflow link the quarterly flow last 63 trading days suggests the S P ought now be now 100 points lower at 1948 Course our live price to earnings ratio of 39 2x still suggests the Index ought be halved But wait there s more guess what starts this coming week Q1 Earnings Season the truth of which also you can track at the website Ain t honest arithmetic wonderful
Wonderful as well is the supportive stance of gold s 10 Market Profile below on the left with that for Sister Silver on the right
In closing we ve these three quick notes
You ve likely read that in response to folks pulling out tens of thousands of bucks at a time from its ATMs JPMorgan Chase NYSE JPM is now limiting such withdrawals for non customers to a wee 1 000 day Having started my banking career as teller with the BNP cash withdrawals of 10 000 and up required per IRS Publication 1544 an on the spot filing at the teller s window of Form 8300 One wonders if the ATMs dispense said Form along with the dough In a world of unqualified people ascending into supervisory managerial positions I doubt it But when the gold dispensaries show up you can bet so will the IRS
Ahhh those Golden Moments post infant birth In a nutshell California allows both mums and dads six weeks of paid bonding leave at 55 of wages salaries But here in the San Francisco Enclave of Tyranny the other 45 of pay also now must be doled out by private firms 100 paid maternity leave for mum and dad There goes the condom biz
Finally speaking of our once fair city I shall be escaping said foul locale in a week s time such that the next gold Update shall be a rather abbreviated on the fly piece Short but sweet as it were for heaven forbid we ever leave you in the lurch out there At least not until Gold 2000
Enchanted April indeed the IRS expects your share by Friday Have a nice day And for goodness sake avoid having to convert your gold |
JPM | Record Bullish Bets Fail To Advance Yen | Hedge funds and other large speculators boosted bullish yen wagers to the highest since at least 1992 as Japan s currency struggled to extend its gains into a seventh day
The yen advanced to a fresh 17 month high earlier on Monday after speculators defied rhetoric from Japanese authorities aimed at checking its advance Chief Cabinet Secretary Yoshihide Suga reiterated that officials are watching the foreign exchange market with vigilance and will take appropriate action if necessary Deutsche Bank AG DE DBKGn and Bank of Singapore Ltd said the yen remains at or below fair value
The yen is nowhere near overvalued making it hard to justify intervention said Sim Moh Siong a foreign exchange strategist at Bank of Singapore Ltd Even though the yen has moved quite substantially against the dollar you look at yen relative to euro and other currencies it hasn t really strengthened all that much
The yen was little changed at 108 13 per dollar as of 10 a m in London after advancing to 107 63 the strongest level since Oct 27 2014 Its six day winning streak through Friday was the longest in a year A seventh day would have been its best run since September 2012
Japan s currency jumped 3 4 percent versus the dollar last week and has appreciated against all its 16 major peers this year as investors flock to haven assets amid a rout in stocks around the world The yen was little changed Monday at 123 18 per euro and last week reached the strongest level in a month
Yen Undervalued
A measure of purchasing power parity from the Organisation for Economic Co operation and Development suggests the Japanese currency is still almost 2 percent undervalued versus the dollar
Japan s biggest problem with the current yen rally is that it is justified by fundamentals George Saravelos a strategist at Deutsche Bank in London wrote in a client noted dated April 11
Speculators increased bets on yen gains against the dollar to 98 130 contacts in the week ended April 5 the most in Commodity Futures Trading Commission data starting in 1992 In mid December bullish yen contracts were at a 10 month low of 26 400
The yen s surge last week pushed up global currency volatility with a JPMorgan Chase Co NYSE JPM index approaching the highest since 2011 Price swings accelerated after the yen climbed past 110 per dollar for the first time in 17 months fueling speculation the central bank would intervene to weaken it
The yen can appreciate in the short term but the market is extremely long said Steve Brice chief investment strategist at Standard Chartered LON STAN Plc in Singapore It may strengthen to 106 per dollar and then the Bank of Japan may come in and intervene and push it back beyond 110 he said |
JPM | Earnings Watch Big Bank Reports Wednesday | JPMorgan Chase Co NYSE JPM Financials Diversified Financial Services Reports April 13 Before Market Opens
Key Takeaways
The Estimize consensus is looking for EPS of 1 32 on revenue expectations of 24 20 billion 6 cents higher than Wall Street on the bottom line and almost 350 million in sales
Chase like other banks has been adversely hit by the Fed s resistance to raise rates again weak conditions in China and volatility in energy prices
New regulations and ongoing litigation fees continue to hamper Chase s bottom line
With earnings season just underway we will soon know how some of the biggest names performed in early 2016 This week and early next big banks and financial services prepare to kick things off with what looks to be underwhelming Wednesday morning JPMorgan Chase is scheduled to report first quarter earnings possibly setting the tone for the next 7 days The bank is coming off a better than expected fourth quarter where it beat on both the top and bottom line by a wide margin This marked the third quarter that Chase topped expectations in fiscal 2015
On Wednesday the Estimize consensus is looking for EPS of 1 32 on revenue expectations of 24 20 billion 6 cents higher than Wall Street on the bottom line and almost 350 million in sales Our Select consensus on the other hand is expecting a more modest beat of 3 cents and 90 million Estimates have been feverishly cut lately with per share estimates droping 15 and sales falling 5 in the past 3 months This results in JPM s 8 decline in earnings on a year over year basis
Chase like other banks has been adversely impacted by the skepticism surrounding interest rates The Fed s resistance to raising rates multiple times so far this year has put pressure on net interest income That said Chase is expected to see net interest income rise by about 2 billion for fiscal 2016 Moreover total loan growth has been very strong and is expected to be a large revenue driver This should help offset the losses in its trading and energy divisions
Trading is tracking negative year over year growth on the lows in the energy market JPM expects to build up reserves in excess of 750 million to cover its energy loans Chase also faces ongoing threats of litigation which resulted in over 100 million in losses last quarter On the bright side the modest gains the market has made in the past month have put the bank in a better position
Think JPM will beat the estimates |
JPM | iFOREX Daily Analysis April 14 2016 | The dollar rose to one week highs against the other major currencies on Wednesday despite the release of disappointing U S economic reports as the greenback continued to recover from sharp losses posted earlier in the week The U S Census Bureau said that retail sales fell by 0 3 in March disappointing expectations for a 0 1 rise and after a 0 1 fall the previous month Core retail sales which exclude automobiles rose by 0 2 last month compared to expectations for a 0 4 gain A separate report showed that the U S producer price index fell by 0 1 in March while forecasts anticipated an increase of 0 2 Core PPI which excludes food and energy slipped 0 1 last month disappointing expectations for a 0 1 increase The Australian dollar did not react to better than expected jobs data as an easing in Singapore pressured Asian currencies on growth concerns The Monetary Authority of Singapore on Thursday said it would adopt a neutral currency stance against a basket of currencies after it said the regional economic picture had dimmed For today the euro zone is to produce revised data on consumer inflation the Bank of England is to announce its benchmark interest rate and publish the minutes of its monetary policy meeting while the U S is to release the weekly report on initial jobless claims and data on consumer inflation
EUR USD
The euro fell sharply against the dollar on Wednesday dropping to its lowest closing level in more than two weeks as a wave of strong economic data eased fears of a global slowdown and providing support to the dollar against other major currencies The currency pair traded in a broad range between 1 1268 and 1 1391 before settling 0 93 higher on the day The dollar has come under intense pressure in recent weeks amid strong indications from the Federal Reserve that it will delay the timing of its first interest rate hike of 2016 The dollar recovered from near eight month lows on Wednesday after the Chinese government reported on Wednesday that exports grew by 11 5 in March on an annual basis above expectations for a 2 5 gain For today the euro zone is to produce revised data on consumer inflation while the U S is to release the weekly report on initial jobless claims and data on consumer inflation
Pivot 1 1315Support 1 1231 11851 115Resistance 1 13151 13451 137Scenario 1 short positions below 1 1315 with targets 1 1230 1 1185 in extension Scenario 2 above 1 1315 look for further upside with 1 1345 1 1370 as targets Comment the RSI is mixed to bearish
Gold
Gold prices fell sharply on Wednesday due to a stronger dollar as solid trade data in China eased concerns on slowing growth in the world s second largest economy weakening demand for the precious metal a safe haven asset The Chinese government reported on Wednesday that exports surged by 11 5 in March on an annual basis defying expectations for slight gains of 2 5 Dollar denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates For today gold traders attention is shifted towards the U S weekly report on initial jobless claims and data on consumer inflation
Pivot 1240Support 122512171209Resistance 124012511263Scenario 1 short positions below 1240 00 with targets 1225 00 1217 00 in extension Scenario 2 above 1240 00 look for further upside with 1251 00 1263 00 as targets Comment the RSI lacks upward momentum
WTI Oil
Crude oil prices retreated from 2016 yearly highs and posted considerable losses on Wednesday as after Saudi Arabia energy minister Ali al Naimi lowered prospects of coordinated production cuts between Russia Venezuela Qatar and the Saudi kingdom at a highly anticipated meeting in Doha on Sunday Also on Wednesday OPEC cut its forecasts for global oil demand growth in 2016 warning of potential reductions among customers in China and Latin America Meanwhile crude oil prices fell further after the U S Energy Information Administration said that domestic crude oil inventories increased by 6 6 million barrels for the week ending on April 8 Baker Hughes oil rigs count will be in focus now for oil traders
Pivot 40 3Support 40 339 238 25Resistance 42 543 244 2Scenario 1 long positions above 40 30 with targets 42 50 43 20 in extension Scenario 2 below 40 30 look for further downside with 39 20 38 25 as targets Comment a support base at 40 30 has formed and has allowed for a temporary stabilisation
US 500
U S stocks rose sharply on Wednesday as JPMorgan Chase Co NYSE JPM led a broad rally among financial stocks with stronger than expected quarterly earnings and China bolstered the major indices with upbeat monthly export data easing concerns of slowing growth in the world s second largest economy On Wednesday morning JP Morgan Chase reported first quarter revenues of 24 083 billion and earnings per share of 1 35 eclipsing analysts sales forecasts of 23 399 billion and EPS estimates of 1 26 respectively Despite significant losses from the energy sector during the three month period analysts said the world s largest bank s overall loan portfolio showed little signs of weakening The S P 500 gained by 1 00 as eight of 10 sectors closed in the green Stocks in the Financials Technology and Industrials sectors led the rise each gaining more than 1 4 For today the U S weekly report on initial jobless claims and data on consumer inflation will be in focus
Pivot 2020 Support 2020 1970 1950 Resistance 2080 2100 2130 Scenario 1 long positions above 2020 00 with targets 2100 00 2115 00 in extension Scenario 2 below 2020 00 look for further downside with 1970 00 1950 00 as targets Comment investors have to remain cautious since these levels may trigger profit taking |
MS | Oil tumbles towards 11 year lows on worsening glut | By Dmitry Zhdannikov and Amanda Cooper LONDON Reuters Oil prices tumbled 4 percent on Monday coming close to their 11 year low on growing fears that the global oil glut would worsen in the months to come in a pricing war between leading OPEC and non OPEC producers Brent crude LCOc1 fell by 4 percent to below 36 40 a barrel for the first time since December 2008 and U S West Texas Intermediate WTI CLc1 sank almost 3 percent below 34 60 a barrel Brent traded only 14 cents above the lows last seen during the 2008 financial crisis of 36 20 a barrel If Brent falls below that level that will be its lowest since mid 2004 a year when oil was beginning its surge from the single digits it hit during the 1998 financial crisis and when talk of a commodity super cycle was only beginning WTI s financial crisis low was 32 40 in December 2008 Oil is coming under pressure as the lack of OPEC cuts mean incessant oversupply continues said Amrita Sen from Energy Aspects think tank Both benchmarks have fallen every day since the Organization of the Petroleum Exporting Countries on Dec 4 abandoned its output ceiling In the past six sessions they have shed more than 13 percent each OPEC has been pumping near record levels since last year in an attempt to drive higher cost producers such as U S shale firms out of the market New supply is likely to hit the market early next year as OPEC member Iran ramps up production once sanctions are lifted as expected following the July agreement on its disputed nuclear programme All new production will be earmarked for exports BMI Research said in a note In addition to volumes released from storage Iran will be able to increase crude oil and condensates exports by a maximum of 700 000 b d by end 2016 it said Iran s crude oil exports are set to hit a six month high in December as buyers ramp up purchases in expectation that sanctions against the country will be lifted early next year according to an industry source with knowledge of tanker loading schedules Iranian news agency Shana quoted on Monday manager director of Iran s Central Oil Fields Company Salbali Karimi as saying Iran s cost of production stood 1 1 5 per barrel in a clear indication it would ramp up output in any price scenario Gulf producers and Russia have said they would not cut output even if prices fell to 20 per barrel On Friday the International Energy Agency IEA said that the global supply glut was likely to deepen next year and put more pressure on prices EIA OPEC supply is likely to increase by 1 million bpd next year Morgan Stanley N MS analysts said in a research note on Monday
Almost the entirety of added supplies in 2016 will come from Iran Iraq and Saudi it said |
JPM | Twitter announces new crackdowns on hate speech violence | Twitter NYSE TWTR will place a warning in front of hateful imagery like swastikas and ban the use of such images as profile photos The social network will shut down accounts promoting violence against civilians ban usernames that contain a violent threat or racial slur and delete tweets celebrating violence or those who commit violence The crackdowns come after the rise of white nationalism and hate speech on the platform Previously Twitter 5 after JPMorgan NYSE JPM upgrade Dec 18 Now read |
C | Miners lend support as rate sensitive stocks drag Europe | By Kit Rees LONDON Reuters European shares edged lower on Wednesday weighed down by weak healthcare stocks and utilities although gains among basic resources stocks after an upgrade helped cap losses The pan European STOXX 600 index was down 0 1 percent by 0831 GMT in choppy trade while the blue chip index also fell 0 1 percent Miners rose 0 9 percent hitting a two month high after Credit Suisse SIX CSGN upgraded the sector to overweight in its latest global equity strategy update saying the sector was a more rewarding play on higher oil prices interest rates and inflation Glencore LON GLEN which rose 2 2 percent also supported Britain s commodity heavy FTSE 100 with BHP Billiton LON BLT in tow as Chinese steel rebar futures rallied Among individual movers British housebuilder Persimmon LON PSN jumped around 3 percent after it reported a 7 percent rise in first half sales with the market unaffected by the UK s June general election There s been a fair bit of concern regarding the housing sector what the outlook might be like with the uncertainty caused by the general election and the Brexit negotiations ongoing Dafydd Davies partner at Charles Hanover Investments said However we do see further upside to the housebuilders due to the current shortage of housing stock there is still in the UK Shares in Adidas DE ADSGN were the biggest individual gainers rising 4 3 percent to the top of the STOXX after HSBC said that the sporting goods firm was likely to increase its outlook upgrading it to buy We believe the sales growth story and associated margin expansion plan make this stock a very visible compounder HSBC analysts said in a note Interest rate sensitive utilities and health care stocks were a weak spot with pharmaceuticals dragged down by GlaxoSmithKline which fell after a downgrade from Citigroup NYSE C to neutral from buy citing a slowdown in market for HIV drugs if the Affordable Care Act ACA is repealed
A rise in interest rates has been a focus for markets ever since central banks hinted at a possible tightening in monetary policy with a rise in bond yields making high dividend paying stocks less attractive |
C | GlaxoSmithKline slips on analyst downgrade worries about HIV competition | GlaxoSmithKline NYSE GSK shares slip premarket following a Citigroup NYSE C downgrade based on potential losses in the HIV treatment market Citigroup downgrades GlaxoSmithKline from Buy to Neutral and cut earnings guidance by 9 Analyst Andrew Baum thinks Merck s development stage HIV drug EFdA which could hit the market in 2021 poses a significant threat to GSK s profitable ViiV Healthcare unit and the drug dolutegravir Baum forecasts EFdA adjusted peak annual sales of 150M but thinks the success could add 5B to Merck s guidance GlaxoSmithKline shares are down 1 38 premarket Now read |
C | JPMorgan won t bid for Worldpay | Vantiv earlier announced a near 10B deal to purchase U K based Worldpay Also reported to have had interest in Worldpay JPMorgan NYSE JPM says it doesn t intend to make an offer Will Square NYSE SQ show up on JPMorgan s radar Its shares are higher by 1 4 premarket presumably on the Worldpay news Now read |
C | Where To Ride Out The Volatility | We look at the causes of the latest round of fear and volatility and where to ride out the storm Stock markets were hammered again Thursday but it was the New Zealand dollar that led the way in a sign of shifting correlations China trade balance is due up next Thursday s Premium trade is firmly in the money after gold was bought at 1199 The thesis was put forth in this week s English and Arabic videos
There was no single trigger for the rout in markets but a handful of factors came together leading to a tipping point
1 Rates
Fed hikes are coming whether Trump likes it or not The Fed will take pains to appear to be independent and that could harden their resolve to hike In any case the market is signalling a new regime of higher rates and potentially higher inflation What would become of the 3 8 GDP growth when we take out 2 0 inflation followed by the expiry of Trump s tax stimulus 3 20 yields become an obstacle especially when the IMF downgraded growth for the US and Europe
2 The trade war
There was one good sign Thursday as the WSJ reported that Trump will meet with Xi at the G20 but the news has been overwhelmingly negative It s no coincidence that equity selling started after Pence s anti China speech The lines are being drawn for a long battle
3 Earnings
Big financials kick off earnings season Friday Citigroup NYSE C in particular might have insight into how consumers are coping with higher rates More broadly the focus will be on guidance and commentary because the near term numbers will be strong Companies warning about global growth may turn this from an equity event into a rout in FX
4 China
Perhaps the most concerning chart right now is the Shanghai Composite Yesterday s 5 2 decline broke major support in a drop to the lowest since 2016
Where to ride it out
Gold showed genuine signs of life Thursday in a 30 to close above the September highs With bonds equities and almost everything else falling there s an increasing demand for safety even if it pays nothing More demand makes sense with looming trouble coming from the US midterms the continued China battle and rising interest rates
Looking to China the trade balance report is due later but there were also rumours that the Treasury would name China a currency manipulator on Monday when the semi annual FX report is expected to be released there is no firm release date A Politico report said it will be the status quo but that news did little to calm markets Ashraf reminded us of the unusual event of the dollar failing to rise during the equities selloff That could be part and parcel of pre empting a reflexive rise in the Chinese yuan And we know how that correlates with gold |
C | iFOREX Daily Analysis October 12 2018 | With inflation lower than expected and the sell off on Wall Street the dollar saw a further downside against other major currencies with the US Dollar Index USDX closing 0 55 lower Even battered emerging market currencies such as the Indian rupee INR the Turkish lira TRY were able to gain against the struggling greenback Reports that Turkey could release the US citizen Brunson they are holding under house arrest further helped the lira recovery His incarceration and subsequent US sanctions previously deteriorated the relations between the US and Turkey sending the lira lower Oil prices saw a further downside on Thursday after the EIA also released a statistic showing a significant build in crude oil and a higher than anticipated increase in gasoline stockpiles Gold broke out of the range it held for more than two months in an upwards move possibly due to the demand for safe haven assets in the current market environment After another day of losses most equity future indices started the trading on Friday significantly stronger with Chinese and Indian indices gaining around two percent while the NASDAQ US Tech 100 was also one of the best performing index on Friday morning adding hope that the sell off could stop The sell off in cryptocurrencies quickly stopped after a rapid decline just a day earlier Bitcoin prices stabilized well above the 6 000 level while Ethereum fell below 200 Of the major cryptocurrencies Ripple was one of the best performers on Friday morning recovering a significant part of its earlier losses On Friday the European Industrial Production data will be released followed by Import Export Prices and University of Michigan Consumer Sentiment statistic from the United States
EUR USD
The dollar saw a further downside after CPI data for the US showed a more timid inflation than anticipated while comparable data for Europe was mostly as expected with the French CPI at 2 2 y y and the Spanish CPI at 2 3 y y even higher than anticipated for September The German CPI at 2 3 y y which was published on Friday morning was also as expected As inflation is one key economic figure which central banks use when determining their interest rate decision higher inflation in theory urges central banks to raise rates The US Federal Reserve has a target of keeping inflation around 2 while the European Central Bank ECB has the target of below 2 On Friday the European Industrial Production IP statistic will be released In the US data on Consumer Expectations Sentiment and Import Export Prices will be released
Gold
Gold had a breakout above the range it held for more than two months Analysts attributed the rise in gold prices to the declines in the stock markets after investors started pricing rising bond yields in their calculations It is not clear what impact the statement from US President Trump about the Federal Reserve had as he bashed the Fed s hawkish monetary policy of raising interest rates as crazy Lower interest rates could make gold in theory a comparably more appealing investment as then the difference between bonds which bear interest and gold reduces However it remains doubtful that the relatively independent Fed would act as envisioned by Trump as it tries to keep the economy from overheating with the unemployment rate at a record low The relatively lower inflation as the Consumer Price Index with 2 3 y y expected 2 4 fell behind expectations however could have given some investors hope that this would slow down the pace with which the Fed proceeds with its rate hikes Regarding US dollar related data releases for Friday Import Export Prices and the University of Michigan Consumer Sentiment are expected
WTI Oil
Oil prices further declined on Thursday given concerns about a possible global economic slowdown as key equity indices further declined Data from the Energy Information Agency EIA added pressure on prices as stockpiles for crude oil increased by 6 million barrels compared to the previous week This is also in in line with the uptick seen in the statistic from the American Petroleum Institute API which indicated oil stockpiles up by almost 10 million barrels in its statistic released a day earlier Stockpiles in gasoline also gained by almost 1 million barrels clearly surpassing expectorations of minimal changes in storage Early on Friday oil prices were seen recovering together with a recovery in equity values while news about robust crude oil import numbers from China could have also helped with the upwards movement On Friday the US Baker Hughes Oil Rig Count will be published showing the number of operating oil rigs
US 500
In another day of declining prices the S P 500 US 500 fell to the lowest level in more than 3 months before a moderate recovery set in on Friday night Especially the bank US Banks ETF 3 09 and real estate US Real Estate 2 72 stocks closed lower by a significant margin while for example the chip sector US Semiconductors 0 83 was relatively stable in the declining markets environment Stocks of the fintech company Square NYSE SQ 10 95 declined for the second day in a row by a double digit percentage after the company s CFO announced her departure while Snapchat 3 18 managed to recover from the new low and end the series of declines However it should be noted that unless there is a significant recovery on Friday this will be the 10th consecutive week where Snap s share price closes lower Shares of the pharmacy CVS 7 32 closed significantly lower after the Department of Justice approved their acquisition of the insurance Aetna NYSE AET with investors being concerned about the impact of the takeover on the company s earnings On Friday some of the key banks on Wall Street such as JP Morgan and Citigroup NYSE C are scheduled to publish their quarterly earnings |
JPM | Today s Trade The Market s Fight Song | Technical Outlook
Extremely dovish and extremely unexpected FOMC Statement yesterday that cut the yearly outlook of 4 additional rate hikes down to 2 additional rate hikes
As a result Yellen by cutting the number of rates for the year essentially gave the market the equivalent of two rate cuts yesterday
Be careful today because a lot of the central banking actions of late including the recent Draghi decision has resulted in next day reversals
200 day moving average was broken yesterday and the down trend off of the December highs was broken too
Bascially S P 500 is now trading above all the major
SPY NYSE SPY volume picked up for the second straight day but even with a FOMC announcement was still below recent averages
VIX saw a major move yesterday that resulted in the VIX dropping below the rising trend line off of the October lows dropping a big 11 down to 14 99
USO NYSE USO coiling at recent highs popping 5 yesterday
Divergence in IWM as yesterday s move failed to make new rally highs
T2108 at 83 5 rising only 2 8 yesterday
S P 500 looking to close in on breakeven for the year At 2044 level on S P 500 there is a significant amount of that was created during February August time period of 2015
My Trades
Did not add any new swing trades yesterday
Closed out JPMorgan Chase Co NYSE JPM at 59 12 for a flat trade
Closed out Direxion Daily S P 500 Bear 3X Shares NYSE SPXS at 16 28 for a 2 5 loss
Currently 100 Cash
Will look to add 1 2 new positions and follow the market s direction
Chart for SPX |
JPM | Rally Keeps Going And The Fed Is Responsible Again | What is left to say that hasn t been said already When you look at the charts from this report over the weekend you will see that they are very self explanatory It s been a straight up move leaving the bears feeling sick You would think that after so much upside action the market would have hesitated at the S P 500 2044 gap Not to be Right through at 70 RSI on the daily chart The Dow got to near 81 RSI today on its sixty minute short term chart Nothing stopping this machine All of this began when Mr Dimon of JPMorgan Chase Co NYSE JPM bought an amazing amount of his own stock I believe that was planned I also believe that after the Ms Yellen cut back on the rate cuts she ordered other banker s CEOs to buy back shares Sure enough that s what happened late yesterday If you remember my letter from Wednesday I spoke about how the banks needed some magic out of the blue and sure enough it came the very next day There are no accidents folks All very carefully constructed
Yellen knew she needed to do something after she became extremely dovish on rates again because that s bad news for the financial world She never is out of bullets and she knew how to fix the problem Thursday the problem was more than solved with the buy back trick The bears just don t have much of a chance big picture when the world central bankers want the market to head north Make people happy when they get those 401k quarterly reports She s a master mind at manipulation through perfect timing Give her an A for doing what s necessary at just the right time So today was yet another happy day for those frothing bulls who believe nothing can get in their way Nothing can stop them from all time highs to come and they may be right but there are headaches as always to try and prevent that from occurring The monthly charts being the biggest culprit but for now they can dream the dream And why not With Yellen covering your back there s good reason to feel confident about the future deservedly so or not
2080 on the S P 500 is both horizontal resistance and down trend line support We will watch that area for a possible short term top This is only 1 5 away and the reason it should stop there for at least a while is the overbought conditions that will exist on the daily charts once we do get that high The Dow RSI would be approaching the upper 70 s And again that s on the daily chart and simply unsustainable over time The S P 500 would be well over 70 It would likely be approaching the mid 70 s thus you get the idea A rest will have to take place soon and yes bulls you ll have to deal with a bit of selling You ll survive It doesn t have to get as high as 2080 as we re already very overbought on many time frames But if the market has its head down enough it s possible it could make its way towards 2080 over the next few days The key to all of this in terms of the bigger picture is how we sell when the overbought RSI conditions cause a sell off We will need to watch the daily and short term sixty minute charts for potential negative divergences if the oscillators sell hard No worries now but when that selling does kick in with a bit of force we will gain a lot of insight once things unwind
Look folks I get it that things don t make sense fundamentally but that s not our worry We know why the market is rocking It is not interested in the real world It s interested in stimulus and low rates and nothing else It keeps the bulls in the game instead of looking for a home for their money elsewhere away from the market Don t let emotion allow you to do things that aren t in concert with the action we re seeing Never say it s wrong Price is never wrong It simply is what it is Play what the market is telling you to play Don t play what you think it should do
A day at a time and let s see if we can finally at some point next week find some selling to unwind very overbought short term conditions |
JPM | Searching For Good Odds | Last week I was in Las Vegas for 48 hours attending a conference Dear reader before you smile at this lame attempt to disguise play as work you should know that I don t gamble drink only moderately and do not enjoy loud rock music Therefore the sight of yours truly staying at the Hard Rock Hotel and Casino might strike you as incongruous to say the least I can report that the thumping rock music is as inescapable as the screens of Big Brother in George Orwell s book 1984 Elevators and bathrooms offered no escape Fortunately I was with many friends from our partner and their company made it a thoroughly worthwhile and enjoyable visit However as my wife noted if you re planning a weekend of alcohol infused debauchery and gambling I might not be your best choice of travel companion
Las Vegas stands for many things as I walked through the hotel casino full of hopeful slot machine fanatics and blackjack buffs it reminded me that the entire city stands as a testament to a glaring failure of classical economics In the theoretical world where individuals make rational decisions to maximize their utility Nevada s gaming tables with their negative expected outcomes should have no place The cheerful acknowledgment of punters that the odds favor the house further illustrates how poor are the economist s tools for explaining the world One can only square the circle by allowing that the irrational hope of winning big provides positive utility to those relieved of their cash State run lotteries work on the same principle and we non lottery buyers theoretically pay slightly lower taxes as a result although that s hard to believe in New Jersey The surest way to win is to be a free rider the Hard Rock Hotel s 43 nightly room charge dramatically underprices the facility because they rely on guests contributing substantially more in the casino As a stalwart non participant I thank my fellow guests for subsidizing my stay Meanwhile consider the tormented soul whose 150 safe bet on Michigan State to beat Middle Tennessee in the NCAA tournament was lost but would in any case have only paid out 2 15 Let s at least hope he derived some modest pleasure from temporarily anticipating his winnings This is someone with a gambling problem
There have been moments as an MLP investor in recent months when selling out and placing everything on black might have felt more rational and maybe even offered better results The constant search for good odds in financial markets renders casinos uninteresting even while MLPs for a while seemed like a faster way to lose money Fund flows have certainly been an important driver of near term performance as noted in last week s post Figures on MLP fund flows provided recently by JPMorgan NYSE JPM were striking showing that in February 570MM of net inflows came into the sector This is a substantial show of confidence by retail investors it more than offset the net outflows 543MM that occurred during the entire second half of 2015 during which MLPs sank by 24 The 0 5 February loss in the Alerian Index masks the substantial intra month collapse and rebound that the 570MM of inflows helped fuel
The appetite of retail investors to buy and then sell and now buy again MLPs has been a significant factor driving performance For a time such investors bridged the gap between MLPs need for growth finance and the limited desire of traditional investors to meet it Direct investors in MLPs who receive K 1s are the quintessential long term investor not least because time steadily worsens the tax consequences of selling Retail investors through mutual funds and ETFs are not always so tax sensitive and therefore more reactive to recent performance February s substantial inflows reflect this shift to more positive sentiment |
MS | Morgan Stanley to take 150 million severance charge in fourth quarter | Reuters Morgan Stanley N MS will take a 150 million severance charge in the fourth quarter related to a workforce reduction a company spokesman said on Tuesday The charge will cover the cost of cutting jobs of 1 200 workers worldwide including about 470 front office employees in its fixed income business a source familiar with the matter said The news was first reported by Bloomberg earlier on Tuesday Morgan Stanley planned to cut up to 25 percent of its fixed income jobs a person familiar with the matter said last month
Metals industry sources told Reuters earlier on Tuesday that the U S investment bank was closing its base metals trading desks globally possibly as part of a wider job cuts program |
MS | Clinton relayed son in law s meeting request at State Department AP | WASHINGTON Reuters Democratic presidential candidate Hillary Clinton forwarded a request made by her son in law for a meeting between one of his hedge fund s clients and State Department officials when she was the country s top diplomat the Associated Press reported Tuesday Marc Mezvinsky the husband of Chelsea Clinton and a partner at the hedge fund Eaglevale Partners LP in 2012 sent to Clinton a request made by an investor in the deep sea mining firm Neptune Minerals Inc to meet with State Department officials Clinton forwarded the request to Thomas Nides a vice chairman at Morgan Stanley N MS who at the time was a deputy secretary of state the AP reported Could you have someone follow up on this request which was forwarded to me Clinton asked Nides I ll get on it Nides replied It is not known whether the meeting took place Clinton s campaign declined to comment on the matter the AP said The Clinton campaign also declined to comment to Reuters At the time of the request the Obama administration was trying to get the Law of the Sea Treaty through the U S Congress Had it passed the agreement would have assisted deep sea mining companies that mine minerals in international waters
Government ethics rules state that government employees should not give preferential treatment to any private organization or individual but do not ban the consideration of requests made by relatives the AP reported |
MS | Fed set for very gradual rate path after expected Dec 16 hike poll | By Aaradhana Ramesh Reuters The U S Federal Reserve will move very gradually after it delivers what is widely expected to be its first interest rate hike in nearly a decade next week according to a Reuters poll that points to a tame inflation outlook for next year Now that Fed officials have made clear they are comfortable the employment part of their dual mandate is met the pace of future rate increases will depend on confirmation that inflation which is set to rise actually is rising The probability the Fed raises rates from near zero on Dec 16 rose to 90 percent from 70 percent in the latest Reuters poll of over 90 economists taken Dec 4 9 What has not risen at all are expectations for inflation next year To be sure moving now appears more about getting the first hike out of the way and changing the conversation away from liftoff to the shallow path of hikes expected thereafter than it is about the current state of the economy demanding tighter policy Ellen Zentner economist at Morgan Stanley N MS wrote in a note So a period of digestion and watching to be sure inflation is in fact turning up towards the Fed s goal and growth remains on track would make sense Median predictions for core PCE inflation which the Fed watches closely haven t fluctuated much in half a year of monthly Reuters polls now in a 1 5 1 7 percent range for 2016 There has also been a drop over the same period in the most aggressive core PCE inflation forecasts particularly for the first quarter of 2016 where the highest forecast has tumbled to 1 8 percent from 2 5 percent The lowest core PCE forecasts also fell over the same period particularly for the third and fourth quarters of next year to 0 9 percent and 1 0 percent respectively from 1 4 percent in earlier polls This strongly suggests that while analysts believe the Fed will finally raise rates on Dec 16 after taking a pass several times this year they are not convinced the Fed will have the proof it needs to hike rates more quickly than even the most gentle of scenarios How much financial conditions tighten and particularly how much more the dollar rises will also determine how quickly the Fed will be able to follow up on its first hike EUR POLL The median projection of the 17 Fed policymakers in September on the projected path of interest rates was 1 375 percent by end 2016 and 2 625 percent by end 2017 The latest Reuters poll medians suggest a much more gradual policy path with economists forecasting the federal funds rate to be 1 0 1 25 percent by end 2016 and 2 25 percent by end 2017 similar to conclusions from recent polls GROWTH OUTLOOK Another reason for that slow pace is a tame growth outlook The world s largest economy is forecast to expand at a steady 2 4 2 5 percent annualized pace in each quarter over the coming year little changed from previous polls That outlook for steady growth comes despite disastrous starts to the year in recent years due in part to punishingly cold winters as well as a West Coast port strike early this year But even among the individual contributions the most optimistic growth forecasts in a sample of almost 50 was 3 5 percent in any quarter As recently as October the highest growth forecast for any quarter in 2016 was 4 2 percent None of the economists polled expect a recession any time soon despite the fact the U S economy is at a more mature stage of the economic cycle with initial weekly jobless claims and the unemployment rate both at very low levels There is only a 10 percent chance of recession in 2016 according to the median of 36 forecasts provided with the highest forecast put at less than one in three Based upon the slope of the yield curve the probability of a recession within the next 12 months is less than 5 percent wrote Hugh Johnson who runs economic advisory firm Hugh Johnson Advisors However given the slowdown in China and the transmission of the slowdown through declining commodity prices the probability becomes meaningfully higher The current recovery may indeed end in a quite unconventional way which is understandable given the global reach of economic events
For other stories from the poll |
MS | U S data company Palantir raises 679 8 million | SAN FRANCISCO Reuters Palantir Technologies the data firm best known for helping the U S government track down al Qaeda leader Osama bin Laden has raised 679 8 million according to a filing on Wednesday The cash injection which further expands the 500 million the company originally said it was raising in July shows that despite shifting market conditions for privately held companies investors still hold confidence in the strongest of them particularly those geared toward enterprises Many richly valued consumer companies have lost some luster in recent months with the valuations of businesses such as message service Snapchat and storage service Dropbox marked down by some investors Morgan Stanley Co N MS and SF Sentry Securities acted as placement agents according to the filing with the Securities and Exchange Commission earning sales commissions that totaled 3 2 million In October Palantir said it had expanded its original 500 million offering to 554 8 million The total is now one third larger than announced in July Palantir is currently valued at 20 billion making it the richest venture backed company in the United States after ride service Uber and accommodation service Airbnb It works closely with the U S government whose steady business provides part of the reason investors like the Palo Alto California based company |
MS | Morgan Stanley begins layoffs in credit division | By Olivia Oran and Richard Leong NEW YORK Reuters Morgan Stanley N MS this week cut staff covering short term credit and regional broker dealers after a quarter in which the bank posted a 42 percent drop in bond trading several sources told Reuters The sources blamed the shakeup at the No 6 U S bank by assets on tougher capital rules mounting competition from faster and cheaper trading on electronic systems and expectations that the Federal Reserve will raise U S interest rates next week for the first time in nearly a decade The decision to downsize followed one of Morgan Stanley s slowest quarters for bond trading since the global credit crunch The bank has been focused on improving profitability within fixed income and has been scaling back businesses that miss those metrics the sources said Morgan Stanley s short term credit desk including its commercial paper business has seen extensive cutbacks they said Morgan Stanley has also significantly reduced the number of bond sales people who cover smaller regional broker dealers they added although the bank will continue to cover these types of clients A Morgan Stanley spokesman declined to comment on the layoffs Traders and fund managers interviewed by Reuters said Morgan Stanley s move is hardly a surprise as tougher capital rules domestic and abroad have made it less profitable to trade Treasuries agency debt corporate bonds and mortgage backed securities These rules intended to curb excessive risk taking have also raised the cost for Morgan Stanley and other top Wall Street firms to borrow in the short term wholesale funding markets including the repurchase agreement repo market With the Fed widely expected to hike rates next week the daily cost for trading will likely go up further In addition the proliferation of electronic systems and high frequency trading firms has eroded Morgan Stanley and other Wall Street dealers dominance in market making the bond market This year electronic trading platforms are on track to capture 20 percent of U S investment grade bond trading volume a 25 percent rise from year earlier according to research firm Greenwich Associates
As competition from anonymous systems has grown the need to pitch blocks of bonds on the phone or emails to clients has decreased |
JPM | Saudi hopes purge will help push to join anti illicit funding body | By Tom Arnold DUBAI Reuters Saudi Arabia has high hopes that a campaign of arrests to crack down on corruption will improve its chances of joining the Financial Action Task Force a global body dedicated to combating illicit money flows The kingdom one of only two G20 nations along with Indonesia which is not a FATF member has tried for years to shake off a reputation as a breeding ground for corruption and terror financing Its last attempt to join the inter governmental body which has 37 members was unsuccessful in 2010 and some lobbyists may oppose the new Saudi push before an expected vote mid next year But achieving membership offers the possibility of strengthening Riyadh s international standing at a time when it wants foreign investors to back its multi billion dollar transformation plan as well as improving global financial ties for its banks Spearheaded by Crown Prince Mohammed bin Salman the kingdom detained dozens of senior business people and government officials last month accusing them of crimes including money laundering although not of terror financing Political analysts say the future king has also tried to tighten his grip on power through the purge The crackdown which involved the freezing of more than 2 000 bank accounts and liaising with central banks in among others Switzerland Kuwait and the United Arab Emirates stress tested the Saudi anti money laundering system and found it largely effective say sources familiar with the matter The system will undergo further tests in the coming weeks as Saudi Arabia targets around 100 billion of settlements with some of those detained This will strengthen Saudi Arabia s position as a reformer and its efforts to move closer to a corruption free society said Jaspal Singh who advises on anti money laundering in the Middle East and North America Joining FATF sets the tone at the top in generating the necessary political will under Prince Mohammad to bring about national legislative and regulatory reforms in the anti money laundering and governance space Saudi efforts to join the body are at a critical stage In the last few weeks it hosted a visit by officials including FATF staff and members of the body assessing its bid The delegates visited public and private sector institutions A final decision on the bid known as the mutual evaluation is expected when existing members vote in June 2018 How soon Saudi Arabia can obtain full membership will depend on the outcomes of the mutual evaluation FATF said in a statement sent to Reuters If the mutual evaluation is not satisfactory then the country must agree to an action plan to address the weaknesses identified by the assessment team Saudi Arabia has struggled with allegations that some of its banks have helped to fund terrorists Its two largest banks National Commercial Bank and Al Rajhi Bank were sued in New York as recently as April along with companies affiliated with Osama bin Laden s family and several charities for at least 4 2 billion over the Sept 11 2001 attacks on the United States At the end of 2013 JPMorgan Chase Co NYSE JPM N cut its correspondent banking relationship with 500 foreign lenders including Al Rajhi Reuters previously reported citing sources Al Rajhi has previously said it has no links to terrorism and is committed to operating at the highest levels of compliance with applicable rules In response to a Reuters query it said on Thursday JP Morgan re established its relationship with Al Rajhi Bank in 2017 National Commercial Bank did not immediately respond to a Reuters request for comment While the central bank has maintained Saudi banks have not experienced a dip in correspondent banking relationships it has said it remains vigilant as any decline could hurt the stability of the financial system and economic growth The central bank did not respond to a Reuters request for comment on FATF If you want to eat at top table you have to have top table manners said a financial sector source The benefits from a banking perspective will be stronger correspondent banking ties Saudi Arabia s last attempt to join failed when it fell short in its ability to test a relatively new risk framework the kingdom criminalized money laundering in 2003 The process also exposed a general lack of awareness about illicit financial flows especially among non bank financial institutions But since then Riyadh has made strides to improve its level of compliance For one Saudi Arabia has massively increased its rate of convictions for terrorist financing Between 2010 and 2015 it topped the table with 863 convictions compared with around 100 for the next highest ranked country the United States according to FATF data In recent weeks Saudi Arabia has also published new versions of its anti money laundering and anti terrorism laws strengthening due diligence requirements for financial institutions and toughening criminal penalties Both laws were revised to bring Saudi Arabia more in line with FATF requirements said a source familiar with the matter But some observers have expressed concern about the changes We don t think Saudi Arabia should be admitted to FATF with the anti terrorism legislation they have in place in its current form said Kay Guinane director of Washington based Charity Security Network a lobby group for non profit organizations
Our mission is to protect civil society and our concern is that the definition of terrorism is so broad that it s impossible for civil society to operate in a free and open way The legislation also does not meet FATF s recommendations of its members having a risk based approach |
JPM | U S Stocks Dip as Investors Turn to Tax Overhaul Markets Wrap | Bloomberg U S equities turned lower with the dollar as investors try to assess the tax overhaul package with leaders in the Senate and House of Representatives aiming to finalize compromise legislation and hold floor votes next week The euro retreated with the European Central Bank remaining cautious about the prospects of reaching its inflation goals
The S P 500 Index climbed at the open but then reversed direction while the tech heavy Nasdaq Composite Index fell following the U S Federal Communications Commission s decision to sweep aside internet neutrality rules Yields on 10 year Treasuries gained amid continued optimism about the economy s strength after U S retail sales topped estimates Oil rose to near 57 a barrel
The retail figures signaled a broad strengthening of consumer demand as the holiday shopping season got under way bolstering optimism in the world s largest economy The Fed on Wednesday said the labor market was tightening but it still didn t see inflation accelerating a sentiment echoed Thursday by the ECB
With broad based gains across a number of key categories U S retailers are already feeling a bit more cheer this holiday season Lindsey Piegza chief economist at Stifel Nicolaus Co wrote in an email The consumer appears to have double downed on their optimism for fiscal reform translating into more cash in their pockets next year to supplement the rise in spending absent meaningful income growth
Meanwhile in comments after Europe s central bank kept rates steady President Mario Draghi stopped short of declaring that the lender will meet its inflation goal in 2020 signaling that the euro area economy isn t yet strong enough to warrant cutting monetary stimulus
For the ECB the big question is what is their next steps once tapering is done said Alex Dryden a London based market strategist at JPMorgan NYSE JPM Asset Management The most important central bank to be watching in 2018 is the ECB They are the ones with some of the biggest question marks over their heads there s a lot of clarity that is needed on what will be happening there
Elsewhere the pound slipped after the Bank of England kept interest rates unchanged Turkey s lira fell after its central bank raised a key rate less than investors expected Gold rose with crude which reversed Wednesday s declines
Terminal customers can read more in our Markets Live blog
Here are some of the key events scheduled for this week
European lawmakers continue to debate Brexit and weigh moves on the next step while North America Free Trade Agreement negotiators meet again
And these are the main moves in markets
Stocks
The S P 500 was down 0 1 percent at 1 54 p m in New York while the Nasdaq Composite slid 0 1 percent after rising as much as 0 4 percent earlier in the session
The Stoxx Europe 600 Index declined 0 5 percent
The MSCI All Country World Index was little changed
The U K s FTSE 100 Index fell 0 7 percent the largest retreat in two weeks
Currencies
The Bloomberg Dollar Spot Index gave up earlier gains and was down less than 0 1 percent
The euro decreased 0 3 percent to 1 1796
The British pound rose 0 1 percent to 1 3439
The Japanese yen added 0 3 percent to 112 22 per dollar
Bonds
The yield on 10 year Treasuries climbed one basis point to 2 3529 percent
Britain s 10 year yield declined four basis points to 1 174 percent the lowest in three months
Germany s 10 year yield was little changed at 0 316 percent
France s 10 year yield fell one basis point to 0 644 percent
Commodities
West Texas Intermediate crude added 0 7 percent to 56 98 a barrel
Gold decreased less than 0 1 percent to 1 254 50 an ounce
Copper rose 0 7 percent to 3 07 a pound |
JPM | Twitter 5 after JPMorgan upgrade | JPMorgan NYSE JPM upgrades Twitter NYSE TWTR from Hold to Overweight raises the price target by 7 to 27 and calls the company one of the top smid cap ideas in 2018 Analyst Doug Anmuth s predictions for 2018 include improvements in video and live streaming a 10 DAU growth an 8 ad revenue growth and reaching GAAP profitability Anmuth recognizes that Twitter shares aren t cheap at 11 8x 2019E EBITDA after rising 30 since Q3 earnings but believes user and ad traction will create upside to 2018 consensus Twitter shares are up 5 premarket Now read |
JPM | Don t Expect NFP To Help USD | By Kathy Lien Managing Director of FX Strategy for BK Asset Management
With fewer than 24 hours to go before the most important event risk this week U S nonfarm payrolls the U S dollar is trading lower against all of the major currencies In fact this has been an extremely challenging week for the greenback which experienced broad based losses What s particularly interesting about the move is that it comes in spite of an increase in Treasury yields this week U S data hasn t been terrible but it hasn t been great either And with the dollar rising as much as it has in recent weeks investors have grown weary of holding dollars ahead of nonfarm payrolls and the FOMC rate decision It also doesn t help that JPMorgan NYSE JPM analysts believe there s a 1 in 3 chance of a U S recession Bridgewater s Dalios says the next big move by the Fed will be easing Markit economics warns that worse may be to come as inflows of new business have slowed or that Fed President Kaplan said that if in doubt it s better to wait on raising rates
At this stage no one expects the Federal Reserve to tighten in March which is one of the reasons why we believe nonfarm payrolls won t help the dollar If the labor market report is weak it will reinforce the market s expectations that the dollar won t receive a boost in yields and if it is strong investors will still question whether it s enough for the Fed to pull the trigger the answer will be no However a strong nonfarm payrolls report should encourage the Fed to maintain a hawkish bias but it may be a few days before investors recognize this possibility
Another reason why we don t expect nonfarm payrolls to help the dollar is because the leading indicators that we track ahead of the report give us little confidence in a healthy report While the following list includes more arguments for stronger payrolls the employment component of non manufacturing ISM hit a 2 year low and confidence has been cratering Expectations are also high with economists predicting a sharp rise in payroll growth While we are also looking for an uptick after last month s low 151k reading the increase could easily fall short of the 195k forecast Trading nonfarm payrolls is always tricky because of the importance of the unemployment rate and average hourly earnings Last month we saw how the market bought dollars despite the headline NFP miss because the jobless rate fell and earnings soared This month the risk is for a slowdown in earnings growth and an uptick in unemployment The bottom line is there are far too many reasons to be long dollars ahead of NFP But after the report the opportunities should become clearer
Arguments for Stronger Payrolls
ADP Rises to 214K from 193K
4 Week Jobless Claims Moving Average drops to 270K from 284K
Continuing Claims Dip Slightly
Challenger Reports Lower Layoffs
Employment Component of ISM Manufacturing Rises
Arguments for Weaker Payrolls
Employment Component of ISM Services Hit 2 Year Low
Consumer Confidence Index Drops to 92 2 Lowest since Nov 2014
University of Michigan Expectations Index Falls
Nervous markets make for nervous traders but there s one fact that can t be argued which is that oil stocks and high beta currencies are attempting to bottom with buyers sweeping in on every decline We saw that in the remarkable resilience of the GBP USD the commodity currencies which were up 1 on Thursday oil which tested 35 a barrel and the euro While a large part of this may be attributed to the dollar s exhaustion market sentiment is clearly turning as well However given the weakness in U S Chinese U K Japanese and Eurozone data we can t help but eye these moves with skepticism As every sell off has been bought big news will be needed to change the near term trend
The resilience of the British pound to weak data continues to astound us With Thursday s decline in the PMI services index we now have a trifecta of lower PMIs Both the service and manufacturing sectors grew at their slowest pace in nearly 3 years while the construction sector expanded at its slowest in 10 months This drove the PMI composite index from 56 2 down to 52 8 the lowest level since April 2013 Yet sterling continues to rise taking out 3 big figures this past week A lot of this has to do with positioning as sterling became deeply oversold but concerns about Brexit also appear to be easing There s been no specific headlines or polls to suggest that the risk has diminished but we heard from German Finance Minister Schaeuble who said he would cry if the UK votes to leave the EU Perhaps this is being interpreted by investors to mean that the Germans will do everything possible to avoid that scenario 1 4200 is now resistance in GBP USD If it is broken the next stop for the currency pair could be 1 4400
Euro also traded higher on Thursday thanks to better than expected data Eurozone retail sales rose 0 4 in January which was much stronger than expected Spending in December was also revised higher This followed upward revisions to the Eurozone and German PMI services indices This is the first pieces of good news that we have heard from the Eurozone in a while and on a day dominated by U S dollar weakness these reports had an unusually large impact on the euro
Thursday s best performing currencies were the Australian and New Zealand dollars Good data continues to pour out of Australia with service sector activity turning positive in February and the trade deficit narrowing significantly Even as China s economy continues to slow we are seeing green shoots in Australia s economy Rising commodity prices including gold and iron ore also lent support to AUD which climbed to fresh year to date highs 74 cents is the main resistance level for AUD USD and if that s broken the next stop should be 75 cents The New Zealand dollar finally caught up to AUD thanks to an increase in the value of buildings and commodity prices Still NZD USD needs to clear 68 cents before a stronger move higher can happen
Friday is also important for the Canadian dollar which rose to its strongest level versus the greenback in nearly 3 months Canada s trade balance and manufacturing PMI reports are scheduled for release Friday and these numbers could take the market s focus away from oil With that in mind there s been quite a bit of volatility in oil which is trying to decide whether it wants to break above 35 a barrel We ve seen a dramatic recovery in the past few weeks and it has coincided with a strong decline in USD CAD The currency pair is within 100 pips of its 200 day SMA support at 1 3280 1 3400 has been a level of magnetism and how oil trades near 35 will determine whether the pair remains below that level |
JPM | US Private Payrolls Rebound | American companies added 230 000 workers to payrolls in February a solid improvement over the upwardly revised 182 000 gain for January based on seasonally adjusted data Today s update from the Labor Dept handily beat the consensus forecast for a rise in the low 180k range The year over year growth rate for private sector jobs continued to tick lower but the annual pace of 2 18 through last month continues to reflect a bullish tailwind for the labor market
Today s release offers another upbeat round of macro data that raises doubts on the veracity of recent worries about the US economy Wage growth was soft however Average hourly earnings dipped 0 1 last month vs January marking the first drop in more than a year a drop that throws cold water on the prospects for firmer wage growth
From a top down perspective however today s update sends a strong signal that February s economic profile will remain firmly in the growth column once all of last month s numbers are published The January review of the US trend pointed in that direction and today s figures certainly strengthen the case for anticipating that forward momentum will prevail for the foreseeable future
Michael Feroli chief US economist at JPMorgan Chase NYSE JPM tells Bloomberg that the news indicates the resilience of the economy The labor market doesn t appear to be hurt by financial market volatility
Does this mean that a rate hike is back on the table for the Fed s monetary meeting that s scheduled for later this month Well sure Today s numbers juice the odds in favor of the hawks With recession risk off the table via the spectrum of numbers in hand at the moment squeezing policy no longer looks like a low probability event
This is the best news the Fed could have expected going into the meeting Chris Rupkey chief economist at MUFG Union Bank explains via Reuters With jobs bouncing back you can be sure that rate hikes are just around the corner |
JPM | Doorways And Liquidity | A very curious thing happened overnight in Japan trading in their 10 year bonds was briefly halted This was the result of a selloff that pushed yields from minus 10 up to minus 015 The price move in the bonds was only 6 so not a huge move but the circuit breakers were hit and trading stopped
So why is this a big deal or is it First the JGB market is second or third largest and most liquid in the world behind U S Treasuries and maybe Eurobonds This sort of chaotic movement should not happen More importantly I believe the circuit breakers are so tight because a panic event can not be allowed to gain ANY momentum Any momentum in the wrong direction at this point could easily become self reinforcing because of leverage or margin used to carry positions today Please understand I am not picking on JGB s as the same thing could be said of many if not ALL markets today as markets are so intertwined The point we are driving at here is volatility kills
This thought that volatility kills has become the absolute center of ALL financial markets on the planet Because everything has become derivatized the leverage has expanded much further than just credit outstanding or margin balances You see derivatives morphed into the tool of choice to price or manage markets Now because these derivative markets have gotten so large volatility cannot be allowed Whether it be circuit breakers mysterious software problems or simply pulling the plug volatility must be tamped down at all costs
It is no coincidence volatility is rising now as liquidity has begun to dry up All you need to do is talk to an institutional bond trader to know this to be true Even small 10 million trades or less are tough to move and here is the rub The exit door has drastically shrunk while the population in the room has continually expanded
If we look at only the credit markets alone the room is inhabited by 7 trillion worth of bonds trading at negative interest rates Stating the obvious this is the largest greater fool trade in all of history Are bond traders really buying bonds to lock in a negative return Do they really believe they will win because the underlying currency will gain value even though the stated goal of every central bank is to debase No the only reason a bond trader would purchase a negative yield is because they believe there is a greater fool out there who will purchase that bond from them at an even greater negative yield
Now you must ask yourself one more question are negative interest rates the new normal and here to stay Logically the answer is no because mathematically a system based on negative rates is like a snake eating its own tail Practically speaking negative rates are an accident waiting to happen when someone finally yells FIRE
Speaking of doorways and liquidity if you understood what was meant in my last writing when JPMorgan NYSE JPM testified Gold is money everything else is credit then you probably have an idea where we are going here The entire system is credit based Everything you do use consume or even touch on a daily basis had the use of credit somewhere along the way this even includes your dollar bills in your pocket Put simply we are living in a credit mania
Gold and especially silver are ridiculously small markets Real global production is about 80 billion per year for gold and 12 billion for silver Unless you have been sleeping or just don t get it the stock of silver and gold has been continually diluted by paper over the last 4 years as a means to control the price Now demand has gotten so great they are having a problem creating even paper gold fast enough to contain the price The doorway into real gold and silver is very very minute and will become 100 times smaller than it already is once people with paper receipts find out they hold nothing What I am trying to say here is this on top of current and safe haven demand will also be demand from those who have already bought In reality they own nothing because their previous purchase was deflected from metal into paper air
I know the above is not groundbreaking news to many of you but it needs to be reminded once in a while The exit door for the massive paper credit buildup is small and getting smaller as liquidity shrinks and leverage grows The entrance door for real gold and silver may not even exist once people understand they are the very core to the strong dollar fraud You see liquidity has a direct effect on how functional any door is whether it be an exit or entrance Not enough shrinks the exit too much closes the entrance |
JPM | These Charts Should Do One Thing For You | Global Liquidity
The last time that global liquidity conditions contracted at this pace was on the back of the government s guarantee of Bear Stearns sale to JPMorgan NYSE JPM
Inflation
Back in 37 the Fed raised rates when headline inflation hit 3 7
But this tightening move was a collossal mistake
with CPI falling from 3 7 to 2 0 the following year
AND today core inflation is already ABOVE 2 and moving vertical
Is this the start of hyperinflation now which is deadly when it comes to growth
Credit
The following chart which DoubleLine s Jeff Gundlach calls his favorite and the scariest chart in the world illustrates a 20 sell off in stocks when the lines converge
Japan
Last year the government spent about 100 trillion yen but only collected 50 trillion in revenue on the back of a 240 debt to GDP ratio
This disaster is coming to an end though 30 year bond rates just hit a historic low of 0 47
How much longer will these rates stay low when the country is in a depression and spending twice as much they are taking in |
JPM | Today s Trading Plan Brace For The FOMC | Another low volume and tight trading range for S P 500 yesterday
Volume was on par with yesterday s light reading and well below recent averages
Price closed below the declining trend line as well as below the 200 day moving average for SPX
Market behavior over the last two trading sessions and a few others before it where price dips lower in the first 30 minutes of trading and inches higher throughout the remainder of the day
Today should see an increase in volume due to the FOMC Statement at 2pm and presser at 2 30pm eastern No one is expecting a rate increase but should one happen it would likely create plenty of turmoil for the markets today
Also remember that the initial move by the market in response to the FOMC is more times than not a head fake
Dip buyers continue to buy up the market at every turn
S P 500 30 minute chart starting to show some choppiness at the highs
VIX dropped by 0 5 despite being up over 8 early on in trading
Meanwhile T2108 dropped by 4 5 down to 81 3 still very high and
A lot of exists between 2020 and 2040 going forward and will pose difficulties for the market
The next price target for S P 500 will be to close the massive New Year s gap down and close over 2044 which impressively enough would put the market in positive territory for the year
At the aforementioned 2044 level on S P 500 there is a significant amount of resistance that was created during February August time period of 2015
My Trades
Added one new swing trade to the portfolio yesterday
Did not close out any swing trades yesterday
Currently 10 Long 10 Short 80 Cash
Remain long NYSE JPM at 59 11
Will look to add 1 2 new positions and follow the market s direction
Chart for S P |
MS | Morgan Stanley to cut up to 25 percent of fixed income jobs | By Olivia Oran and Sudarshan Varadhan Reuters Morgan Stanley N MS plans to cut up to 25 percent of its fixed income jobs according to a person familiar with the matter The workforce reduction will be across all regions and is set to take place in the next two weeks the person said The news was first reported by Bloomberg earlier on Monday The Wall Street bank reported a 42 percent slide in bond trading in the third quarter one of its worst performances since the financial crisis Morgan Stanley Chief Executive James Gorman has been focusing on equities trading and particularly wealth management as profit drivers for the No 6 U S bank by assets as stricter regulations and capital requirements make it more difficult to trade bonds Ted Pick who was in charge of the company s equities business was picked by Gorman last month to oversee its entire trading business to facilitate better coordination between the firm s bond and equities desks Morgan Stanley declined to comment
The company s shares which have fallen 12 9 percent this year up to Friday s close were up 2 1 percent in afternoon trading |
MS | Yuan s Reserve Currency Status Evokes Mixed Reactions | By
SHANGHAI A major milestone in the opening of China s economy or a purely symbolic gesture with little real significance Both reactions were in evidence in China Tuesday after the International Monetary Fund IMF voted to include the country s currency the yuan in its Special Drawing Rights SDR basket of currencies used to guarantee loans to IMF borrowers from Oct 1 next year Mainstream media and some international analysts said the move would boost the internationalization of the Chinese currency A historic moment which has stirred debate around the world said the populist tabloid Global Times while Shanghai s Oriental Morning Post which filled its front page with the story stressed that the yuan s 10 92 percent share of the basket was higher than the Japanese yen and the British pound Overtaking such global currencies clearly excited some I stayed up half the night for the news let s celebrate said a commenter on online news site The Paper while another added This is a symbol of global acknowledgment of China s economic development And some international observers agreed Analysts at HSBC in Hong Kong wrote in a research note that the move was a key milestone for the internationalization of the yuan which should increasingly be looked upon as a major currency Yet there was also some debate about the significance of taking up a small proportion of a basket which as a whole as even the Global Times acknowledged accounts for only 2 5 percent of global foreign exchange reserves Andy Xie a Shanghai based analyst who was formerly chief economist for Asia at Morgan Stanley N MS was dismissive The SDR is just an accounting unit this has no real world significance he told International Business Times Xie suggested that the move was primarily a publicity coup for the Chinese government aimed at convincing Chinese people not to buy dollars at a time when the country has seen significant outflows of currency following its surprise devaluation of the yuan in August Some members of the public were cynical too One commenter on The Paper suggested that the yuan s proportion of the SDR was actually lower than some experts had predicted and another questioned whether the Chinese currency really met IMF standards of being freely tradable and convertible asking Can we really freely use it abroad It seems there are limits It was a reference to the regulations that limit Chinese people to converting only 50 000 worth of yuan into foreign currencies each year while the government has also recently introduced new rules limiting ATM withdrawals by Chinese citizens while overseas And even an op ed piece in the Global Times English language edition suggested there should not be excessive expectations about the significance of the event which it said was unlikely to substantially increase the proportion of the yuan in global reserves It said that the key to whether foreign central banks and others would put their money into a currency was the credibility of that currency and the economy of the country that issued it It noted that the use of the Japanese yen as a reserve asset has actually fallen since it was included in the SDR basket Further financial reforms are still essential for it the yuan to become a global currency the article added However it stressed that China s leaders understood this and a statement from China s central bank said the IMF s decision would encourage China to continue to deepen and accelerate economic reforms and financial opening up Indeed some analysts have said that international support for the IMF s move is designed in part to boost Chinese reformers keen to open the country s economy including its stock and bond market to foreign investors The South China Morning Post also quoted leading brokerage China International Capital Corporation CICC as saying the yuan s inclusion in the SDR was part of an irreversible push towards financial liberalisation which will have a profound impact on China s economy The China Daily meanwhile quoted one expert as saying China s central bank would now come under immense pressure to be more transparent and improve its way of communicating with international markets following criticisms of its handling of the devaluation of the yuan earlier this year Li Gang Liu chief economist for Greater China at ANZ Bank in Hong Kong said in a note that the yuan s entry into the SDR was unlikely to bring significant fund inflows in the near term but we believe overseas investors will increase their assets allocated in CNY bonds over the longer term Meanwhile HSBC analysts said the IMF s decision would boost confidence and usage of the yuan because it serves as a sign of quality assurance for global users that the currency in question is very liquid and is stable as a store of value The HSBC report also predicted that the move would boost reform efforts in China and would give the nation s leaders further confidence to let the exchange rate become more market driven saying this could be the most important result of the IMF s decision HSBC predicted the central bank would likely allow the yuan to trade in a slightly wider band against the U S dollar than its current range of 2 percent a day though it said that in the short term this could lead to some further depreciation pressure on the yuan Noting that the U S Federal Reserve may raise interest rates this month which would likely encourage more Chinese investors to put money into dollars it predicted the yuan could fall to about 6 5 to the dollar by the end of the year from its current level of about 6 35 and said more weakness with greater two way volatility could be expected next year |
MS | Global stocks hit euro shines after ECB wrong foots traders | By Nichola Saminather and Hideyuki Sano SINGAPORE TOKYO Reuters Asian shares joined a global markets slump on Friday after the European Central Bank s stimulus package fell well short of markets high expectations sending the euro rocketing to its biggest one day surge in nearly seven years European shares were poised for further declines with financial spreadbetters expecting Britain s FTSE 100 FTSE to fall 0 6 percent and France s CAC40 FCHI and Germany s DAX GDAXI to open down 0 8 percent MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS fell 0 8 percent extending losses for the week to 0 3 percent Japan s Nikkei N225 tumbled 2 2 percent at the close the biggest daily drop since Sept 29 It was down 1 9 percent for the week the most in three months China s CSI300 index slipped 1 6 percent shrinking gains for the week to 3 8 percent On Thursday Wall Street s benchmark S P 500 stock index SPX had its biggest one day percentage decline since Sept 28 dropping 1 4 percent The pan European stock index of FTSEurofirst 300 FTEU3 shed 3 3 percent the biggest fall since Aug 24 The drama started after the ECB cut its deposit rate deeper into negative territory and extended its asset buying by six months Its rate cut of 0 10 percentage point to 0 30 percent was smaller than a 0 15 to 0 20 percentage point cut many traders expected The central bank did not increase the amount of government bonds it buys while the six month extension of the programme was perceived as a bare minimum given traders looked for an extension of one year or even making it an open ended plan It s like doing so much sweet talking before your marriage that you set it up to be a big disappointment said Norihiro Fujito senior investment strategist at Mitsubishi UFJ Morgan Stanley N MS Securities The package sent traders scrambling to unwind short euro positions which they had built since late October when the ECB chief Mario Draghi said there would be another round of stimulus measures The euro jumped 3 1 percent on Thursday posting its biggest single day gain since March 2009 The common currency was little changed at 1 0942 but still near its one month high of 1 0981 hit on Thursday That took the dollar s index against a basket of six major currencies down to a one month low of 97 591 DXY USD overnight before bouncing back to 97 869 on Friday The euro s rebound also helped to lift other currencies against the dollar with European currencies outperforming The British pound rose 1 2 percent to 1 5145 while the Swiss franc gained 2 4 percent to 0 9933 franc on the dollar on Thursday The yen gained 0 5 percent to 122 61 per dollar and was last trading at 122 58 The Chinese yuan also firmed against the dollar with the People s Bank of China setting the midpoint rate at 6 3851 the strongest gain in a month The spot market opened at 6 3867 per dollar and was last changing hands at 6 3973 Global bond yields shot up with the U S 10 year yield US10YT RR rising to as high as 2 347 percent from 2 178 percent overnight The yield on 10 year German Bunds surged about 20 basis points to 0 666 percent from 0 474 percent on Wednesday the biggest jump since late April Investors are now turning their attention to the U S jobs data which is likely to cement expectations that the Federal Reserve will hike interest rates later this month barring surprisingly weak readings ECONUS Federal Reserve Chair Janet Yellen speaking before Congress Joint Economic Committee on Thursday said the U S may be close to the point at which we should be raising rates She also said the U S economy needs to add fewer than 100 000 jobs a month to cover new entrants to the workforce perhaps setting an implicit floor for jobs growth that policymakers want to see That would be a fairly low bar given that economists median forecast was 200 000 when even the most conservative forecast in a Reuters poll of more than 100 economists was 150 000 U S money market futures 0 FF hardly budged after the ECB pricing in about a 75 percent chance of a rate hike this month and possibly two more rate hikes next year Also attracting investors attention was the OPEC meeting later on Friday Crude oil prices rose about 3 percent on the eve of the meeting as traders although expecting no cuts in oil production hedged their positions Brent crude futures climbed to 43 92 per barrel LCOc1 having bounced back from Wednesday s three month low of 42 43 Precious metals also rebounded with gold rising 0 8 percent on Thursday after hitting a near six year low of 1 045 80 per ounce earlier in the day It last stood little changed at 1 062 20 on course to post its first weekly gain in seven weeks The expected rise in U S rates and slowing Chinese demand are hurting copper which is staring down the barrel of an eighth consecutive weekly decline Three month London copper last traded at 4 560 50 a tonne hovering around the six year low seen on Nov 23 and was on track for a weekly loss of 0 3 percent |
JPM | Oil hits two year and a half year high on pipeline shutdown stocks take breather | By Ritvik Carvalho LONDON Reuters Oil prices jumped to their highest in more than two years on Tuesday after the shutdown of a North Sea pipeline knocked out significant supply from an already tightening market World stocks took a break from a three day rally Brent crude futures the global benchmark for oil prices rose above 65 a barrel their highest since mid 2015 after Britain s Forties pipeline was shut due to cracks as a cold snap sweeps the country O R The Forties pipeline is important for the global oil market because the crude it carries normally sets the price of dated Brent a benchmark used to price physical crude around the world and which underpins Brent futures The shutdown comes as oil supply cuts by the Organization of the Petroleum Exporting Countries OPEC have helped chip away an excess of inventories built up following a global supply glut which began to emerge in late 2014 The disruption to Forties is not just about missing barrels it is also about losing a key component for the main seaborne crude oil benchmark said Olivier Jakob analyst at Petromatrix U S crude oil futures CLc1 were last 0 7 percent higher at 58 41 a barrel Prices of gas across Europe also soared following an explosion at Austria s main gas transfer hub and as Russian gas Meanwhile the MSCI index of world equities MIWD00000PUS which tracks stocks across 47 countries was flat after posting three straight days of gains Wall Street futures indicated a positive open ESc1 The jump in oil helped boost energy heavy European stock indices with the pan European STOXX index STOXX rising 0 3 percent by afternoon in London Europe s oil and gas sector index hit its highest in a month SXEP Earlier in Asia MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS drifted off 0 3 percent having bounced 2 percent in the past three sessions with markets consolidating in the hope an upswing in global growth could outlast a likely hike in U S interest rates this week Commodity linked currencies also got a boost from the pick up in oil prices The Australian dollar and the New Zealand dollar were both over half a percent higher while the Norwegian crown rose 0 6 percent CENTRAL BANK SEASON FINALE Investors continued their policy vigil with the U S Federal Reserve set to end its two day meeting on Wednesday while the European Central Bank and the Bank of England will meet for the last time in 2017 on Thursday JPMorgan NYSE JPM economist David Hensley suspects the Fed will revise up its growth forecast while trimming the outlook for the unemployment rate potentially adding upside risk to the dot plot forecasts on interest rates The dot plot previously called for three hikes in 2018 it is a close call whether this moves to four hikes he warned a shift that would likely boost the dollar but could bludgeon bonds For its part the European Central Bank ECB is likely to emphasize its low for long stance and continue to distance itself from the Fed he added The staff is likely to revise up its 2018 growth forecast while we think the core inflation forecast will reveal an even slower recovery than before The divergence in Fed and ECB policy was supposed to be bullish for the dollar given it had widened the premium offered by U S two year yields US2YT RR over German yields DE2YT RR to 256 basis points from 188 basis points this time last year The last time the spread was that plump was in 1999 Yet the euro is currently up 12 percent on the dollar this year while the dollar is down 8 percent on a basket of currencies DXY an indication interest rate differentials aren t everything in forex The dollar was idling at 113 50 yen just off a one month top of 113 69 while the index that measures it against a basket of peers was down 0 1 percent DXY There was a little more action in bitcoin which was last up over half a percent on the day at 16 633 on the Bitstamp exchange BTC BTSP The cryptocurrency s newly launched 1 month futures contract 0 XBT fell 4 percent to stand at 17 830 on its second day of trading Gold remained out of favour at 1 242 51 an ounce having suffered its biggest weekly drop since May last week
For Reuters Live Markets blog on European and UK stock markets see reuters realtime verb Open url |
JPM | Deutsche Bank Economist Hooper Says Bitcoin Is Here to Stay | Bloomberg Bitcoin isn t perfect but don t expect it to go away anytime soon
At a global market outlook breakfast in Manhattan on Tuesday executives at Deutsche Bank AG DE DBKGn were in agreement that the cryptocurrency is here to stay
The whole idea has a potential future but it could be better designed said Peter Hooper the bank s chief economist Ultimately we re going to have to find a way to accommodate and regulate to avoid the problems The bigger this becomes the more it is going to attract regulatory interest
Talk of regulation has already begun as bitcoin surged from 1 000 at the start of 2017 to more than 17 000 today Randy Quarles The Federal Reserve s vice chair of supervision said earlier this month that regulating the asset is worth thinking about Fed Chair nominee Jerome Powell has said that cryptocurrencies could be an issue of concern And while some Wall Street executives like JPMorgan Chase Co NYSE JPM s Jamie Dimon don t think there will be a long run for bitcoin others have a different outlook
There are some potential benefits to this Hooper added citing the ability to send money across borders This has a long way to go to compete with existing money supplies but there are questions about financial stability |
C | Citi likes FibroGen sees 49 upside shares ahead 9 premarket on light volume | FibroGen NASDAQ FGEN is up 9 premarket albeit on only 1 500 shares on the heels of Citigroup NYSE C s announcement that it is a top pick Analyst Joel Beatty says anemia candidate roxadustat should be a winner with the potential to the top drug for the condition He pegs the probability of approval at 80 ahead of the conclusion of late stage studies top line date expected in mid 2018 Source Bloomberg First WordNow read |
C | Bank s rally in front of CCAR results | The CCAR results at which banks capital return plans for the coming year will or won t be approved or something in between will be released after the close tonight After years of this exercise and having built up big capital cushions one would expect nearly all lenders subject to the test to have properly gamed things by now Plus does the Fed really want to fail Citigroup NYSE C just picking a name at a time when the new administration has made clear its distaste for the strict regulatory regime in D C The XLF 1 6 KBE 1 7 KRE 1 5 ETFs XLF FAS FAZ KRE VFH UYG KBE IYF FNCL BTO IAT IYG KBWB QABA FXO SEF KBWR RYF FINU XLFS DPST KRU FINZ RWW WDRW KRS FAZZ JHMF FTXO FNCFNow read |
C | Citigroup plans 18 9 billion capital payout over next four quarters | NEW YORK Reuters Citigroup Inc N C said it plans to repurchase up to 15 6 billion of common stock over the next 12 months and double its quarterly dividend to 32 cents per share bringing total payouts to 18 9 billion Citigroup the fourth biggest U S bank by assets announced its intentions after the U S Federal Reserve said on Wednesday that it would permit the company to go forward with the capital plan it had submitted for stress testing |
C | With Turkish Lira Pounded U S Banks Also Take A Hit | The Turkish Lira dropped 18 in relation to the US dollar on Friday morning as tensions rose between the Turkish and American governments
Turkish President Erdogan gave a defiant speech at a rally encouraging his people to sell dollar denominated foreign exchange reserves
In response President Trump declared I have just authorized a doubling of tariffs on steel and aluminum with respect to Turkey as their currency the Turkish lira slides rapidly downward against our very strong dollar
The Lira hit an all time low as the two countries have been unable to resolve a range of matters including sanctions weapons sales and the release of a Christian pastor
Yet this also affected bank stocks in Europe and the US with the Financial Select Sector SPDR NYSE XLF down over 1 and individual banks such as Citigroup NYSE C down over 2
In analyzing the market cycles for the XLF we can see that it is about a third of the way through its current market cycle perhaps now finishing the rising phase As the declining phase for the ETF would last until mid November What is clear is that XLF backed off once hitting resistance marked by the 61 8 Fibonacci confluence
In analyzing the market cycles for Citigroup Inc NYSE C it appears to be primed for a sell Also about a third of the way through its current cycle the stock declined once hitting our intermediate resistance zone
With this cycle also set to complete in mid November our analysis is that both XLF and C are setting up for a decline into that period Were this analysis to be correct this is a bad omen for the overall stock market |
C | EUR USD 2 Are In Favor 2 Are Against | EUR USD is likely to consolidate in the range of 1 15 1 185 according to fundamental factorsWhat happened to the greenback Just in the mid August Donald Trump was boasting that Money is pouring into our cherished DOLLAR like rarely before and EURUSD was trading close to the 13 month low Scarcely two weeks have gone since that and the situation is completely different Most speculators are exiting USD longs and the euro price is testing figure 17 base That is Forex If you are not prepared for such changes you won t stay there for long I keep saying that the key drivers for the dollar strengthening in April August period have become the gap in the economic growth and monetary policies U S protectionism and the weakness of the competing currencies The USD growth was supported by the turmoil in the emerging markets At the end of summer it is clear that the central banks are willing to protect their local currencies China has revived the counter cyclical factor abandoned in early 2018 Russia has suspended purchasing of foreign currencies Turkey is hiking the interest rate In the short term it gets the yuan the ruble and the lira steady but on the long term investment scope the reduction in the balance sheets of the global leading central banks will continue pressing the EM currencies The Fed s Treasury holdings are reduced by 150 billion Even though the ECB and the Bank of Japan continue buying out assets within QE the European central bank is going to quit the program already in 2018 and the BoJ will substantially cut its volume Changes in the central banks QE bondholdingsSource FinancialTimesDollar is also pressed by the US China trade talks and the progress in the trade relations between the USA and Mexico In fact it is still too early to suggest the end of the trade conflict between Washington and Beijing and Donald Trump s success in NAFTA talks may become the beginning of the end The relocation of the automobile industry from Mexico into the USA will increase the costs and badly affect consumers At the same time car producers will search for the opportunities to move into Asia and other continents To avoid it the U S president will have to increase the tariffs Trade war is a long lasting process And it works to the U S dollar s advantage I think one of the strongest speculators concerns is a potential slowdown in the U S economy growth It can make the Fed to change its plans for the rate increases The U S economic surprise index is down to the lowest level since 2017 and a higher foreign trade deficit made Macroeconomic Advisers lower the expected U S GDP rate down to 3 1 in the third quarter U S economic surprise indexSource Citigroup NYSE C If Jerome Powell is so confident that the inflation rate won t much exceed its 2 target and the U S economy growth starts slowing down the Fed will have strong reasons to suspend its monetary normalization Along with Donald Trump s comments this factor makes speculators more likely to sell the dollar EURUSD bulls couldn t storm the resistance at 1 173 on the first try The euro is down below figure 17 base traders are waiting for the report on the U S GDP in April June period If it is lower than preliminary data euro bulls can be encouraged to go ahead Share the post on the social networks and leave your comments below it would be the best thanks Stay updated of my articles by subscribing to trader blog Fill in the form below and receive the latest articles in trader blog directly via your email Write your questions and comments below I am eager to answer and explain |
C | How Bitcoin Will Make You Big Money Again | If you are a Bitcoin fan or looking for the next opportunity for a Bitcoin rally you may not have long to wait before a price breakout takes place Our research team at believes a price breakout may occur before the end of 2018 the only question is will it be a breakout rally or a breakdown crash before the next mega rally
Cryptos and in particular Bitcoin has increased in popularity and adoption over the past 24 months across the globe Recently Citigroup NYSE C has announced new technology making Crypto transactions more secure and reducing the risk of such transactions Additionally Circle recently announced a US Dollar based Crypto currency that is backed by Goldman Sachs News from Europe is that the EU has been urged to adopt common Crypto Currency rules that will fuel more attention and enterprise on developing suitable Crypto solutions for the European markets
All of this plays into our research that a breakout breakdown is inevitable and it is just a matter of time before this coiling price consolidation apexes and expands
This chart shows massive breakdown washout below 6000 taking it back to prices before crypto became popular in early 2017
This next chart below shows our cycle analysis and how much bitcoin moved from our cycle bottoms to tops We are now at NEARING a critical juncture of a 6000 breakdown which is clearly a support level and a potential major cycle bottom or continuation down cycle Huge money can be made from this extreme volatility that is about to unfold and savvy technical traders can see the profit potential unfolding |
C | EUR USD Dollar Wants But Waits | EUR USD continues consolidating in the range of 1 15 1 185
Two steps forward one step back Since mid April the U S dollar had been 7 up during 27 weeks next it was 2 down during 4 weeks Although speculators are still holding 19 2 billion of net longs for the US dollar the derivative market features more and more interest in the rival currencies including the euro Investors wonder whether the current USD dive is the beginning of the end or just a common correction in the uptrend
In any war there are winners and losers And it is not just about the U S trade battle with China where the stock indexes display who is who It is also about the positions of power in Forex Dollar is leading on every front possible and the most emerging markets currencies are suffering from the most serious losses Their greatest problems are increase in the US Treasury yield US massive fiscal stimulus supporting the impressive results of the US economy growth and trade wars
Dynamics of the dollar rate and the emerging markets currencies rates Source BloombergAccording to 44 from 59 experts interviewed by Wall Street Journal the tax reduction won t have such strong influence on the US economy in the long term 35 2 of respondents expect a little increase in the US GDP supported by the fiscal stimulus 11 are confident that the tax reform will slow down the US GDP growth So the effect of the tax reform on the US GDP will gradually fade out Another matter is trade wars
Investors have expected Donald Trump to announce the expansion the import tariffs on China s imports worth 200 billion for about a week however nothing has changed According to the Chinese media Beijing won t be talking at gunpoint or playing just for defense If the U S doesn t stop threatening there won t be any kind of negotiations Both sides have reached a dangerous point and any careless step can have an enormous impact on global economy
Dollar s advantage is not only in the US tax reform impressive GDP rate and high demand for safe heaven assets resulted from trade wars It is also in the weakness if the greenback rivals A decline in the Euro area economy growth in the first half year supported the EUR USD rise as much as the Fed s monetary normalization However I can t say that the greenback has no soft points Expansion of the US twin deficit Donald Trump s comments drop in the economic surprise index also because of a slower inflation rate and growing risks of recession get investors to be extremely careful before they enter U S dollar longs
Dynamics of the U S economic surprise indexSource Citigroup NYSE C
When the markets want to buy the U S dollar but wait being cautious the EUR USD consolidation looks quite consecutive The bulls try to consolidate the euro above the resistance at 1 171 failed followed by the euro drop down by almost a whole figure due to the strong statistics on the U S industrial production retail sales and the consumer sentiment EUR USD seems to go on its consolidation in the trading range of 1 15 1 185 |
JPM | What s Gold Telling Us | Gold has been one of the best performing assets in 2016 The price of gold has surged from 1061 00 to 1250 00 since the start of the year Generally most traders and investors will look for gold to do poorly when the U S dollar is strong but recently gold has rallied higher despite the strength in the dollar
Gold topped out in September 2011 at 1923 70 an ounce Ironically gold peaked the week after JPMorgan Chase Co N JPM upgraded the equity to 2500 00 an ounce It is still amazing how these giant financial firms can still upgrade an equity at parabolic highs As you all know gold has declined steadily since the 2011 top The precious metal has given back roughly 50 percent of its gain from the 1999 low to the 2011 peak
What is causing gold to rally in 2016 Over the past few years most central banks around the world have followed the Federal Reserve in creating easy money policies Recently the People s Bank of China the Bank of Japan and the European Central Bank have all began new forms of easy monetary policy Japan and Europe have now moved to negative interest rates and this is something new that many investors are trying to understand and figure out Hoarding money is very likely since many people will have to pay the bank to hold their money In fact Japan is seeing a surge in the purchases of safes People are simply going to keep their money at home instead of depositing it with the banks Many people will also rather have precious metals instead of holding lots of paper capital These are just a few reasons why gold is trading at a high for 2016
The current pattern on the daily chart of gold is neutral This is because the precious metal have risen so much recently At this time gold looks to be trading sideways on a weekly chart This sideways consolidation pattern could lead to another break out down the road In fact most of the recent sell offs in gold have resulted in reversal moves right back up to the highs This is bullish action overall since the equity cannot pullback from its overbought condition The price action in gold is telling us that there is something bigger going on globally regarding the financial system Traders and investors should continue to keep a close eye on gold as an important asset class in 2016 Some ways to trade gold are by using the SPDR Gold Shares N GLD iShares Gold N IAU and the Market Vectors Gold Miners N GDX |
JPM | U S Data Steady As She Goes | He that won t be counsell d can t be help d Benjamin Franklin ed Poor Richard s Almanack
Was it really a case of the Dimon Bottom Such is an idea that has been put forth on CNBC and other media outlets the premise being that JP Morgan N JPM CEO Jamie Dimon s big stock purchase 22 6 mm of his own company s stock two weeks ago changed the mindset of the market Instead of being scared of every shadow perhaps traders are now thinking that things aren t so bad 23 million isn t chump change after all and one would think that Dimon widely considered to be one of the most intelligent bankers around and probably the most hands on would know if something big was brewing in banking though it ought to be noted that he did miss his own bank s London Whale fiasco
It was a nice gesture by Dimon and I m sure he must have some good reasons for comfort with the books of the bank he runs However you might do well to keep in mind a few observations the first being that CEOs are much better market timers when it comes to selling stock than they are when it comes to buying Knowing that your books are in good shape is one thing knowing where the market is going to be in a year is quite something else as no less a luminary than Warren Buffett recently remarked
Another point I would stress is that the impending recession and current bear market isn t going to be like the last one There are always commonalities to be sure but there are always major differences as well As the looming recession runs its course there will surely be some problems in credit land as there always are and some institutions will get into trouble As bad market weather develops fixed income markets will do their usual imitation of an ostrich But U S banks are far less extended than they were in 2007 have much better capital cushions and simply aren t going to be the epicenter of the crisis this time No doubt some can and will suffer from banking problems from abroad e g China and the EU just as EU banks paid a heavy price for the U S credit meltdown If some big enough foreign banks blow up then all the banks will pay a price But the U S is most unlikely to be at the center of the storm
Dimon may end up wishing he had bought stock a little later but he s certainly rich enough to ride out a trip back to 40 or so even less in the price of his stock currently in the mid 50s then wait for it to come back Those of you who are near retirement may have an entirely different perspective and rightly so
The rally last week is part of a bear market rally that could still have some legs Some of the economic news has been widely misinterpreted very typical of the early stages of down periods and last week s reports on durable goods and GDP were right in that mode see below A few weeks ago I was writing nearly every week about the market being oversold now we are out of that region The S P 500 finished last week by hanging onto the widely anticipated test of the 1950 level and there is some hope of recovering to the region of 2000 where the 150 day and 200 day averages lurk A market friendly employment report good but not too good a dovish sounding Fed meeting next month the next statement is due March 16 and a little earnings amnesia just might extend the upside trade
But that is all it would be an upside trade and I am growing a little concerned at the growing number of voices who feel a continuing rebound is a done deal Certainty about price movements invites trouble on Wall Street Should the upside come to pass however it s not as if it s far fetched expect many loud voices proclaiming that the correction was all a tempest in a teapot that the data was somehow misguided and all is about to be well for some time to come
Don t believe it A good rebound will provide a nice opportunity to ease your way out of equity positions and build up a nice pot of cash to weather the impending storm Don t miss out on the chance because the business cycle is nearly over parts of it already are and it won t be much longer before the market has to face the music My guess is the worst of it is still a couple of quarters away but when it comes to bear markets it s better to exit a little early than to exit a little late
The Economic Beat
The week started off quietly with the first half mainly housing news The existing home sales rate of 5 47mm was virtually the same as the previous month s 5 45mm rate though the consensus had been for something slightly less The median price fell somewhat in the report possibly a mix issue as the Case Shiller report released earlier showed no change in the year on year rate of increase of 5 7 though the price report was for December and the sales release was for January Ditto for the new home sales report which showed the annual rate easing back to 494K seasonally adjusted from 544K in December The actual trailing twelve month TTM rate has been in a narrow range of 490K 500K since July so there was no real change in a sales rate that seems to be quite stable for now
The durable goods report is going to be erroneously cited as a great report for some time Take advantage of this Seasonal adjustments resulted in a rousing 4 9 gain for January and many have been cheerfully pointing to the rebound in business cap ex spending of 3 9
It s an illusion generated by January spending declining less steeply from December than it did a year ago The smaller decline results in the seasonally adjusted SA gain but know this business cap ex spending was down 4 6 from January 2015 using unadjusted data That s a lot worse than the year ago performance when it was only down 1 1 from January 2014 The month was also the thirteenth consecutive one of negative year on year comparisons The TTM total for the category is now off 4 1 from a year ago the worst such reading since June 2010
It s going to take a while for the hard data to work its way into GDP which was revised back up to a 1 run rate SA for the fourth quarter versus the original print of 0 7 and expectations for a downward revision to 0 4 The market wasn t too cheered by the news though as analysts were quick to point out that the revision a small amount of dollars really that gets boosted heavily by annualization was on the back of inventory accumulation That will probably weigh on the first quarter s output Going into the quarter the inventory to sales ratios were at very high levels so I m expecting more trouble ahead from this sector
There were signs of that trouble in some manufacturing surveys as both Kansas City 12 and Richmond 4 had poor showings for their respective Fed districts The Markit flash national purchasing index also declined to 51 and while it isn t very widely followed the direction is something to think about
Personal income and spending seemed alright in January with both up about 0 5 Like employment though income and spending are lagging indicators The market paid more attention to the result of the Fed s preferred inflation gauge core PCE a gauge that excludes food and energy and focuses on what the central bank considers to be essential spending inflation It rose to 1 7 a big jump from last month s 1 4 I don t consider the economy to be anywhere near the verge of inflation trouble but the Fed s target is 2 Some traders are worried that further increases will add conviction to central bank thinking about rate increases
Such thinking won t get any conviction from looking at global trade The exports of goods fell faster than imports in January a weight on first quarter GDP Services will be added next week with the release of the full report on Friday
The highlight of next week is of course the jobs report on Friday Consensus is for something in the 190K 200K range though that may shift a bit after Wednesday s ADP report Weekly jobless claims haven t signaled any real trouble
The week will lead off with the Chicago PMI a report that has been fairly erratic for about a year now It ll be accompanied on the tape by the last housing report for the month pending home sales and followed by another regional manufacturing report from the Dallas Fed The two national purchasing surveys follow with the ISM manufacturing result on Tuesday and non manufacturing on Thursday Factory orders round out the industrial sector on Thursday
We ll also see construction spending on Tuesday a report where one should heed revisions more than the current number The Beige Book is on Wednesday and fourth quarter productivity gets an update on Thursday Monthly car sales data for January will be announced throughout the week |
JPM | Oil Rises Despite Weak Economic Data | US stocks closed lower on Monday despite higher oil prices The dollar strengthened live dollar index data indicate the ICE US Dollar Index a measure of the dollar s value against a basket of six major currencies rose 0 2 to 98 324 The Dow Jones Industrial Average slid 0 3 to 16588 weighed by a 0 8 loss in JPMorgan N JPM shares The S P 500 fell 0 8 to 1932 22 with nine of the ten major sectors closing in the red led by 1 58 decline in healthcare stocks Disappointing economic data undermined investor confidence Chicago area manufacturing activity index fell below 50 signaling contraction and a survey of Dallas area activity came in much weaker than expected Weak data came after strong readings of fourth quarter GDP growth inflation and consumer spending last Friday Today at 15 45 CET final reading of February Manufacturing PMI will be released by Markit At 16 00 CET February ISM Manufacturing PMI Prices Paid and Construction Spending for January will be published The tentative outlook is positive
European stocks ended higher on Monday after China s central bank lowered the required reserves ratio by 50 basis points to provide more stimulus for the slowing economy The euro weakened following weak inflation reading from the euro zone inflation fell to minus 0 2 in February after a 0 3 rise in January The Stoxx Europe 600 closed up 0 7 bolstered also by expectations that the European Central Bank will expand its monetary stimulus program later this month However Germany s DAX 30 lost 0 2 settling at 9495 40 France s CAC 40 gained 0 9 and UK s FTSE 100 edged up less than 0 1 Today at 09 55 CET German Unemployment Change and Unemployment Rate for February will be published in euro zone The tentative outlook is neutral At 10 30 CET Markit Manufacturing PMI for February will be released in UK The tentative outlook is negative And At 11 00 CET January euro zone Unemployment Rate will be released The tentative outlook is neutral
Asian stocks are advancing today as investor optimism was buoyed by China central bank s fresh monetary stimulus measure overnight despite weak manufacturing reports today manufacturing activity in China contracted for a seventh straight month in February according to both official and Caixin PMI reports The drop was sharper than expected but the services sector continued to expand Chinese stocks are rising today with Shanghai Composite Index up 1 7 Nikkei closed 0 4 higher today erasing early losses as yen weakened against the dollar
Oil futures prices are rising today after closing higher on Monday as declining US active oil rig numbers and the tentative agreement between major producers to freeze output spurred expectations of easing of the current oversupply April WTI rose 3 to 33 75 a barrel on the New York Mercantile Exchange while Brent gained 2 5 to 35 97 a barrel on London s ICE Futures exchange US official data showed crude output last December fell for a third straight month by 43000 barrels per day bpd to 9 26 million bpd to lowest in a year and active oil rig count dropped by 13 to 400 for a tenth straight week The clearing of the current glut is expected to take time though as slowing global demand growth evidenced by weak economic data from China will be offsetting declines in output |
JPM | ISM Manufacturing Up In February | The ISM Manufacturing Index was reported at 49 5 for February 2016 up from 48 2 in January It was the second consecutive rise for the overall index December being the lowest so the it s all over narrative has been flying around heavily today Lost in the relief is that February was the fifth consecutive month below 50 and sixth straight at or below 50 It s also a message and condition that we have seen before notably last summer when the ISM s PMI rose from a low of 51 6 in April to 53 1in May and June closely followed by re emphasis upon transitory
In fact there is always a tendency to over interpret monthly variations On July 1 2008 the ISM reported its index peaked back above 50 in June 2008 for the first time after four months of sub 50 index levels Like today it alleviated some recession fears particularly in the sub components From Reuters
Bond appetite eased in reaction to the unexpectedly strong growth components in the June ISM report which also showed the prices paid index rose to an almost three decade high fanning fears of inflation that erode bond values
It s negative for bonds and pro stocks It paints a slow growth scenario with rising inflation That s a tough path for the Fed to traverse said George Adell fixed income strategist at Commerce Capital Markets in Jupiter Florida
Even the original overstated the economic case as the recession had already begun but misreading economic accounts especially in isolation kept alive the idea that the worst of 2008 would be just a slowdown no matter how many markets and banks failed
Economic activity in the manufacturing sector expanded in June following four months of contraction while the overall economy grew for the 80th consecutive month say the nation s supply executives in the latest Manufacturing ISM Report On Business
That was July 2008 not July 2007 where even after Bear Stearns recession was still believed just a small possibility by far too many The ability to ignore context and to place so much faith in stimulus remains ubiquitous no matter how much market turmoil is presented There was a similar response into the 1990 recession where the ISM Manufacturing PMI had fallen below 50 in early 1989 but then rebounded back to 50 by April 1990 just two months before the official cycle peak
Even the Markit Manufacturing PMI which has been noticeably higher than the ISM for the past year has come back down into suggesting not just this manufacturing recession but that it is still far from over or
U S factories are reporting the worst business conditions for over three years Every indicator from the flash PMI survey from output order books and exports to employment inventories and prices is flashing a warning light about the health of the manufacturing economy
Again context matters not just from China but the entire global
World manufacturing sector growth stagnated in February as falling prices failed to stimulate new orders pushing factories to trim workforces and dealing a blow to policymakers who are struggling to stimulate their economies
Manufacturing output across much of Asia shrank in February while waning throughout Europe and remaining sluggish in the U S according to surveys of purchasing managers on Tuesday
Inflows of new business and production volumes barely rose while the trend in international trade deteriorated said David Hensley a director at JPMorgan NYSE JPM Market conditions will need to improve in the short run if global manufacturing is to avoid falling back into contraction
If you were looking for evidence of manufacturing growth stabilising then this isn t it There were a couple of low spots that are quite surprising said Philip Shaw at Investec
The point of these PMIs is not whether above 50 or below 50 such precision is fallacy rather it is that the world economy overall and local networks within it such as the US and US consumers are clearly under imbalanced conditions that present very real dangers Whether or not that means recession is beside the point right now as official declarations are a post hoc matter for historians Imbalance is nasty business to see it globally and in such a heavy and uniform way under rather and relatively benign conditions is quite alarming Around the world there are as yet any systems expressing major job losses and still global manufacturing recession is suggested
When the FOMC gathers soon to contemplate their monetary policy communication not rate hikes credit markets are having none of that they will have to account for this contradiction The US economy is in their view close to overheating yet this global manufacturing recession is the best case that it will stay manufacturing The dichotomy is such that those are mutually exclusive possibilities Personally I don t think that it makes any difference whether they raise rates or not but it might again highlight their unique ability to only make a bad situation worse even if all it ever amounts to is lost credibility The economy appears yet again stuck in the wrong direction no matter what meaning that the only variable might be whether or not at some point the economy US and global shows the V |
MS | HSBC says to shut down India private banking business | By Sumeet Chatterjee MUMBAI Reuters HSBC Holdings Plc L HSBA is shutting its private banking unit in India marking the exit of another foreign bank from the cut throat wealth management business in Asia s third largest economy After a strategic review of the global private banking operations in India we have decided to close the business an India spokesman said on Friday This marks further progress in the HSBC group strategy to simplify business and deliver sustainable growth Many foreign wealth managers had scrambled to open up shop in India a few years ago and aggressively ramped up operations to take advantage of robust economic growth only to find themselves struggling Even though India s economy has been minting millionaires at a strong pace it has failed to translate into profits for the foreign wealth managers that have set up teams of well paid bankers to help manage those riches Banks including Royal Bank of Scotland L RBS and Morgan Stanley N MS have sold their onshore India private banking units in the recent past as part of their global business restructuring The Mumbai based HSBC spokesman said it would offer private banking clients the choice to move to HSBC Premier the bank s global retail banking and wealth management platform The process is likely to be completed in the first quarter of 2016 HSBC s private banking business in India has about 70 staff a source with direct knowledge of the development told Reuters The bank employs about 32 000 people in India where it also offers corporate retail and investment banking services It was not immediately clear how much assets HSBC s private banking unit managed in India but wealth management industry sources said the bank was not one of the top three players in this segment
The bank Europe s biggest lender did not immediately respond to a Reuters request for comment on its private banking staff in India and its market position |
JPM | JPMorgan downgrades Syntel and Synopsys | JPMorgan NYSE JPM downgrades Syntel NASDAQ SYNT from Neutral to Underweight citing limited near term earnings growth and margins above the industry average The firm also downgrades Synopsys NASDAQ SNPS from Neutral to Underweight with a reiterated 87 price target The downgrade comes as part of the 2018 annual outlook for Software Technology Previously JPMorgan downgrades Imperva and Adobe Dec 12 Now read |
C | Oil and gas producer EQT to buy Rice Energy in 6 7 billion deal | By Yashaswini Swamynathan and Arathy S Nair Reuters U S oil and gas company EQT Corp N EQT said on Monday it would buy Rice Energy N RICE for 6 7 billion 5 24 billion pounds in its biggest deal ever as it looks to expand its natural gas business Rice Energy s shares surged more than 24 percent to 24 47 in early trading but below the 27 05 per share offered by EQT EQT s shares were down 9 4 percent The deal comes at a time when U S energy firms are pumping in money to develop facilities in gas rich states like Pennsylvania West Virginia and Ohio as the country prepares to become the world s top natural gas exporter EQT said it would be able to drill longer horizontal wells in Pennsylvania after the deal as most of the acquired acreage is next to where EQT already drills or owns land EQT is a decade behind in fracking technology used by industry leaders in Marcellus Utica said Dallas Salazar CEO of energy consulting firm Atlas Consulting EQT needs a lot and Rice offers a lot of what it needs EQT has been buying acreage in the Marcellus shale field where gas is among the cheapest in the country Most recently it picked up 53 400 acres in the field from Stone Energy Corp EQT said the acquisition would increase its 2017 average sales volume by 1 3 billion cubic feet equivalent per day bcfe d and its core acres in the Marcellus field by 187 000 to 670 000 The deal would also give the company access to Rice Energy s midstream assets including a 92 percent interest in Rice Midstream GP Holdings EQT will take on about 1 5 billion in debt Rice Energy shareholders will receive 5 30 per share in cash and 0 37 EQT shares for each share they hold EQT said The offer translates to a price of 27 05 per Rice Energy share representing a premium of 37 4 percent to the stock s Friday closing price according to Reuters calculations Citigroup NYSE C was EQT s financial adviser while Wachtell Lipton Rosen Katz were its legal advisers Barclays LON BARC Capital Inc was Rice Energy s financial adviser and Vinson Elkins LLP its legal adviser |
C | Prepare for a V shaped rebound in oil prices Citi | Investors should position for a potential V shaped rebound in crude prices in H2 Citigroup NYSE C says While it s possible oil prices will dip even lower in near term Citi doesn t see this as sustainable Says 1x2 call spreads and outright short dated calls provide most attractive risk reward Trade ideas Buy Dec 2017 WTI 46 53 call spreads sell Dec 2017 WTI 40 puts for zero cost Buy 1x Dec 2017 WTI 44 call sell 2x Dec 2017 WTI 52 calls for 1 67 Buy Sept 2017 WTI 44 calls for 1 63 ETFs USO OIL UWT UCO DWT SCO BNO DBO DTO USL DNO OLO SZO OLEM OILK WTIU OILX WTID USOI Now read |
C | Big Citi Life And 500 Billion In U S Trade Democracy | The focus is on two key events
Citigroup s net profit has increased by 14
Citigroup Inc NYSE C has reported net income for the second quarter of 2018 of 4 5 billion That s revenues of 18 5 billion compared to the same period in 2017
According to Citigroup CEO Michael Corbat the strong financial performance reflects the expansion of almost all divisions of the corporation as well as loan growth across all of Citigroup s geographies In addition Corbat is pleased with the confirmation from the US Federal Reserve in respect to a strategic plan which will allow the corporation to return 22 billion dollars of share capital next year
After the report was released the company s shares showed growth up to 69 per share Given the positive outlook and the general bullish sentiment of investors we should expect the quotes to rise to a high for 2018 80 per share
Trump is ready to impose duties on all Chinese imports
The president of the United States Donald Trump is ready to impose duties on the import of Chinese goods worth 500 billion
If the US president s threat is implemented the duties will affect almost the entire volume of imports from China which in 2017 amounted to 505 6 billion compared to 129 9 billion in exports of American goods to China
Let s recall how in mid June the US introduced a 25 percent duty on goods from China This affected about a tenth of Chinese imports to America
The volume of deliveries that the tariffs affect so far is 34 billion for each country The list of additional taxable goods in the United States includes 818 positions and in the PRC it s 545
Investor fears concerning the introduction of duties are not unfounded If events continue to develop in an unfavorable manner we could see people running to assets with reduced levels of risk |
JPM | Nasdaq Down 20 S P 500 Down 14 | Throughout 2015 I felt the market was in a topping phase due to complacency along with massive negative divergences on those key monthly index charts The market didn t fall much in 2015 but it refused to have sustainable upside action In the end the markets were down slightly for the year It took all of 2015 for the market to finally stop its upward thrusts That s normal since the bulls had been trained to buy any and all pullbacks They were sure to be rewarded but with the bears fighting harder it took a little over a year to finally get the market from consistently moving higher Then came the first trading days of 2016 and the slaughter was on A very violent move lower in just a few weeks time The NASDAQ was down nearly 20 off its highs with the S P 500 down about 14 Some indexes officially reached what the market calls bear market territory while other sectors only reached corrective status That said most stocks it seemed were in bear markets Many down well over 20 percent Some well over 30 and even 40 percent
The lower P E and higher dividend stocks carried enough weighting in the S P 500 and Dow to prevent those two indexes from falling in to bear market territory A few days back the market finally printed some daily index chart positive divergences Some bigger than others The CEO of JPMorgan Chase Co N JPM bought shares I think asked to by the fed and the rally was on The gap up came and we were off to the races thus our position in the Q s A good play for sure The move off the bottom did something different than at any time during the 2008 bear market It has now printed three consecutive large gap ups and go It also did the last gap up today from very overbought sixty minute conditions Extremely unusual if we re in a bearish environment Once overbought the gaps should stop It didn t So now that has to be taken in to the equation as something you see in an environment that s turning more bullish It has been an interesting ride but maybe all it has really been was a correction to a bear depending on whether you re froth or not Froth to a quick bear while non froth to a correction Time will tell
So now let s go exploring the world of sentiment which is critical to look at only at extremes We spent nearly two years at extremes on the complacency side of the equation with the highest reading in the upper 40s which eventually topped the market out Anything over 30 is complacent but we had at least ten readings over 40 The complacency was absolutely off the charts As the market began to go sideways the bulls began to lose faith Upside seemed difficult at best The market was no longer rewarding the buy pullback story that had been the friend of the bull for so long Slowly but very gradually the market began to see the fruits of this frustration with the bull bear spread getting smaller and smaller as the weeks wore on This week we wake up to a negative reading of 13 3 That is extreme fear It can be a reading from which a market can bottom permanently Doesn t have to be but definitely can be so that has to be put in to the equation So now we see three gap ups and go off a positive divergence and extremes of fear Two for the bulls
So what is there for the bears Just about everything else from bank headaches globally to diminishing fundamentals both here and abroad We have earnings on a major decline Worst quarter in many many years The problems on the fundamental level seem to be worsening not improving Huge one for the bears The biggest plus on the side of the bears but some very big pluses on the side of the bulls I think we ll get our answer in the weeks to come We closed today extremely overbought A pullback will occur soon and then another rally right back up which should form a negative divergence Off of that eventual negative divergence we should get our answer How this market sells off a sixty minute negative divergence meaning how those oscillators respond to selling on the daily chart will tell me if the correction is over or not I couldn t tell you for sure what to expect We ll get the answer shown to us so be ready to adjust and adapt to whatever the message is It s 50 50 to me I can see us blasting out to new highs and I can see the reverse
You don t have to know the answer As it unfolds the oscillators will help us with the answer Let them talk to us with an open mind No pre conceived notion of what should be There are no should be s in this insane Disneyland of a game Oh and you can add low rates as being in favor of the bulls They aren t going up much if at all this year They will stay very close to zero A very interesting time is upon us Let the story unfold in the coming weeks |
JPM | Real Money Moves Into Real Assets | It was a busy week of news in Master Limited Partnerships MLPs Although there were several earnings announcements perhaps most notable was the disclosure of new investments by Berkshire Hathaway N BRKa David Tepper s hedge fund Appaloosa and George Soros in much maligned Kinder Morgan N KMI Appaloosa also disclosed holdings in KMI warrants which expire at 40 in May 2017 so represent an exceptionally optimistic view of the company given its current price of 17 37 They also disclosed new holdings in Energy Transfer Partners ETP and the Alps ETF AMLP These purchases all took place sometime during 4Q15 coincidentally when I added personally to my MLP investments So these three investment giants shared the disbelief of many at the continued MLP rout Nonetheless for those who draw comfort from the decisions of others it was a good start to the week
Taxes play an important role for MLP investors Tax barriers impede many institutional investors from allocating and most mutual funds and ETFs face a substantial drag from corporate income tax so it s worth spending a moment on how these issues likely affected these three investors First of all KMI is not an MLP but is instead a C corp so there are no impediments to investing in them In any event BRK is an insurance company one of the few classes of institutional investor who can easily hold MLPs because they are taxable whereas most institutional equity investors pension funds endowments and foundations sovereign wealth funds are not
ETP is a partnership and Appaloosa doesn t disclose which of its funds invested Appaloosa could hold ETP through a domestic partnership since its investors would generally be U S taxable Most hedge fund money is offshore though so holding ETP through say a Cayman vehicle is more problematic When I was at JPMorgan N JPM investing offshore capital in hedge funds 10 15 years ago we used total return swaps executed with a prime broker These provide the economic exposure to the MLP without the tax problems but tax opinions have fluctuated on these over the years since the swap has no true purpose beyond tax management Or Appaloosa may have created a blocker corporation to hold ETP on behalf of its offshore fund and paid taxes at that level We can only guess but what is clear is that they regard the potential upside as worth the cost of handling the tax issues
The Oklahoma Teachers Retirement System evidently feels the same way about the return potential since they recently added 250 million to their MLP exposure As a tax exempt U S institution they may face Unrelated Business Income Tax UBIT through their MLP investments Since tax exempt institutions generally like to avoid paying taxes UBIT represents an impediment to holding MLPs However they are not prohibited from making such investments and Oklahoma Teachers may have concluded that the returns even after UBIT remain attractive or their tax analysis may have shown that the ineligible income from MLPs falls below the threshold for a tax liability given their 14BN in funds
In any event all of the above shows that institutional investors are beginning to take advantage of the market dislocation in MLPs and indeed began to do so several months ago As we wrote in the comparative rigidity of the traditional investor base was exposed by the rapid exit of retail investors from MLP mutual funds and ETFs It s creating an opportunity MLPs will not reclaim their place as a stable source of income anytime soon but an asset class with double digit yields offers the potential for 30 one year returns assuming 1 distributions keep being paid and 2 the constant paying of distributions leads to inflows driving yields lower by a couple of percent Of course the potential upside comes with the possibility of losing 10 in a week as we ve seen However it s hard to identify another asset class that offers that kind of potential return And it s worth noting that investors such as Oklahoma see attractive returns even with the hurdle of potential tax expense For investors in a RIC compliant MLP fund that doesn t pay tax such as ours it s a simpler decision
We are invested in BRK and KMI |
JPM | iFOREX Daily Analysis 24 02 2016 | The dollar was almost unchanged against the other major currencies on Tuesday as after the release of mixed U S economic reports and as oil prices dropped further
The National Association of Retailers said that existing home sales rose 0 4 in January to 5 47 million units from 5 45 million units in December Analysts had expected existing home sales to fall 2 9 to 5 32 million units last month Separately the U S
Conference Board said its index of consumer confidence fell to a seven month low of 92 2 this month from a reading of 97 8 in January whose figure was revised from a previously reported 98 1 Analysts expected the index to fall to 97 0 in February
Meanwhile oil prices pushed lower following bearish comments from Iran s oil minister Bijan Zanganeh who called last week s output freeze deal between Saudi Arabia and Russia ridiculous
Last week s proposal by Saudi Arabia Russia Venezuela and Qatar for oil producers to freeze output at January levels puts unrealistic demands on Iran Zanganeh said
Today the U S is to release a report on new home sales and data on crude oil inventories while later on St Louis Fed President James Bullard is to speak at an event in New York
EUR USD
The single currency fell mildly on Tuesday briefly dropping below 1 10 for the first time since early February as Bank of England governor Mark Carney admitted the risks of a potential Brexit from the European bloc have weighed on the pound since last week s agreement between the UK and the European Union paved the way for a referendum in June
Appearing before the Treasury Select Committee on Tuesday Carney testified that the referendum on Britain s membership in the EU is driving demand for protection of the sterling
In the U S further gains in the dollar were restrained by a flurry of soft economic data
The currency pair traded between 1 0990 and 1 1124 before settling down 0 14 on the session
Today investors focus will be on US data on new home sales and on St Louis Fed President James Bullard speech in New York for further information on the strength of the economy
Pivot 1 1065Support 1 0985 1 0965 1 0935Resistance 1 1065 1 11 1 114Scenario 1 short positions below 1 1065 with targets 1 0985 1 0965 in extension Scenario 2 above 1 1065 look for further upside with 1 1100 1 1140 as targets Comment the RSI lacks upward momentum
Gold
Gold surged more than 1 on Tuesday building on gains from earlier in the session following the release of soft consumer confidence and manufacturing data in the U S
The precious metal traded in a broad range between 1 207 70 and 1 226 20 an ounce before settling up 1 11 on the session Gold still remains on pace for one of its strongest opening quarters in nearly 30 years
Today investors focus will be on US data on new home sales and on St Louis Fed President James Bullard speech in New York for further information on the strength of the greenback
Pivot 1215Support 1215 1200 1191Resistance 1240 1248 1256Scenario 1 long positions above 1215 with targets 1240 1248 in extension Scenario 2 below 1215 look for further downside with 1200 1191 as targets Comment the RSI is mixed with a bullish bias
WTI Oil
Crude futures fell sharply on Tuesday erasing most of their gains from the previous session s rally as bearish comments from officials in Saudi Arabia and Iran provided few signals of any forthcoming reductions in the massive global supply glut in the near term future
Speaking before an audience at the CERAWeek 2016 Energy conference in Houston Saudi Arabia oil minister Ali al Naimi reiterated on Tuesday morning that the kingdom will not lower production from its current levels resisting calls to slash output in an effort to rescue prices
Always on Tuesday the American Petroleum Institute said crude oil stocks rose 7 1 million barrels last week well above the 3 0 million barrel build seen Distillates stocks fell 267 000 barrels and gasoline stocks rose 569 000 barrels
Today energy traders will keep a close eye on the government report from the U S Department of Energy which could show that crude inventories rose by 3 2 million barrels for the week ending on February 19
Pivot 32 5Support 30 7 29 8 28 8Resistance 32 5 33 55 34 2Scenario 1 short positions below 32 50 with targets 30 70 29 80 in extension Scenario 2 above 32 50 look for further upside with 33 55 34 20 as targets Comment the RSI is bearish and calls for further downside
S P 500
On Tuesday U S stocks retreated from near six week highs reached in the previous session as a pair of prominent energy ministers rattled markets with bearish comments on global supply and JPMorgan Chase Co N JPM announced downbeat forecasts for the first quarter due in part to its exposure to the oil and gas industry
The Dow Jones Industrial Average lost 1 14 while the NASDAQ Composite index fell 1 47 as tech and pharmaceutical stocks weighed meanwhile the S P 500 Composite index dropped 1 25 as 9 of 10 sectors closed in the red Stocks in the Energy and Basic Materials sectors lagged each falling by more than 2 5 while stocks in the Utilities industry led
Today investors focus will be on US data on new home sales and on St Louis Fed President James Bullard speech in New York for further information on the strength of the American economy
Pivot 1950 Support 1810 1738 1650 Resistance 1950 2010 2080 Scenario 1 short positions below 1950 with targets 1810 1738 in extension Scenario 2 above 1950 look for further upside with 2010 2080 as targets Comment the RSI is mixed and calls for caution |
JPM | Oil Edges Lower Gold Holds Stable | US stocks ended lower on Tuesday as the resumption of oil decline once again undermined investor confidence The dollar was little changed According to live dollar index data the ICE US Dollar Index a measure of the dollar s strength against a basket of six rival currencies was flat at 97 43 The S P 500 closed 1 3 lower at 1921 27 Only utility stocks ended 0 1 higher while remaining nine sectors finished in the negative territory led by energy stocks down 3 2 Material and financial stocks were the next worst performers falling 2 4 and 1 8 respectively The largest US bank JPMorgan Chase Co N JPM dropped 4 2 on announcement it will increase provisions for expected losses on energy loans by 500 million or more than 60 of its existing reserves The Dow Jones Industrial Average lost 1 1 In economic news sales of existing homes rose 0 4 to a seasonally adjusted annual rate of 5 47 million Case Shiller 20 city Home Price Index rose 0 8 after seasonal adjustment Speaking at an energy industry gathering in Houston Federal Reserve Vice Chairman Stanley Fischer indicated there was no rush for an interest rate hike
Today at 13 00 CET Mortgage Applications will be released in US At 15 45 CET February preliminary Services and Composite PMIs will be released by Markit The tentative outlook is positive At 16 00 CET January New Home Sales will come out The tentative outlook is negative At the same time Richmond Fed s Manufacturing Index for January will come out
European stocks retreated on Tuesday from a three week high as oil fell The euro hit three week low of 1 099 against the dollar after the Ifo survey results indicated German business sentiment slumped to the lowest levels in four years The Stoxx Europe 600 index ended 1 2 lower Germany s DAX 30 dropped 1 6 to 9416 77 as the German Ifo business climate index fell to 105 7 France s CAC 40 ended 1 4 lower Basic materials stocks were among worst performers with BHP Billiton L BLT shares sinking 6 1 after the world s largest mining company cut its midyear dividend by 74 to preserve cash in a period of prolonged low commodity prices Today at 10 30 CET January Loans for House Purchases will be released by British Banker s Association in UK The tentative outlook is positive for pound
Asian stocks are retreating today as investor risk aversion rose with falling oil prices Chinese shares managed to erase earlier losses with CSI 300 index of 300 largest companies listed on Shanghai or Shenzhen exchanges up 0 65 Nikkei fell 0 9 today as yen strengthened on the back of higher demand for haven assets
Oil prices are edging down after closing sharply lower on Tuesday following Saudi Arabia oil minister s comment that a coordinated production cut by OPEC and non OPEC exporters was not going to happen because not many countries are going to deliver April WTI crude fell 4 6 to 31 87 a barrel on the New York Mercantile Exchange Iran made clear it will not restrain production Iran had indicated earlier it planned to increase crude oil output and export after international sanctions were lifted to gain the market share lost due to sanctions Traders will be watching closely the Energy Information Administration report of US Crude Oil Inventories at 16 30 CET today Crude stockpiles are expected to rise The American Petroleum Institute industry group report released on Tuesday estimates crude inventories rose 7 1 million barrels to 506 2 million against a 3 4 million barrels expected rise
Gold is holding stable after spot gold gained about 1 5 in the previous session as global stocks sold off |
MS | China s Struggle Against Capital Flight | By
SHANGHAI Two decades ago when he first set up his business in China the European businessman with an interest in design was captivated by seemingly boundless opportunities His company which tapped Chinese factories to manufacture high end garments quickly boomed soon his local staff swelled to two dozen But on a recent fall morning the businessman sat in the living room of his house in a suburban residential compound looking out at a blue sky unusual for this frequently smoggy city waiting anxiously for the real estate agent to arrive He was putting his home on the market as he prepared to shut down what remained of his company and shift his base back to Europe We had some great times here he said But now it s time to leave The businessman who spoke on condition he not be named because of sensitivities over de investing from China said life had changed When I arrived people were kind life felt straightforward Now it s all about money people are under a lot of pressure Rents are high schools are expensive And the pollution So I m tired I really don t want to stay anymore Frustration at the slowing economy and unpredictable shifts in business regulations were factors too he added and not just for him The real estate company said a lot of people are selling houses some are afraid about the economy or about new regulations in China you never know whether they ll change the regulations change the taxes Some of those selling were Chinese nationals seeking to move abroad he added He recalled what he had heard from a real estate agent back in Europe during a visit earlier this year Our best customers now are Chinese they all come with cash to buy property Official government data bear out the trend of capital flowing out of the country with growing numbers of investors foreign and Chinese shifting assets out of China at an intensifying pace This year alone more than 600 billion of assets have been moved from Chinese yuan into foreign currency In August and September the pace quickened to more than 100 billion in each month compared to outflows that had been running at under 5 billion per month previously The forces propelling money out of China are many but a prime factor is alarm over the government s August decision to suddenly devalue the Chinese currency the yuan not long after officials denied such a move would take place Falling exports and slowing economic growth also played a role along with the spectacular boom and bust on China s stock markets which fell some 30 percent during the summer unleashing questions about the extent of the authorities grip on the economy Speculation is rife among certain financial analysts that another currency devaluation is in the works to make Chinese exports cheaper and more attractive on global markets although the government has denied such rumors Andy Xie the former chief economist for Asia at Morgan Stanley N MS warned of parallels with the Asian financial crisis of the late 1990s when speculative bubbles in real estate and stock markets in Southeast Asia Hong Kong and South Korea eventually led to a crisis of confidence causing dramatic falls in the value of currencies China s story is the East Asian story in 1998 says Xie who has long held more bearish views on the nation s economic trajectory They d over invested there was huge overcapacity due to speculation and there were no real profitable opportunities but the money supply kept growing Then one day the speculation stopped and there was too much money in the economy but the government didn t want to raise interest rates And then people wanted to leave all at once and then the currency collapsed and if the money leaves you have chaos In the Asian financial crisis the run on currencies resulted in a major economic fall out raising prices of imported goods adding to inflation and prompting a mass default on loans with an attendant wave of layoffs This crippling reversal of economic growth has implications for China today China s leaders said recently the economy must expand by at least 6 5 percent annually over the next five years to generate moderate prosperity for its citizens Given the stakes the prospect of an unruly exit of capital is disturbing That said most economists see substantial differences between China s predicament and the conditions that produced the Asian crisis nearly two decades ago not least the scale of China s economy and its enormous reserves of foreign exchange some 3 5 trillion giving it the wherewithal to shore up the value of its currency Our analysis is that they need around 1 1 trillion to cover six months import needs and short term debt obligations and resident corporate foreign exchange needs says Li Gang Liu Chief Economist for Greater China at ANZ Bank Any more is excess reserves they can afford to run down Chinese trade while falling is still running a surplus and latest figures suggest a slight rebound in the growth of foreign investment into China But the risks are real enough that the government is taking measures to halt the flow of money out of the country Under long standing rules ordinary people are limited to converting no more than 50 000 worth of Chinese yuan into foreign currency per year In recent months the government has tightened channels that have been widely used to evade those strictures limiting how much people can withdraw from overseas ATMs and requiring banks selling foreign exchange to keep more assets in reserve which Liu says will will help to stem out speculative transactions It s also considering levying a Tobin tax originally devised by economist James Tobin to limit speculative conversion of currency on foreign exchange transactions Xie portrays these as short term tactics rather than a solution to the problem These restrictions just lock up the little people s money he says but rich people can still buy overseas assets And before a currency crashes it s usually induced by the elite taking the money out Now we see all these rich Chinese people buying offshore assets whether they re buying companies or properties in London It s all capital flight Foreign enthusiasm for bringing new money into China for decades a pronounced driver of growth in the world economy has given way to anxiety he adds I ve never seen multi national companies so bearish about China Xie says They re not increasing investment in China period There s no growth and so many problems DEVALUATION IS FINAL STRAW For the European businessman the drop in the value of the yuan was especially troubling This devaluation was in the air for many years he said but suddenly whoosh it goes from 6 1 yuan to the dollar to 6 4 in two days just to improve the exports And they didn t explain clearly what was going on he added No one does a devaluation like this but in China you never know It added to his sense of uncertainty about the security of his investments in China Well informed Chinese friends were advising him that real estate prices which have risen again this year after a three year stagnation that followed a decade long boom could fall back in the next couple of years Of course some Chinese people still say prices won t go down only up he said but I think the prices are already very high compared to Europe Another factor in his decision to sell was rising costs both within his business and from suppliers Hikes in rents wages and the cost of land as well as high import taxes have made it ever more difficult to draw a sizeable profit Salaries have got very high especially in the cities and every factory in China is very expensive now And when these factories buy new machines they want to get the money back in one year in Europe they might wait five or ten years So some of our products are actually cheaper to make in southern Europe now Suppliers were increasingly frustrating to deal with too he said as they d grown complacent on a constant supply of orders Either they said your order was too small or they take on too many orders then they delay delivery it s very embarrassing because you re always letting customers down I ve been working 25 hours a day to deal with this now I ve had enough China s restrictions on moving currency in or out of the country also made business challenging he added The European businessman s devolving confidence is representative of a broader mentality at work as money leaves China Internationally people s faith in China s stock markets our marketization even our sincerity in reforming and opening and the rule of law has been shaken said Liu Shengjun Executive Deputy Director of the Lujiazui Institute of Finance at the China Europe International Business School CEIBS in Shanghai Liu said a series of errors were made from official Chinese media being very irresponsible in encouraging the boom on the stock market earlier this year to regulators failing to deal with insider trading properly and then intervening to prop up the falling market too early before it had reached a natural level Pinning much of the blame for the problems on foreign speculators who were not the main problem didn t help boost investor confidence he adds Joerg Wuttke President of the European Union Chamber of Commerce in China agrees the events of the summer came as a shock Everybody s concerned about this in varying degrees he says It has taken off the image of invincibility that the Chinese leadership had This was seen as a very smooth policy machine hence the surprise was bigger It doesn t take away the lure of the market size but certainly people look at China differently some are wondering where the next policy mistake is going to come from Wuttke says foreign investors already in China are likely to be there for the long term but financial industry professionals like fund managers are far more more flexible and have been able to move funds out The very big instability in the market and policy has had a huge impact on confidence of investors agrees the U S based manager of a China focused investment fund It s made it harder to raise funds to expand here Some money has moved into commodities or Singapore s FTSE A50 China stock index futures market but most funds are just holding onto their cash and observing from the sidelines A sharp tightening of rules on trading in stock index futures following the market volatility has effectively closed this market for investors in China he adds and added to investor worries that further financial reforms many had anticipated could be delayed Anxieties about the economy the market and prospects for reform have also fueled concerns about further devaluation of China s currency a significant factor in encouraging capital flight ANZ Bank s Li gang Liu predicts that the Chinese yuan will not devalue further thanks to government intervention The problem he told International Business Times is that investor clients from the West think the credibility of the government has been damaged This worry of further devaluation is still there and it s up to the People s Bank of China the country s central bank to manage this expectation if it can t that could generate larger capital flight EVEN CHINA S FRIENDS ARE LEAVING One investor who has sparked controversy this year by pulling assets out of China is Li Ka shing the veteran Hong Kong property logistics and telecommunications tycoon seen as one of the Chinese government s most loyal supporters Li s decision to sell several large developments in China and pour some 30 billion into companies like telecommunications operator 02 in the U K has attracted criticism in China Media commentators accused him of a lack of loyalty or even patriotism for moving at a time of economic slowdown saying he had benefited from close ties to government leaders and his move could encourage others to follow suit Li later retorted saying his moves were normal business dealings and accusing his critics of chilling aggression Liu Shengjun of CEIBS in Shanghai said Li s sales were in part motivated by his desire to prepare for retirement from business but he says Li s move could also be seen as a sign of a lack of confidence in the current leadership Whatever Li s motives questions relating to China s political leadership and direction are certainly a factor for some who are thinking of moving out Some of the things the leadership has been saying about politics recently are very leftist quite old style Communist I find that quite worrying so it s added to my desire to leave China a young foreign educated Chinese professional who is planning to move abroad in the near future told IBT For all continuing talk of market reforms and an ongoing crackdown on corruption China s leadership under President Xi Jinping is pushing an ideological line which some say has echoes of the Mao era a sharp criticism of western values in education and politics the reassertion of sovereignty and a clamp down on civil society and expression in the media and online Some wonder whether this emphasis on ideology could ultimately erode not just economic reform but also protection for individual wealth and assets The government changes its mind so much that you sometimes feel you d better safeguard your savings before they are locked into the country says a western professional who recently relocated part of his China based business to his home country China can feel quite volatile If you re wanting flexibility it s not the place to have all your personal investments Worries about politics may not affect everyone and President Xi remains popular with many Chinese citizens for his anti corruption campaign Yet that too is adding to the motivation for some people to move their assets or indeed themselves and their families abroad Many who earn money in China are linked to the government especially if they re in the real estate sector says Gary Kwok a consultant who advises Chinese citizens on investing in Europe And with the crackdown on corruption some people who have made money with the help of such connections may feel their position could be affected they don t feel their assets are secure so they want to move at least part of them abroad These issues are the latest in a range of factors that are encouraging growing numbers of Chinese people the middle class as well as the super rich to buy property overseas in recent years or to move there themselves People generally have two motives one is to move some of their money abroad the other is for the sake of their children in particular to find a better environment says Kwok They re worried about air quality food safety In Europe there s not much pollution no fake alcohol you can afford to drink milk he adds And they like the western education system too The bursting of China s stock market bubble in the past few months has only encouraged wealthy Chinese people to look abroad Kwok says Earlier this year when the market was flying up many people were only interested in buying stocks but then when it burst so fast lots of them decided the stock market was very unstable Now they see overseas property as a more stable investment And he says with several of China s biggest real estate developers companies like Greenland Wanda and Vanke beginning to built property in London and other major European cities the trend for investing abroad is only likely to gather pace in the coming years These are famous companies in China for people who ve never invested abroad before these brands give them confidence says Kwok Two years ago Hurun Report a Shanghai based research firm that analyzes China s wealthy attracted much attention with a report saying that almost two thirds of rich Chinese citizens had obtained or were thinking of getting a foreign passport The obsession with getting a foreign passport may have faded a little since according to Hurun s founder Rupert Hoogewerf many western countries including the U S have now begun to offer Chinese citizens ten year multiple entry visas giving them an ease of travel previously not possible on a Chinese passport And Hoogewerf notes that some overseas based Chinese are still looking to the mainland for new business opportunities But he says the current economic climate is still encouraging many to move abroad I think if people had questions before about the general quality of life in China about pollution about education about security food safety the economic slowdown has pushed them to say perhaps we really should be looking to spend more time in Australia or New Zealand And while the amounts of money leaving China might not yet be a significant problem for the nation some believe the country is losing out in other ways from this trend What China is losing is not only the wealth but the entrepreneurship and this is the most important thing for a country says Liu Shengjun of CEIBS If Chinese entrepreneurs are emigrating because they lack a sense of security about their assets in China which means they can t peacefully get on with running their businesses and with innovating then it s a big problem Only if you have good property protection can entrepreneurs have long term confidence Liu says further opening of China s stock markets to private companies would reassure investors ANZ Bank s Li Gang Liu meanwhile says the government should open up the market to foreign funds and expand its financial services sector for full foreign participation Currently foreign companies have almost no access to sectors such as legal services and insurance while banking remains restricted Changing this he says would help attract vast and more stable capital inflow into China BABY STEP REFORMS Some in China hope that the Chinese yuan s predicted entry into the IMF s Special Drawing Rights basket of reserve currencies later this year may help to boost confidence in the currency and help slow capital outflows But in the current climate such a move on its own may not be enough to reassure all China s nervous investors The Chinese government is taking steps to change this the recently drafted five year plan promises clearer rules and wider access for foreign investment and some details may be revealed in December when the government issues a new list of the sectors foreigners can and can t invest in The authorities have also agreed to begin a trial project that will allow Chinese citizens to invest in more financial products overseas up to now very limited via the pilot Shanghai Free Trade Zone According to Li Gang Liu it s an encouraging sign of confidence that even when China is under pressure for large capital outflow the government would still like to see its capital account become more open Last month s appointment of two new vice chairmen of China s stock market regulator Fang Xinghai and Li Chao both cosmopolitan figures popular with foreign investors is also seen by some as a sign that the government has realized it needs to take action to shore up investor confidence I think the unexpected media questioning and global onslaught from investors has been a major wake up call for the authorities says European Union Chamber of Commerce President Joerg Wuttke The fact that Fang Xinghai is in that position indicates they learned something Wuttke says he s reasonably optimistic about long term prospects for China s opening Nevertheless he says there is still resistance to reform in the system and he remains worried about the slow pace of development in many economic sectors that the government pledged to liberalize two years ago He is also concerned about the debilitating effect on business of China s restrictions on Internet use Chinese authorities he says need to live up to what they ve said if they are serious about seeking more foreign investment in China than Chinese investment abroad China can t just do baby step reforms if it wants to be convincing in its reform efforts China is not the only story in the world economy We have choices |
MS | Monsanto cuts first quarter earnings guidance | CHICAGO Reuters Monsanto Co N MON on Tuesday confirmed earlier guidance that its fiscal first quarter 2016 is expected to show an earnings per share loss in the 23 to 33 cent range amid continued pricing weakness in glyphosate fewer South American corn acres being planted and restructuring costs Market consensus has been for the company s fiscal quarter ending Nov 30 to have an earnings per share EPS gain of 6 cents according to market analysts Monsanto said Kerry Preete its executive vice president of global strategy will tell investors at the Morgan Stanley N MS Global Chemicals Agriculture Conference on Tuesday that Monsanto expects to achieve ongoing EPS of 5 10 to 5 60 in fiscal year 2016 The world s leading seed company said it continues to project free cash flow in the range of 1 6 billion to 1 8 billion for fiscal year 2016 Also the company s EPS on an as reported basis now is updated to reflect additional estimated restructuring charges the company said in its statement These additional estimated charges are early estimates for the cost of the supplemental phase of restructuring actions which in combination with cost savings initiatives is now expected to generate up to 200 million of savings bringing the total estimated savings to 500 million by the end of fiscal year 2018 the company said Preete also is expected to say Monsanto now expects EPS on an as reported basis to be 4 00 to 4 66 in fiscal year 2016
The company s statement can be found here |
MS | Cisco Ericsson reveal bigger ambitions for revenues in new partnership | By Eric Auchard BARCELONA Reuters The 1 billion in added revenue Cisco and Ericsson ST ERICAs each expect to see by 2018 from their new partnership to build next generation networks is just the beginning top executives said on Wednesday Executives at both Cisco and Ericsson said in an on stage interview that they expected at least 1 billion a piece during the first phase of the partnership announced this week but that they had bigger ambitions for the years to come Mounting a spirited defense of the deal with investors at the Morgan Stanley N MS TMT conference Cisco Executive Chairman John Chambers and Ericsson CEO Hans Vestberg said the projected revenue boost only covers their partnership s first two years We have much higher ambitions Vestberg said referring to revenue targets If we do this right there are other opportunities as well Ericsson s CEO said of further sales growth ahead The deal calls for each company to resell the other s products expand the range of services they provide while working to merge mobile and fixed line networks they said The first stage of the partnership will focus largely on providing equipment and services for telecom network operators aiming to upgrade their existing networks to the cloud they said A second stage will involve selling to corporate enterprises and a third stage will cover the wider world of network connected devices in cars industry retail and agriculture Responding to a fund manager who questioned how big any partnership might be to either company Chambers said 1 billion in fresh sales would expand Cisco revenues by just 2 percent and add 3 percent to Ericsson s top line but these targets have little incremental expense boosting the profit ratios of both If you are asking if we do Phase 1 right is there incremental upside The answer is yes Chambers said adding that the two were being cautious in their predictions Vestberg agreed there was also further upside for Ericsson
Partnership will be as important over the next two decades as acquisitions were over the past two decades for us Chambers said If we do it right our peers wont be able to keep up |
JPM | Even as Prices Rise Japan Still Won t Say Deflation Is Dead | Bloomberg While Japan s consumer price index has been inching higher for almost a year the government still hasn t declared the nation to be officially free of deflation
The question of how you can have rising prices but not be out of deflation might seem like a point for bureaucrats and academics to debate but it has real world implications for Japan The government will likely need to pass this milestone before it can go ahead with a planned increase to the sales tax and the central bank may find it difficult to do anything more than stealth tapering of its monetary stimulus unless the deflation demon is pronounced dead
The time could be ripe for a decision around the end of 2018 as economic conditions fall into place according to Masamichi Adachi a former central bank official and now senior economist at JPMorgan NYSE JPM Securities Japan Bloomberg Economics Yuki Masujima notes that adjustments in the Bank of Japan s yield curve program could follow an eventual announcement on exiting deflation
These are four key measures the government is watching to help guide its decision
The core consumer price index
CPI has increased steadily over the past year but maintaining that momentum means that inflation expectations need to become firmer according to Adachi People and corporates both need to have confidence that prices will continue to rise he said
The output gap
The output gap serves as a gauge of demand in the economy with a positive reading indicating more demand Further increases into positive territory should boost prices more
The gross domestic product deflator
The GDP deflator is an important measure of inflation that uses output data rather than a basket of goods and services like CPI The deflator rose 0 1 percent in the third quarter from a year earlier pointing to weak price increases
Unit labor costs
This measure in part reflects changes in compensation to workers It provides a marker by which policy makers can assess wage inflation another crucial element that s required to truly exit deflation It rose 0 4 percent from a year earlier in the third quarter according to Bloomberg calculations
Adachi cautions that these guideposts alone won t determine when a pronouncement is made A subjective sense of whether Japan has left behind economic stagnation and downturn also considered part of deflation in Japan will also come into play he said
That means economists will be watching closely for any shift in comments from policy makers like Finance Minister Taro Aso who s repeatedly spoken of the difficulty of beating once and for all the deflationary malaise
To contact the authors of this story Connor Cislo in Tokyo at ccislo bloomberg net James Mayger in Tokyo at jmayger bloomberg net
To contact the editor responsible for this story Brett Miller at bmiller30 bloomberg net
2017 Bloomberg L P |
C | London based FX cartel traders will not fight U S extradition | By Jamie McGeever
LONDON Reuters Three London based former currency traders facing U S charges that they tried to manipulate prices in the world s largest financial market have agreed not to fight extradition and will appear at a New York court hearing next month
Rohan Ramchandani Richard Usher and Chris Ashton formerly of Citi N C JP Morgan Chase N JPM and Barclays L BARC dubbed the Cartel were indicted by the Department of Justice in January
A preliminary hearing in New York has been scheduled for July 17 As per the bail terms agreed with the DOJ the three men who all deny wrongdoing will be able to return to and stay in Britain until the case comes to trial
Mr Ramchandani has agreed to travel voluntarily to the USA to stand trial and clear his name He has not committed any criminal offense said Alison Geary a lawyer at WilmerHale in London acting on behalf of Ramchandani in a statement
Sara George partner at Stephenson Harwood acting on behalf of Chris Ashton said in a statement Chris Ashton has reached an agreement with the U S Department of Justice which will allow him to travel voluntarily to the United States to stand trial for an offense which he did not commit
Jonathan Pickworth a lawyer at White Case representing Usher said in a statement that his client welcomes the opportunity to defend himself and set the record straight the first time he has had such opportunity in the four years since this investigation began
The three men were members of the Cartel electronic chatroom in which they are alleged to have shared sensitive client order information to manipulate exchange rates
Britain s Serious Fraud Office in March last year closed its own criminal investigation concluding that there was insufficient evidence for a realistic prospect of conviction
The global FX investigation into allegations that the Cartel and others rigged benchmark FX rates resulted in the world s biggest banks paying 10 billion in fines and dozens of traders being fired |
C | Citi credit card write offs jump in May | Citigroup NYSE C May credit card write offs of 2 94 were up 60 basis points from April Card delinquencies of 1 5 slipped two basis points The big jump in write offs is notable considering the more benign experience at peers Previously Synchrony Financial credit card charge offs and delinquencies both dip in May June 15 Previously Capital One credit card charge offs delinquencies both fall in May June 15 Previously BofA credit card charge offs rise in May delinquencies edge lower June 15 Now read |
C | Australian banks agree 4 6 billion tax hit not fatal but want foreign rivals included | By Jamie Freed SYDNEY Reuters Australia s five biggest banks on Friday agreed a surprise 4 6 billion tax can be absorbed without damaging the stability of the country s financial system or pushing lenders to move overseas but have asked that foreign rivals face the same levy Banks have criticized the tax as unfair since its unveiling last month but executives on Friday told lawmakers they agreed with the Australian Prudential LON PRU Regulation Authority s assessment that it would not threaten the financial system The lenders also pressed for legislation to be amended to include foreign banks such as HSBC Holdings PLC L HSBA and Citigroup Inc N C to help them stay competitive in low profit margin markets such as trade finance and bond trading All we ask is that we be put into the same position as the foreign banks and that the levy be applied to them given the advantage their scale gives on a global basis and here in Australia Commonwealth Bank of Australia AX CBA General Counsel Anna Lenahan told a senate committee The tax on bank liabilities including corporate bonds commercial paper and certificates of deposit is forecast to raise 4 6 billion in its first four years to help Australia return to a budget surplus by 2021 But the tax which is not yet in effect lacks an expiration date sought by the banks The tax which has bipartisan backing applies to banks with more than A 100 billion 76 billion of relevant liabilities in Australia capturing the country s five largest domestic banks by assets Many international banks operating in Australia fall short of that threshold locally though they exceed it globally But Australia and New Zealand Banking Group Ltd AX ANZ told the committee the big five Australian banks overseas branches would also be taxed under the legislation National Australia Bank Ltd AX NAB Chief Financial Officer Gary Lennon said he doubted lawmakers intent was to put Australian banks at a disadvantage to foreign rivals at home or anywhere else It is possible that it will change the profitability of some of our businesses he said of the levy Once you change the profitability we might be deploying less capital to those businesses or exiting that business Macquarie Group Ltd AX MQG Chief Executive Nicholas Moore said the tax would inevitably make the bank less competitive but that there were no plans to move the firm s head office offshore as a result Westpac Banking Corp AX WBC said there should be provisions to suspend the tax if bank profits were significantly affected HSBC and Citigroup declined to comment The senate committee will issue a report on the hearings on Monday Both houses of parliament will vote on the tax next week |
C | XLF Favourite For Shorting | As I trust I have made clear the financial sector is a favorite right now for shorting This chart of the XLF is based on over 30 years of staring at charts one of the most exciting and enticing opportunities I have ever laid eyes on The analog and breakdown have thus far been spot on
As the earnings season kicks off some of the earliest reporters are big banks like Wells Fargo NYSE WFC and Citigroup NYSE C I was thus eager to see this morning how pre market trading was going now that their earnings are released It s a step in the right direction |
JPM | Here s How I Shorted JPM | Ideally I like holding a short 2 3 days Once I get profits in the 4 7 profits that is where I start getting itchy to cover my position
While I embrace shorting stocks when the market calls for it I recognize too that I am swimming against the current every time I do 99 9 of the country wants the market to go higher so when you are shorting the market you are fighting a lot of forces including the companies that want their stock to go up the federal government namely the Fed that wants the market going up and many more factors As a result I don t pretend that somehow I am greater than all these forces at work Instead I take my profits when I get them and don t let them run for extended periods of time
A perfect example of this is here in JPMorgan Chase Co N JPM today Up 6 3 on news CEO Jamie Dimon purchased 500 00 shares of the company s stock or roughly 26 million dollars
I covered my position once the market started to rally yesterday off of the lows and took my 5 1 in profits with me Had I continued to push this short position into today the situation would be far different
Here s How I traded It
Even when the market is trending in your favor to the downside you still have plenty of headwinds as I ve already described When you have the profits take them Don t press short positions it is never ever a good idea Be quick and be nimble because for every hard sell off there is a dead cat bounce right around the corner and if you don t manage risk appropriately any gains that you once had will quickly evaporate |
JPM | Nasdaq Fell 18 In 6 Weeks Market Can t Go Straight Down Forever | If we study the market charts we can see quite clearly that we re seeing bear market action That said you can t go straight down forever The Nasdaq fell 18 in just six weeks By any bear market measurement this is too much too fast Price isn t the problem It s the speed of the move along with price Such a short time frame to have that size of a loss without some type of exhaustion One would think anyway There are missing ingredients to a short term bottom such I have recently discussed Nothing with regards to a high put call ratio for several hours over 1 5 No trin at 3 0 or higher and clearly no dramatic VIX spike
All of these ingredients are usually present when a market is about to bottom Not one of them occurred Makes things a little less certain on the we have to rally front but all of that said the fall has been intense over a very short period of time so the thinking is that we should rally a bit Not the rally of a life time but a rally nonetheless that should retrace some of the recent losses before we head lower once again It can last for weeks overall but not up every day A trend higher over a few weeks that one would think should at least back test all of the lost 20 day exponential moving averages currently at 4479 on the Nasdaq 1895 on the S P 500 and 16 201 on the Dow
We have a ways to go to get there thus it s still possible we ll see those levels before the overall rally ends No promise and surely no guarantee but these levels make sense Maybe we fall a bit shy or maybe we clear them a bit before heading back south Impossible to know but again some relief should be in the cards unless this is one of those never before seen types of bears Today gave us the first sign of the potential rally but we still have much to prove before getting up to those 20 day back tests It s time for the bulls to act Let s hope they have some guts and get us up for those back tests
One real hope for the bulls near term is the clear positive divergences that live on every major index daily chart Sometimes the rallies off these divergences are muted to some degree due to the bear market just in its beginning stages but they should allow for upside to unwind and relieve oversold oscillators Even if they play out a bit we can be hopeful for a rest from the recent carnage The Nasdaq has the smallest but is also the most compressed oscillator wise A divergence doesn t have to be gargantuan as we all know by now If it exists it exists and they clearly exist on every major index daily chart If they played out in full the rally up could be rather large or said better larger than one might expect
I don t think they will play out fully but they are clear and present and should allow for overall upward movement over time It would be shocking if we just fell straight back down but it s hard to measure what negative affect the Fed has had over the past many years and just how angry the market may be The monthly charts remain a major sell signal thus we can only expect so much from these daily divergences but I think most bulls will be happy to get whatever they can since the wounds of this year have been so terrible for them The other good news is that all of the divergences exist in concert It s not just one sector It s across the board thus there s short term hope for sure for the bulls We ll see how this unfolds next week
When markets get desperate so do some higher ups I ll leave it at that Just yesterday I spoke about how the banks needed to firm up for me to get more bullish short term It seemed to me that without the banks the market wasn t going to get rocking positive divergences or not And wouldn t you know it Suddenly we hear Jamie Dimon or the CEO of JPMorgan Chase Co N JPM announce he himself is buying a boat load of his own stock Very interesting timing Yes folks I do believe this came from Fed Yellen Another bullet She knows the market was at the precipice of losing the banks and thus I believe they all worked together to make it happen
Whatever you believe I guess doesn t matter We got this very interesting timing of a massive buy back by the CEO himself and off these dramatically oversold stocks went They need to show some staying power next week so we ll see if they can follow through but that buy back by Mr Dimon was clearly the catalyst to get the market rocking higher today The banks will need to keep racing ahead for a few weeks overall to get those divergences to play out to their fullest capabilities Bottom line is the market got what it needed before it lost key support at S P 500 1812 Now we watch to see what it can do to the up side and whether all of the indexes can rally up to their 20 day exponential moving averages which would equate to gains of between 3 5 and 5 from Thursday s closing prices |
JPM | Last Week Was More Of The Same For Gold And Silver | Which Is Good For Gold and Silver
12 February 2016
Friday was another day of extreme volatility a day when the Dow Jones closes 2 or more from a previous day s closing price However I suspect the policy makers ripped off Mr Bear this week On Monday and on Thursday the Dow Jones was down more than 2 intraday only to close well above the 2 threshold Had the markets on Monday and on Thursday closed at their lows I expect we would have also seen at least one day of extreme market breadth
The week ended with an 8 count of 1 and a 200 count of 14 but these counts should have been higher It doesn t matter though because Mr Bear is still racking up Dow Jones 2 days days of extreme market volatility in the 200 count Blue Plot below Ever since January 1900 a rising 200 count has been a harbinger of woe for the NYSE Seeing it rise to 14 this week since last July won t prove to be any different
How do we know if we really arein a bear market Since bear markets begin at the absolute peak of bull markets when investors are full of optimism it s hard to recognize when the top is in and a new bear market has begun This is especially true if one follows only the major market indexes like the Dow Jones or S P 500 Fortunately there are other means available to monitor the stock market one of my favorites is new NYSE 52Wk Highs and Lows
The simple fact is that during bull markets major market indexes routinely make new 52Wk Highs just as they make new 52Wk Lows during bear markets The Dow Jones made a new 52Wk Low this week In bull and bear markets companies trading on the NYSE will also be making new 52 Wk Highs and Lows frequently before the major indexes themselves So let s look at the NYSE Breadth and 52Wk H L data to see if the NYSE itself is telling us if we are in a bear market
In the table below I show the raw daily data of Advancing Declining and Unchanged shares from which I compute the Shares Traded sums and the daily 52Wk Highs and Lows Using this information I calculate two data sets
NYSE 70 Days Advancing Declining Shares
NYSE High Low Ratio
For the NYSE 70 Days Days of Extreme Market Breadth far right column I compute as follows
Advancing Shares Declining Shares Shares Traded
Whenever this formula produces a result exceeding 69 999 the NYSE had a Day of Extreme Market Breadth as happened three times between January 11th 29th Bull markets see very few days of extreme market breadth while they are a regular feature in bear markets Having three NYSE 70 days in the past month is very bearish
The NYSE 52Wk High Low Ratio table s second column from right data points plotted in the chart below are computed exactly as the Advance Decline data
52Wk Highs 52Wk Lows Shares Traded that day
Below the final eighteen months of the sub prime bubble are easy to identify the NYSE 52Wk H L Ratio had been making regular advances above the 10 line However the NYSE 52Wk H L Ratio began falling below its 10 line in late July 2007 just as the stock market began deflating This was months before the major market averages reached their last 52Wk highs in October 2007
A good rule of thumb is that whenever the major market indexes are making new 52Wk Highs the NYSE 52Wk H L Ratio had best be making plus 10 days as well or something is wrong At such times you may not want to liquidate your positions if they are still going up as they may continue to advance for months to come But it is a time to begin looking for reasons to sell your stocks and begin locking in your profits instead of buying more
We see the same thing happening at bear market bottoms chart above and table below During the credit crisis the peak in NYSE 52Wk Lows occurred on 10 Oct 2008 On that day the Dow Jones made its first 40 decline from its all time high since November 1974 2 901 companies trading on the NYSE reached a 52Wk Low But the Dow Jones itself didn t bottom for another five months 09 March 2009 When it finally did just 600 NYSE listings reached a new 52Wk Low
Although Doctor Bernanke s multi trillion dollar QE 1 had been working many companies trading on the NYSE benefited from his injections of liquidity weeks and months before the major market indexes did Look below at what happened to NYSE 52Wk Lows after the Dow Bottomed on 09 March 2009 they just disappeared as the stock market floated ever higher on a rising tide of liquidity
Going back to the NYSE 52Wk H L Ratio chart above it s obvious the stock market began deflating after the summer of 2014 when the NSYE 52Wk H L Ratio stopped seeing 10 days The major market indexes continued seeing new 52Wk and all time highs until May of 2015 but the NYSE was becoming increasingly selective
The last significant positive day occurred in March when the Ratio was at 8 52 Since then the best the ratio has achieved have been small single digits positive days with more negative 10 days than should be seen in a bull market correction Take a moment to study the NYSE 52Wk H L Ratio chart from March 2009 through today There were times when the ratio declined below its negative 10 line but during true bull market corrections it snaps back to its 10 line soon thereafter This hasn t happened since the summer of 2014 and is a big red flag flying over the stock market
The best way to plot the NYSE 52Wk H L Ratio for a clear Big Picture view of the market is to construct a step sum from it
Positive days equal 1
Negative days equal 1
Then plot the resulting step sum with your favorite major market index as I have done with the Dow Jones below During periods when the NYSE has been seeing more 52Wk Highs than Lows its step sum advances with the Dow Jones Those times when the NYSE sees more 52Wk Lows than Highs its step sum declines with the Dow Jones But note this did not happen during the late 1990s and early 2000s
Alan Greenspan s bull market of the 1990s became a bull market in high tech shares beginning in May of 1998 Any market sector that wasn t digital began a bear market decline two years before the high tech top of January 2000 You can see this in the NYSE 52Wk H L Ratio s step sum Red Plot below Interestingly during the tech wreck we see the NYSE 52Wk H L Ratio bottom in June 2000 While the Dow Jones and the tech stocks continued to deflate for two more years 52Wk Highs were overwhelming 52Wk Lows at the NYSE
The Dow Jones reached its sub prime mortgage bubble top in October 2007 although the NYSE began seeing more 52Wk Lows than Highs four months earlier in June The Dow Jones bottomed in March 2009 as did the NYSE 52Wk H L Ratio s step sum a month later The Dow Jones reached its post credit crisis peak in May of 2015 the Ratio s step sum peaked two months later in July As evident above ever since the NYSE 52Wk H L Ratio step sum turned down last July the market has been under a lot of pressure
We should expect this to continue until the Ratio s step sum reverses to the upside when once again 52Wk highs begin to dominate trading at the NYSE However I doubt that will happen until we ve see many of the old bear market records from the 1930s broken Records such as how many dump trucks Mr Bear will require to haul out the inflationary filth now stinking up balance sheets for government corporations charitable institutions and individuals
Bear markets are a process and our current process is still in the denial stage but when it eventually shifts into the liquidation phase you ll know it Stock indexes will be down 70 or more dividend and bond yields well into double digits and gold silver and mining shares will reach prices that are unimaginable today
On Thursday of this week the Dow Jones made its third new 52Wk Low of the current bear market moving the Dow Jones 52 Wk line Red Plot down just six points You can t see it in the chart below but it s there
The banks in the DJTMG are under a lot of pressure In the chart below we see that for four of the past five weeks this index has closed at a new 52Wk Low It s gotten so bad that J P Morgan s Jamie Dimon as per CNBC Chief Cheerleader for the big banks is putting his money where his mouth is
Jamie Dimon has put his own money where his mouth institutionally speaking has long been The JPMorgan N JPM chief executive on Thursday bought more than 25 million of his bank s stock It s a personal extension of his mantra that lenders do best buying back stock is when it is near book value and right now JPMorgan carries a roughly 10 percent discount This vote of confidence is also an important counterweight to the panic gripping investorsin U S financial institutions
What s this CNBC admitting panic is gripping investors in U S financial institutions That s something you don t see every day
If a bill ever came before Congress to resume marking J P Morgan s and the rest of the big banks on Wall Street assets to market on a daily basis as was the practice many years ago Jamie would be the first to lobby Congress to kill this proposal as he knows what the actual book value of J P Morgan is Personally I d say that even with the continual aid provided by the FOMC since the credit crisis Morgan s book value would most likely prove to be negative if they had to mark the bank s assets at market This may not even be possible for their multi trillion dollar derivative obligations
This story reminds me of the 1929 crash when JP Morgan made a much to do multi million dollar purchase of US Steel on the floor of the NYSE to wild applause by the traders and media only to quietly short the shares moments later Is that what Dimon is doing Looking at the banks in the chart below I wouldn t doubt that he is hedging this 25 million dollar investment in his own company using derivatives This would be cheap insurance for his highly risky publicity stunt
It is painfully apparent that after trillions of dollars in aid from the Federal Reserve the banks have yet to recover from the sub prime mortgage debacle And now they are rolling over again Keep in mind that the market crash of 2007 09 was due to a banking crisis I expect this will also prove to be the case for the current market decline
Before the Dow Jones and everything else declines to their ultimate bottom in the current bear market we ll see many more new 52Wk Lows as will the NYSE 52Wk H L Ratio But don t expect the policy makers to stand aside and allow the financial markets to upchuck the many decades of inflation they ve injected into it At some point expect CNBC with much fanfare to announce that Janet Yellen s FOMC is considering implementing QE4 As evident in the Dow Jones chart above the first three QEs were very effective at reflating the Dow Jones from its March 2009 bottom but not the banks Maybe a fourth round of QE could do the same but then again maybe not
When speaking of bull markets in stocks and bonds it s becoming painfully apparent that it s best to speak in the past tense for fear of appearing foolish However this chart plotting gold with it step sum is looking better and better all the time
Gold is up 16 8 since mid December so it may be due for correction But should the banking stocks crash in the weeks to come or an international crisis arise in the Mid East gold and silver could gap up too
So just how big a toll has the market taken on gold and silver since 2011 A quick look at the chart below tells the tale But for someone who purchased gold Brown Plot or silver Black Plot in January 2000 and just held it they d still have made twice as much at the end of this week as investing in blue chip stocks
From 2000 to through 2011 the gains in gold and silver were fantastic which is why they got stepped on by the policy makers Even so their gains even after market declines of 45 for gold and 70 by silver never fell below the rate of CinC inflation Green Plot while the Dow Jones Blue Plot never appreciated faster than the rate of CinC inflation for the past sixteen years
Since the beginning of January this year everything has changed Look at the nice recent up turns in the price of gold and silver in the chart In the next year capital flight may drive the Dow Jones well below its January 2000 level 1 0 line and some of that deflating liquidity will flow into gold and silver However after a century of unrelenting monetary inflation from central banks gold and silvertodayare tiny illiquid markets compared to global stock and bond markets I expect the gains in the metals will be significantly greater than the losses in the Dow Jones But like me you will to have to wait to see what actually happens
This week saw the surprise early opening of THE ABX ALLOCATED PHYSICAL GOLD EXCHANGE on Wednesday which hadn t been expected to open until April Not only was this done without fanfare it was totally ignored by the worthless western media This is likely what s behind gold returning more than any other investment category so far this year and gold s impressive performance this past week It also explains why silver s daily and weekly gains didn t exceed gold s as usual This could be a game changer in coming months
For the foreseeable future the place to be will be gold silver and precious metals mining shares Make sure to get a position in bullion first before you invest in the miners |
JPM | Markets Last Week The Opposite Of Calm | Another violent week in the markets as each asset class had some security making a two standard deviation move Oil yen Bank Credits and plenty of Equity groups were bobbing in the winter surf last week Oil and Credit continued to be the main thermometers of the Equity markets while Yellen spent her time on the Hill answering questions about negative interest rates OPEC meetings were the daily rumor and when they did occur the market remained just as confused Late last week interventions everywhere helped the markets find a low Japan in the yen China in the yuan Deutsche Bank N DB in their Debt and Jamie Dimon in JPM N JPM But Kanye is still waiting for the Zuckerberg call
If you needed an hourly chart to summarize the consensus opinion on Friday this is a good one Basically the majority of equity investors are hoping that the lows have been set but also realize that there is plenty of either technical or fundamental valuation resistance just above
Here is a glance at the major U S indexes along with the worst and best performing major ETFs since the Fed lifted rates in December Eye opening moves
Since the Fed raised the benchmark Fed Funds rate by 25 basis points on December 16th 8 trillion in global equity market cap has vanished That equates to 12 of global stock market capitalization wiped out bringing total world market cap down to 56 trillion from its level of 64 trillion on December 16th
Looking at last week only Staples managed a positive return Financials and Utilities were the bottom performers
More broadly Safety again led this week just as it did last week International Equities again posted a rough week
Will Junk Bonds ever disconnect from Energy prices They couldn t be more closely correlated over the last four months
The world is running out of places to store liquid energy This will eventually bring an end to further production
BP L BP is planning for oil prices to stay low for the first six months of the year and expects surplus production to only start diminishing when storage tanks fill up in the second half
We are very bearish for the first half of the year Chief Executive Officer Robert Dudley said at the IP Week conference in London Wednesday In the second half every tank and swimming pool in the world is going to fill and fundamentals are going to kick in The market will start balancing in the second half of this year
The Saudis held a mini OPEC meeting with Russia early Tuesday to discuss U S swimming pools filled with crude oil But an agreement to freeze production is dependent on others joining the party So a turning point or just more hollow words
The reason we agreed to a potential freeze of production is simply the beginning of a process to asses in the next few months and decide whether we need other steps to stabilize the market Ali Naimi said after meeting the Russian Qatari and Venezuelan oil ministers in Doha We want a stable oil price
The production freeze set at January levels is conditional on other nation s agreeing to participate Russia s Energy Ministry said in a statement after the meeting ended The deal doesn t yet include Iran and Iraq two OPEC members that have increased output in recent months
matthewmreed How different are these comments by the UAE oil minister really The latter is what got markets excited
If OPEC really wanted to move oil prices they should just buy Mercedes Benz and give every driver on Earth a G Wagon
The shape of the U S Yield Curve is getting lots of attention
The most accurate financial market predictor of recession is starting to blink more ominously in the US
The yield curve the slope made up of the yields of Treasury bonds of various maturities is a popular gauge for the health of economies and historically the most accurate market gauge for a recession While the stock market has a patchy record of predicting economic downturns the US yield curve has inverted when short term borrowing costs are higher than longer term ones ahead of every recession since the second world war
The yield curve is still far from inverting but the difference between the 2 and 10 year Treasury yield a popular measure of its shape on Wednesday slipped just below 100 basis points or 1 percentage point for the first time since January 2 2008
A bit more on the potential for a recession as seen in the crystal ball of the financial markets
This dichotomy is neatly captured by two indexes compiled by Cornerstone Macro One using financial indicators such as the stock market and corporate bond yields puts the probability the U S is now in recession at 50 The other which adds in macroeconomic data such as loan delinquencies and inflation adjusted income puts the probability at just 28
Of course markets often wrongly predict recessions But in some circumstances they can help bring them about Economic turning points are unpredictable because they are caused by changes in psychology not just mechanical factors such as interest rates and wages and salaries Markets influence that psychology by signaling to businesses whether they should invest or hire Fear of recession can thus be self fulfilling
Equally important to pay attention to is the slowdown in Corporate Earnings
It is no coincidence that the decline in credit and stocks have led to a big slowdown of M A in 2016
Meanwhile the economic data out of Europe gets much more difficult
TheStalwart These are not good industrial production numbers released this week
As the World s Central Banks increasingly rely on Negative Interest Rate policies to fight economic weakness JPMorgan has some thoughts
Janet Yellen spoke to Congress last week and reiterated her belief that the Fed is still on track to move rates higher
Yellen said the Fed s intention in December when it raised its benchmark federal funds rate for the first time in nearly a decade was to gradually gradually continue to raise rates not to cut them
A lot has happened since then she said But I have not thought that a downturn sufficient to cause the next move to be a cut was a likely possibility and we ve not yet seen I would say a shift in the economic outlook that s sufficient to make that highly likely
However the financial markets continue to place bets against the Fed
One asset class that is finding Valentine s love in 2016 is gold
bySamRo Second largest weekly inflow into precious metals in six years BAML is calling it a gold rush
Now comparing gold to oil here is a great chart
Onto other commodities if you have direct exposure to rural or agricultural economies you might want to review your positions
Tyne Ag USDA thinks we ll see the lowest farm income since 2002 this yr That s off 56 from the high in 2013 brutal
I have always been a fan of dividends and stock buybacks but this chart suggests that maybe companies have taken it too far
In each of the last seven years shareholder payout has gone up both in terms of absolute dollar value as well as relative to earnings and cash flow So much so that in 2015 corporate America returned way beyond its means the payout ratio as measured by buybacks and dividends as a of Net Income spiked to 135 40 percentage points above its 10 year average Exhibit 25 We note that dividend payouts standalone for 2015 came in at 55 vs the 10 year average of slightly in excess of 35
The New Hampshire Primary was last week Some thoughts from Jared Dillian that could be pressuring the markets
You don t get two bigger command and control guys than Bernie and Trump Bad for markets Bad for trade Bad for everything Pretend I am a portfolio manager in Geneva and I own a bunch of U S stocks I m watching what s going on I sell everything For the same reason you sell Turkey today or Argentina back in 2002 These things happen in slow motion You can see it coming If I m in Geneva and I calculate a 20 30 chance of President Sanders and a 30 40 chance of President Trump I am not going to stick around and see what happens I hit the Mad Money sell button Sell sell sell
WSJ
Some good news for consumers as rates return to lows cheap mortgages
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MS | Shire to buy Dyax for 5 9 billion still wants Baxalta | By Ben Hirschler LONDON Reuters Shire Plc L SHP has agreed to buy U S rare disease specialist Dyax Corp O DYAX for about 5 9 billion and potentially up to 6 5 billion while still pursuing a five times larger unsolicited bid for Baxalta Inc N BXLT The Dyax deal the latest in a series of purchases by the acquisitive Dublin headquartered company will give it access to the drug developer s late stage experimental treatment for a dangerous inflammatory disease that can block breathing It comes amid a record wave of deal making in the broader healthcare sector so far this year which amounted to 477 billion as of last week according to Thomson Reuters data The offer price of 37 30 per share represents a 35 5 percent premium to Dyax s closing stock price on Friday Dyax shareholders will also get a non tradable contingent value right potentially worth 4 00 a share or an additional 646 million if Dyax s DX 2930 drug which could reach the market in 2018 is approved for hereditary angioedema HAE Shares of the U S biotech firm jumped about 29 percent to 35 45 at mid afternoon on Monday while Shire s stock in London fell 0 8 percent Shire has been locked in a three month battle to acquire Baxalta although a drop in its shares has led some investors to suspect that takeover bid worth 30 billion when it was announced in August may flounder But Shire Chief Executive Flemming Ornskov insisted his group had capacity to do both deals Even with this transaction we will continue to have the financial firepower to pursue other value added strategic acquisitions including Baxalta he said Ornskov declined to give further details on his strategy for winning Baxalta which has spurned Shire s approach However Jefferies analysts said that since Dyax was a debt funded cash deal there was no direct impact on Shire s ability to do an all equity Baxalta acquisition EARNINGS BOOST FROM 2018 Dyax already has one HAE drug on the market called Kalbitor but its sales totaled only 68 million last year and consensus analyst forecasts do not predict it will exceed annual sales of 100 million according to Thomson Reuters Cortellis By contrast Shire believes DX 2930 has potential to expand the number of HAE patients treated and achieve annual worldwide sales of up to 2 billion while enjoying exclusivity beyond 2030 The new drug will complement Shire s own existing HAE treatments Firazyr and Cinryze which are two of its fast growing products with combined sales approaching 1 billion Given its existing HAE presence Ornskov acknowledged the deal would be scrutinized by antitrust authorities and he said Shire was already preparing for this Shire expects small operating synergies in 2016 rising to 50 million in 2017 and growing to at least 100 million in 2019 Adding Dyax is expected to hit earnings slightly in 2016 and 2017 but boost them from 2018 Shire has secured a 5 6 billion bank loan which in addition to the amount undrawn under a 2 1 billion revolving credit facility will be available to finance the transaction which is expected to close in the first half of 2016 Deutsche Bank DE DBKGn Evercore and Morgan Stanley N MS advised Shire while Centerview Partners acted for Dyax
Deutsche Bank and Morgan Stanley are also providing Shire with financing for the deal |
MS | Jury hears opening arguments in Morgan Stanley insider trading trial | By Brendan Pierson NEW YORK Reuters A lawyer for Morgan Stanley N MS struck back sharply on Monday against an insider trading lawsuit brought by a Russian billionaire s company telling jurors it was one of the craziest most made up cases ever brought Attorney Jonathan Polkes fiery tone on the first day of trial in Manhattan federal court followed a more subdued opening by Aaron Marks for plaintiff Veleron BV a Dutch company owned by Oleg Deripaska owner of industrial group Basic Element The case arises from Deripaska s 2007 investment through Veleron in Canadian auto parts maker Magna International That investment was financed with a 1 2 billion loan from BNP Paribas PA BNPP with Veleron s Magna shares as collateral Morgan Stanley agreed to act as BNP s agent to sell off Veleron s Magna stock if Veleron defaulted It also entered into a credit default swap with BNP assuming some of the risk of the loan in exchange for fixed payments On Sept 29 2008 amid the global financial crisis BNP made a 93 million margin call to Veleron Morgan Stanley learned the next morning from BNP that Veleron could fail to meet the margin call triggering a sell off of its Magna stock None of this information was public Marks said None of it was something that ordinary investors would know about Nonetheless he said Morgan Stanley immediately began short selling Magna That trading damaged our client Veleron by millions of dollars by driving down the share price Marks told the jury When Veleron finally defaulted on Oct 3 one of the biggest buyers of Veleron s Magna stock was Morgan Stanley itself covering its short positions Marks said Morgan Stanley lost about 6 6 million as a result of the default but later recouped about 4 6 million through its short sales according to court filings Polkes painted a very different picture telling the jury that Veleron was a shell company created to protect Deripaska s personal wealth This whole thing was just a vehicle for Mr Deripaska to take out a loan so he could default if he wanted to Polkes said Polkes said Morgan Stanley which had no fiduciary duty to Veleron was within its rights to protect itself against a possible default The company has said its actions were entirely consistent with and in full compliance with all securities laws Morgan Stanley makes no apologies for having protected itself Polkes told the jury Testimony is expected to begin on Tuesday morning
The case is Veleron Holding BV v Morgan Stanley U S District Court Southern District of New York No 1 12 cv 05966 |
MS | Square Inc IPO to value company at up to 4 2 billion | Reuters Mobile payments company Square Inc headed by Twitter N TWTR Inc Chief Executive Jack Dorsey said it expects its initial public offering to price at between 11 and 13 per share valuing the company up to 4 2 billion The company which expects to raise over 403 7 million had initially set a fundraising target of 275 million when it filed for the offering on Oct 14 Square founded in 2009 was valued at 6 billion after its last funding round a year ago The San Francisco based company said in a regulatory filing on Friday it would sell 25 7 million Class A common shares while selling stockholder Start Small Foundation a charitable fund created by Dorsey would sell about 1 35 million Neither Twitter nor Square has been clear about how Dorsey will split his time between the two companies a cause of concern for some investors of both companies
Goldman Sachs Co Morgan Stanley Co LLC N MS and J P Morgan Securities LLC are among 10 firms underwriting the offering |
MS | Alibaba to pay about 3 7 billion for China s YouTube | By Anya George Tharakan and Devika Krishna Kumar Reuters Alibaba Group Holding Ltd N BABA agreed to buy Youku Tudou Inc N YOKU popularly known as China s YouTube for about 3 7 billion slightly more than it had offered in October The deal announced on Friday will give the e commerce giant access to more than half a billion online video users accelerating its push into the Chinese digital media market It is also a vote of confidence in China s economy by Alibaba Chairman Jack Ma who has said investors should not overreact to his country s slowing growth Youku Tudou s American Depositary Shares rose 10 percent to 26 80 in premarket trading on Friday below Alibaba s offer of 27 60 per ADS Alibaba held 18 3 percent of Youku Tudou as of Oct 16 when it made its initial offer of 26 60 per ADS The new offer values the rest of Youku Tudou at about 4 8 billion The new offer represents a premium of 35 1 percent over Youku Tudou s closing price on Oct 15 Any deal would include the 1 1 billion of cash held by Youku Tudou Alibaba s chief financial officer Maggie Wu said in October Based on this Alibaba will end up paying about 3 7 billion under its revised offer Unprofitable Youku Todou needed the partnership with Alibaba Summit Research analyst Henry Guo said Youku Tudou Chief Executive Victor Koo a Bain Co alumnus who owns about 18 percent of Youku Tudou will remain CEO of Youku Tudou after the deal closes in the first quarter of 2016 With Alibaba s support Youku Tudou s future as the leading multi screen entertainment and media platform in China has been firmly secured Koo said in a statement Formerly bitter rivals Youku which means what s best and what s cool in Chinese merged with Tudou potato in a deal worth over 1 billion in 2012 Alibaba has made a number of sizeable investments in digital media in China in the past couple of years In March 2014 it agreed to buy a controlling stake in ChinaVision Media Group Ltd for 804 million to get access to TV and movie content The company is now known as Alibaba Pictures
A month later Alibaba said it would pay about 1 billion for a 20 percent stake in Wasu Media Holding Co Ltd 000156 SZ In March 2015 TV program producer Beijing Enlight Media Co Ltd 300251 SZ said Alibaba had invested 383 million Morgan Stanley N MS Asia Ltd advised Alibaba while J P Morgan Securities Asia Pacific Ltd advised Youku Tudou s special committee |
JPM | Premarket analyst action healthcare | Bluebird Bio NASDAQ BLUE initiated with Buy rating and 202 25 upside price target by Canaccord Genuity Audentes Therapeutics NASDAQ BOLD initiated with Outperform rating and 35 26 upside price target by BMO BeyondSpring NASDAQ BYSI initiated with Buy rating and 56 70 upside price target by Seaport Global Erytech Pharma Pending ERYP initiated with Outperform rating by Cowen Co Repligen NASDAQ RGEN initiated with Overweight rating and 42 24 upside price target by JPMorgan NYSE JPM Neogen NASDAQ NEOG resumed with Neutral rating and 82 2 downside risk price target by Roth Capital Depomed NASDAQ DEPO upgraded to Buy with a 9 29 upside price target by Mizuho Sunesis Pharmaceuticals NASDAQ SNSS downgraded to Market Perform with a 2 26 downside risk price target by Wells Fargo NYSE WFC Source BloombergNow read |
JPM | Farming startup Indigo raises 203 million with help from Dubai fund | By Heather Somerville
SAN FRANCISCO Reuters Farming technology startup Indigo has raised more than 200 million from investors to fund its efforts to reform how crops including wheat soybeans cotton and corn are grown around the world
The Boston based company announced on Wednesday an additional 47 million investment led by the Investment Corporation of Dubai a state owned sovereign wealth fund bringing its latest financing round to 203 million Indigo is valued after the latest round at 1 4 billion Indigo s President and Chief Executive David Perry said in an interview
The financing is one of the largest single investments into a private agriculture technology company It rivals SoftBank Group Corp s investment into Plenty a startup working on new technology to grow crops indoors announced in July That investment from SoftBank s Vision Fund was 200 million
Perry said Indigo will use the funding to open or expand new offices in Australia Argentina and Brazil and continue to invest in research The company raised 100 million last year and has raised more than 400 million since its founding in 2014
Indigo hired JPMorgan Chase Co NYSE JPM to facilitate the deal Perry said
Indigo says it is working to create a new way to grow crops so they are more resistant to insects drought severe weather and nutrient poor soil The company says its formula of coating seeds in microbes will one day help crops to withstand environmental stresses and allow farmers to forgo chemical fertilizers herbicides and insecticides
There is an enormous initiative to grow crops differently and in a more sustainable way Perry said
Indigo s business is a work in progress and far from proven Perry said most farmers that use Indigo technology still also use fertilizers and chemicals on their plants The company works with farmers in the United States Argentina and Australia
Indigo contracts with farmers before their growing season begins and sells the crops at a premium Perry said For instance Indigo sells its wheat to millers and brewers and the wheat farmer earns about 15 percent more from the sale than average commodity prices |
C | Citi snags Freepoint Commodities SVP sources | HOUSTON Reuters John Haynes a senior vice president for Freepoint Commodities has left the trading firm for Citigroup s energy division two sources familiar with the matter said on Monday
Haynes who traded West Coast natural gas joined Freepoint in October 2014 He previously traded natural gas at EDF PA EDF Trading It was not clear what Haynes new title would be at Citigroup NYSE C
Representatives from Citigroup and Freepoint did not respond to requests for comment |
JPM | iFOREX Daily Analysis 09 02 2016 | The dollar continues to lose ground against other major currencies on Monday but still remains supported amid ongoing concerns over the outlook for global growth Market sentiment was hit amid declining oil prices as hopes faded for a deal between major producers to reduce the excess in supply Meanwhile a report showing that euro zone investor confidence deteriorated sharply this month highlighted the problems in the global economy The Sentix index of investor morale hit a 10 month low in February dropping from 9 6 to 6 0 Stocks globally have had a rough start to 2016 hurt by weak U S growth falling oil prices and concerns regarding a China led slowdown But the greenback moved higher on Friday boosted by the largely upbeat U S employment report for January In addition a rise in wage growth to a one year high supported the outlook for inflation and increased the likelihood that the Fed could make further rate hikes in 2016 For today markets in China will remain closed for the Lunar New Year holiday Australia is to release private sector data on business confidence and the U S is to produce a report on the trade balance
EUR USD
EUR USD rose considerably on Monday extending sharp gains from last week as bond yields in the euro zone fell deeper into negative territory amid continued declines in oil prices and a major sell off in financial stocks on both continents Since dropping nearly 1 on the final session of January the euro has surged more than 3 25 versus the dollar over the first two weeks of the month A number of stocks among prominent European financial firms including Deutschebank Commerzbank DE CBKG HSBC and BNB Paribas plummeted between 3 and 7 on Monday amid mounting fears on the impact of negative interest rates and persistently low oil prices several days after rising more than 8 last Wednesday on hopes of a dramatic reduction in OPEC crude oil production In Europe the sell off in bank stocks dragged down the major indices as the Stoxx Europe 600 France CAC 40 and Germany Dax all fell by more than 3 on Monday For today investors will be focusing on U S trade balance data for further indications on the strength of the U S economy
Pivot 1 115Support 1 115 1 112 1 108Resistance 1 124 1 131 1 14Scenario 1 long positions above 1 1150 with targets 1 1240 1 1310 in extension Scenario 2 below 1 1150 look for further downside with 1 1120 1 1080 as targets Comment technically the RSI is above its neutrality area at 50
Gold
Gold surged by more than 3 at session highs on Monday rising to its highest level since June as investors piled into the safe haven asset amid a continuing drop in major banking stocks throughout the world Last month JPMorgan Chase Co N JPM Citigroup Inc N C and Wells Fargo N WFC Company all warned that they could incur credit losses in the range of hundreds of millions in oil and gas loans later this year if oil prices continued to weaken On Monday the People s Bank of China reported that its foreign currency reserves declined by 99 5 billion in January falling to the lowest level since 2012 adding further support on the price of gold Last month the total amount of Chinese foreign reserves fell for a third consecutive month as the PBOC continues to unload large amounts of the dollar in an effort to support the yuan For today investors will be focusing on U S trade balance data for further indications on the strength of the U S economy
Pivot 1127Support 1127 1088 1046Resistance 1225 1246 1273Scenario 1 long positions above 1127 00 with targets 1225 00 1246 00 in extension Scenario 2 below 1127 00 look for further downside with 1088 00 1046 00 as targets Comment the RSI is well directed
WTI Oil
U S crude oil prices slipped back below 30 a barrel on Monday after a meeting between oil ministers from Saudi Arabia and Venezuela over the weekend reportedly accomplished little headway toward reaching an agreement that could reduce near record high production by OPEC WTI crude oil prices crashed nearly 20 since the start of the new year A meeting between Venezuela oil minister Eulogio Del Pino and Saudi Arabia counterpart Ali al Naimi on Sunday concluded with very few indications that the OPEC members have moved closer to setting a date for an emergency summit which could result in significant production cuts Investors also digested comments from Iran oil minister Bijan Zangeneh that the National Iranian Oil Company NIOC is close to finalizing a deal with France s Total to sell 160 000 barrels per day For today the focus remains on the API inventory data
Pivot 30 72Support 31 9 31 35 30 72Resistance 29 2 28 5 27 85Scenario 1 short positions below 30 72 with targets 29 20 28 50 in extension Scenario 2 above 30 72 look for further upside with 31 35 31 90 as targets Comment the RSI lacks upward momentum
S P 500
U S stocks fell sharply on Monday extending losses from late last week as a major sell off on European markets spilled across the Atlantic amid persisting concerns related to dropping energy prices and the talk of negative interest rates among the world s largest central banks At the same time U S crude oil prices tumbled below 30 a barrel at Monday s close placing further pressure on major banks who warned that they could incur credit losses of hundreds of millions in oil and gas loans later this year if oil prices continued to weaken The Dow Jones Industrial Average fell by 1 10 while the NASDAQ and the S P 500 also fell to their lowest intraday levels since 2014 while suffering one of their worst two day declines since the August The S P 500 Composite index meanwhile dipped 26 61 or 1 42 to 1 853 44 as all 10 sectors closed in the red Stocks in the Financials Basic Materials and Technology sectors lagged each falling by more than 1 5 on the session For today investors will be focusing on U S trade balance data
Pivot 1950 Support 1821 1738 1650 Resistance 1950 2010 2080 Scenario 1 short positions below 1950 00 with targets 1821 00 1738 00 in extension Scenario 2 above 1950 00 look for further upside with 2010 00 2080 00 as targets Comment the RSI is capped by a declining trend line |
JPM | A 918 Point Stock Market Crash In Japan | On Tuesday junk bonds continued to crash the price of oil briefly dipped below 28 dollars a barrel Deutsche Bank DE DBKGn was forced to deny that it is on the verge of collapse but the biggest news was what happened in Japan The Nikkei was down a staggering 918 points but that stock crash made very few headlines in the western world If the Dow had crashed 918 points today that would have been the largest single day point crash in all of U S history So what just happened in Japan is a really big deal The Nikkei is now down 23 1 percent from the peak of the market and that places it solidly in bear market territory Overall a total of 16 5 trillion dollars of global stock market wealth has been wiped out since the middle of 2015 As I stated yesterday this is what a global financial crisis looks like
Just as we saw during the last financial crisis the big banks are playing a starring role and this is definitely true in Japan Right now Japanese banking stocks are absolutely imploding and this is what drove much of the panic last night The following numbers come from Wolf Richter
Mitsubishi UFJ Financial Group N MTU plunged 8 7 down 47 from June 2015
Mizuho Financial Group N MFG plunged 6 2 down 38 since June 2015
Sumitomo Mitsui N SMFG plunged 6 2 down 26 since May 2015
Nomura N NMR plunged a juicy 9 1 down 42 since June 2015
A lot of analysts have been very focused on the downturn in China in recent months but I think that it is much more important to watch Japan right now
I have become fully convinced that the Japanese financial system is going to play a central role in the initial stages of this new global financial meltdown and so I encourage everyone to keep a close eye on the Nikkei every single night
Meanwhile the stock price of German banking giant Deutsche Bank crashed to a record low on Tuesday If you will recall Deutsche Bank reported a loss of 7 6 billion dollars in 2015 and I wrote quite a bit about their ongoing problems yesterday
Things have gotten so bad that now Deutsche Bank has been forced to come out and publicly deny that they are in trouble
Deutsche Bank co CEO John Cryan moved to quell fears about the bank s stability Tuesday with a surprise memo saying its balance sheet remains absolutely rock solid
The comments come as investors grow increasingly nervous about the health of European banks which have taken a hit on the fall in energy prices and which face rising concerns over their cash levels
Of course Lehman Brothers issued the same kind of denials just before they collapsed in 2008 Cryan s comments did little to calm the markets and even Jim Cramer saw right through them
You know Deutsche Bank puts out a note saying listen don t worry all good Reminds me of JPMorgan N JPM saying if you have to say that you re creditworthy then it s already too late
Another thing that Lehman Brothers did just before they collapsed in 2008 was to lay off workers We have seen a number of major banks do this lately including Deutsche Bank
Cryan 55 has been seeking to boost capital buffers and profitability by cutting costs and eliminating thousands of jobs as volatile markets undermine revenue and outstanding regulatory probes raise the specter of fresh capital measures to help cover continued legal charges The cost of protecting Deutsche Bank s debt against default has more than doubled this year while the shares have dropped about 42 percent
The following chart comes from Zero Hedge Nobody on the Internet does a better job with charts than Zero Hedge does This chart shows that Deutsche Bank stock has already fallen lower than it was during any point during the last financial crisis
Deutsche Bank is the biggest and most important bank in the biggest and most important economy in the EU and it has exposure to derivatives that is approximately 20 times Germany s GDP
If that doesn t alarm you I don t know what will
The biggest financial bubble in the history of the world has entered a terminal phase and the parallels to the last financial crisis have become so apparent that just about anyone can see them at this point Just consider some of the ominous warnings that we have seen recently
Billionaire Carl Icahn for example recently raised a red flag on a national broadcast when he declared The public is walking into a trap again as they did in 2007
And the prophetic economist Andrew Smithers warns U S stocks are now about 80 overvalued
Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999 And we all know what happened next Stocks fell by 89 and 50 respectively
Even the Royal Bank of Scotland L RBS says the markets are flashing stress alerts akin to the 2008 crisis They told their clients to Sell Everything because in a crowded hall the exit doors are small
And let s not forget that famous billionaire retail magnate Hugo Salinas Price has warned that the global economy is going into a depression
The chaos that we have seen this week is simply a logical progression of the crisis that began during the second half of last year If you were to create a checklist of all the things that you would expect to see during the initial stages of a new financial crisis all of the boxes would be checked
In the days ahead keep your eyes on Germany and Japan
Yes the Italian banking system is completely collapsing right now but I believe that what is happening in Germany is going to be the key to the meltdown of Europe and I am convinced that Deutsche Bank is going to be the star of the show
Meanwhile don t underestimate what is taking place in Japan
The Japanese still have the third largest economy on the entire planet and their financial system is essentially a Ponzi scheme built on top of a house of cards that has a rapidly aging population as the foundation
As Japan falls that will be a signal that financial Armageddon is now upon us
And after last night it appears that moment is a lot closer than a lot of us may have thought |
JPM | Dollar Mixed As Markets Await Fed Chair Yellen | US markets ended mildly lower last night after see saw price actions DJIA lost 12 67 pts or 0 08 to close at 16014 38 while S P 500 lost 1 23 pts or 0 07 to close at 1852 21 Crude oil finally let go out 30 handle and dipped to as low as 27 74 and is trading around 28 4 for the moment 10 year yield breached 1 7 briefly to 1 699 but recovered to close at 1 729 Risk aversion then came back in Asian session with Nikkei extending yesterday s 5 4 decline and is trading down 397 pts or 2 47 at the time of writing In the currency markets Swiss Franc and Yen remain the strongest major currencies this week Additional selling in Sterling has pushed it to be the weakest one overwhelming commodity currencies Dollar is mixed as markets await Fed chair Janet Yellen s testimony today
Fed chair Janet Yellen will testify before House Financial Services Committee today and Senate Banking Committee tomorrow As of yesterday Fed fund futures are pricing in 5 chance of rate hike by June 11 by September and 21 by December Yellen would likely face some tough questions regarding the rate hike last December in particular after the recent market turmoils But more importantly markets will pay attention to hints from Yellen on the rate path this year there were talks earlier this year that Fed could hike as many as 3 4 times this year but policy markets have backed off from this predictions Some economists noted that the market turmoils were so far so enough to pause the tightening cycle as there is no evidence of slowdown in US On the other hand there are some far fetched speculations that Fed would eventually going into a negative interest rate policy
In Eurozone Bundesbank Governor Jens Weidmann inflation outlook would be a key topic of discussion in the March ECB meeting and inflation forecasts for this year will need to be substantially reduced Meanwhile Bank of France governor Francois Villeroy de Galhau said that the battle waged on the deflation front was not over ECB is expected to reconsider monetary policy in the coming March meeting JPMorgan N JPM forecast that ECB would push deposit rate aggressively further to for another 40bps to 0 70 later this year And JPMorgan expected ECB to start lowering deposit rate to 0 5 in March first
On the data front Australia Westpac consumer confidence rose 4 2 in February Japan domestic CGPI dropped 3 1 yoy in January UK productions will be the focus in European session and NIESR GDP estimate will be released later in the day US will release crude oil inventories and Fed budget statement |
MS | Asia private equity funds hurt Morgan Stanley s third quarter profit | By Denny Thomas and Lawrence White
HONG KONG Reuters A dramatic fall in the value of Morgan Stanley s N MS Asian private equity funds hit the bank s quarterly earnings highlighting the risks of such investing at a time when rivals are scaling back to avoid losses and higher regulatory costs
Morgan Stanley s investment portfolio suffered a 235 million loss during the July September period compared with a profit of 232 million in the previous quarter Morgan Stanley CFO Jonathan Pruzan told analysts
Virtually all of that negative number can be attributed to the reversal of carry from our Asia PE business Pruzan said
Private equity firms make a standard 2 percent fee based on the assets they manage and can earn additional carry or share of the profits on beating certain pre determined performance goals
Having performed strongly amid China s booming markets earlier this year the funds saw that reverse amid China s stock market mayhem this summer which at one point wiped out more than 3 trillion of investor wealth
Morgan Stanley s Asia buyout funds manage more than 4 5 billion largely in Chinese and South Korean companies
The funds are also stuck with at least three large stocks which have not traded for several months making it harder for them to accurately value their portfolios or exit
Those include Tianhe Chemicals Group HK 1619 whose shares remain suspended following criticism by a short selling research company The Morgan Stanley private equity unit invested 300 million for a minority stake in Tianhe in 2012 its biggest equity investment in Asia
Last year research group Anonymous Analytics accused Tianhe of overstating profits in its initial public offering prospectus ahead of its Hong Kong listing
Another stock in its portfolio China Shanshui Cement Group HK 0691 has been suspended since April after its free float dropped below the regulatory requirement
Voluntary trading suspensions are common among Chinese companies During the market turmoil this summer more than half the Shanghai listed companies halted their shares at one point
In such situations private equity firms use the closest proxy to value their portfolios including using earnings multiples applied to similar publicly listed companies
REGULATORY COSTS
Morgan Stanley s dedicated Asia Private Equity fund strategy is at odds with some of the bank s rivals which are spinning off buyout arms due to the Volcker rule
The U S rule was put in place after the global financial crisis and caps banks involvement in risky businesses such as hedge funds and private equity to just 3 percent of Tier 1 regulatory capital
In Asia private equity is a growing business
It s a long term business and people are unlikely to change strategy just based on one quarter s volatility When you are investing in China public market exposure comes with the turf and one can t escape it said Vinit Bhatia partner at Bain Co s private equity practice in Asia
We expect China buyouts to gain momentum over the next five years which will make it even more attractive for private equity firms
Every publicly listed stock in the Morgan Stanley portfolio lost money in the July September quarter with the biggest plungers being a 50 percent fall in Shanghai listed polyester filament maker TongKun Group Co Ltd followed by a 28 percent slide in luxury brand distributor Sparkle Roll Group Ltd
While the China market has stabilized somewhat Morgan Stanley executives declined to comment on the potential of the funds performance to recover
I m not going to comment on where that carry will go going forward It s obviously going to be based on the investment performance and the valuations in the market Pruzan added
The firm s third Asian private equity fund which raised 1 5 billion in 2007 accounts for the majority of the loss Morgan Stanley s contribution of its own funds dropped to 50 million from 400 million reflecting the global reduction in investment banks putting their own money at risk |
MS | Loss making online meal delivery firm HelloFresh plans flotation | By Arno Schuetze and Alexander H bner FRANKFURT Reuters Loss making ready to cook meal delivery company HelloFresh is readying a Frankfurt stock market listing that looks to capitalize on its rapid global expansion rising consumer demand for convenience and investor appetite for tech flotations The Berlin based company is likely to sell shares worth at least 300 million euros 331 million two people familiar with the deal said on Wednesday HelloFresh delivers meal ingredients and recipes for dishes such as cheeky chicken chow mein and warming lentil moussaka priced as low as 4 pounds 6 apiece to subscribers in seven European countries as well as in Australia Canada and the United States Majority owner Rocket Internet a global e commerce investor said HelloFresh was planning to sell newly issued shares in a capital increase HelloFresh also said revenue swelled 384 percent to 198 million euros in the first nine months of 2015 while losses rose to 58 million from 8 5 million a year before It said it was expecting fourth quarter revenue to top the previous three months by between 15 and 20 percent and intends to use the proceeds of its forthcoming initial public offering IPO to fund growth In only four years we have managed to disrupt the traditional food supply chain and build a global company co founder and CEO Dominik Richter said HelloFresh s offering comes after digital classifieds group Scout24 was able to complete its float as planned in wobbly markets By contrast companies like container shipper Hapag Lloyd HPLG UL plastics maker Covestro and automotive supplier Schaeffler have had to curb their capital raising ambitions due to waning investor demand In the third quarter HelloFresh delivered 13 million meals to its 530 000 active subscribers up from 3 2 million meals and 115 000 subscribers in the year earlier period Last month HelloFresh was valued at 2 6 billion euros in a funding round while U S peer Blue Apron which sells 3 million meals per month in June secured funding which valued it at more than 2 billion The ready to cook meal delivery craze has already featured its share of failed start ups as several early California based start ups including Pop Up Pantry Chefler and Fresh Dish shut down over the past two years Remaining U S players face competition from similar companies such as Munchery which has raised 117 million in venture financing It got its start delivering pre made chef made meals but is now moving into the make you own meal market Goldman Sachs and Morgan Stanley N MS are organizing the IPO with the help of JP Morgan and UBS 1 0 9063 euros 1 0 6538 pounds |
JPM | U S factory orders slip business spending robust | By Lucia Mutikani WASHINGTON Reuters New orders for U S made goods fell less than expected in October and shipments of core capital goods were much stronger than previously reported pointing to sustained strength in manufacturing that should buoy the economy Factory goods orders dipped 0 1 percent amid a drop in demand for both civilian and defense aircraft after an upwardly revised 1 7 percent jump in September the Commerce Department said on Monday These data remain consistent with a solid upswing in manufacturing activity and an acceleration in corporate capital spending said John Ryding chief economist at RDQ Economics in New York Economists had forecast factory orders falling 0 4 percent in October after a previously reported 1 4 percent increase in the prior month Orders for non defense capital goods excluding aircraft seen as a measure of business spending plans rose 0 3 percent in October instead of the 0 5 percent drop reported last month These so called core capital goods orders surged 2 3 percent in September Shipments of core capital goods which are used to calculate business equipment spending in the gross domestic product report advanced 1 1 percent in October instead of the previously reported 0 4 percent rise Core capital goods shipments increased 1 3 percent in September October s upward revision to core capital goods shipments prompted forecasting firm Macroeconomic Advisers to boost its fourth quarter GDP growth estimate by two tenths of percentage point to a 2 7 percent annualized rate Economists at Barclays LON BARC lifted their forecast to a 2 5 percent pace from a 2 4 percent rate The economy grew at a 3 3 percent pace in the third quarter UPSIDE RISK The shipments revision adds upside risk to our already double digit forecast for fourth quarter equipment spending growth and the revised orders data show no sign of a slowdown in capital expenditures in the months ahead said Jesse Edgerton an economist at JPMorgan NYSE JPM in New York Business spending on equipment has increased strongly this year as corporations anticipated hefty tax cuts from the Trump administration Republicans in the U S Congress have approved a broad package of tax cuts including slashing the corporate income tax rate to 20 percent from 35 percent The dollar rose against a basket of currencies on the data and the anticipated fiscal stimulus while prices for U S Treasuries fell U S stocks were mostly trading higher Business spending on equipment increased at its fastest pace in three years in the third quarter helping to underpin manufacturing The sector which makes up about 12 percent of the U S economy is also being supported by a weaker dollar The greenback has lost about 7 percent of its value against the currencies of the United States main trading partners this year Factory activity is also being boosted by businesses replenishing depleted inventories and strengthening global demand helping to offset a slowdown in spending on mining exploration wells and shafts In October orders for machinery rose 1 9 percent after a 0 8 percent gain in September Mining oil field and gas field machinery orders fell 1 4 percent after soaring 20 2 percent in September Orders for transportation equipment declined 4 2 percent reflecting an 18 5 percent plunge in civilian aircraft orders and a 7 6 percent drop in bookings for defense aircraft Transportation equipment orders rose 4 7 percent in September Motor vehicle orders increased 1 3 percent after being unchanged in September
Inventories of unsold goods at factories rose 0 2 percent in October with overall shipments increasing 0 6 percent That left the inventories to shipments ratio unchanged at 1 37 |
C | CalAtlantic Group proposes offering of 300M of senior notes due 2027 | CalAtlantic Group CAA 1 4 proposed public offering of 300M aggregate principal amount of a new series of unsecured senior notes due 2027 Citigroup NYSE C Global Markets Inc J P Morgan Securities LLC Mizuho Securities USA LLC Credit Suisse SIX CSGN Securities NYSE USA LLC BofA Merrill Lynch and Wells Fargo NYSE WFC Securities LLC are acting as joint bookrunning managers for the proposed notes offering The Company intends to use the net proceeds of the notes offering for general corporate purposes which may include acquisition of land or other home building companies land development home construction repurchases of the Company s common stock and repayment or repurchases of the Company s debt including the repayment or repurchase of the Company s 1 25 Senior Convertible Notes due August 2032 Press ReleaseNow read |
C | Noble Group s lenders in talks on 2 billion credit line Financial Times | Reuters Noble Group s main banks are in talks to decide whether to give the commodity trader an extension on its credit line or force it into a restructuring or liquidation the Financial Times newspaper said on Tuesday citing sources with knowledge of the discussions Banks including HSBC Societe Generale PA SOGN ABN Amro Citigroup NYSE C and ING have appointed legal advisers to consider the case for extending the 2 billion line of credit so the Hong Kong based company can continue its lengthy search for a major new investor to recapitalise the business the FT said Law firm Clifford Chance has been appointed by Noble s lenders to advise on whether bankruptcy or liquidation would give them the best means of recouping the borrowing provided to Noble if the credit line is not extended the paper said Banks have also hired consultants Alvarez Marsal who are assessing the collateral pledged by Noble against the credit line FT said The struggling commodity trader is asking banks to extend the credit line until the end of the year while it looks for a strategic investor Citigroup ING and Noble Group declined to comment HSBC Societe Generale and ABN Amro did not immediately respond to requests for comment outside regular business hours I think it is likely that Noble will get some extension to the credit line but it all depends on how much the lenders believe in the credibility of management and its plans an executive at one of Noble s lenders was quoted as telling the FT Noble has struggled ever since Iceberg Research questioned its accounts in early 2015 which came at a time of a brutal downturn in commodity markets The company has stood by its accounts But the share price collapsed and credit rating downgrades management upheavals and a series of writedowns asset sales and a fundraising ensued Earlier this year the company reported it made a net profit of just 8 7 million in 2016 following a net loss of 1 67 billion in 2015 its first loss in nearly two decades
Noble s market value has shrunk to 354 million currently from 6 billion in February 2015 |
JPM | Bizarre Gold And Silver Movements Occurring Behind The Scenes | A lot is riding on the demand side of the equation when it comes to metals price performance this year Demand is the bigger wildcard with signals thus far being mixed in gold and silver bullion markets The outlook for supply is more certain and it isn t pretty
Endeavor Silver one of the largest primary silver mining companies announced last week that it expects to reduce production of the white metal by roughly 30 The company s El Cubo mine is not profitable despite efforts to reduce costs Endeavor plans to halt development and exploration at the mine and process accessible ore only By year end the mine will be placed on care and maintenance
Steve St Angelo of SRS Rocco Report reviewed the company s third quarter 2015 financial reports which revealed the all in sustaining costs at El Cubo at 18 48 per ounce There will need to be a significant recovery in silver prices before the mine can operate profitably Investors should expect other miners to announce similar plans to taper production in the coming months
COMEX Gold Stockpiles Drop 73 in a Single Day
The drop in COMEX inventories of gold and silver may also contribute to supply problems in the bullion markets Registered gold inventories had recovered very modestly from record low levels in December However last week stockpiles dropped an alarming 73 in a single day 201 345 of the available 275 325 ounces of registered gold were reclassified from registered to eligible on Tuesday rendering those ounces unavailable for delivery at least until converted back COMEX silver inventories also continue to fall
It is true the declining inventory of registered metal isn t necessarily a problem Holders can very easily switch metal from one category to the other But registered stocks of gold have never been this low and certainly have never held this low for such an extended period of time We may be seeing a genuine reluctance among holders of COMEX metal to let more go at current prices
On the demand front the data is conflicting Bullion dealers including Money Metals are reporting relatively subdued buying activity compared to several months ago Investors loaded up last summer and during early fall and now appear to be waiting for the prices to make a move Range bound prices aren t providing much motivation to act
U S Mint Reports High Silver Eagle Sales in January but Here s the REAL REASON Demand Remains High
However the month of January was extraordinary when it comes to demand for silver and gold American Eagles The U S Mint sold nearly 6 million silver coins in the month It was 7 7 increase versus January 2015 the prior record Sales of gold Eagles hit 124 000 compared to 81 000 ounces a year ago a 50 jump year over year
Our sources indicate the demand is likely a result of dealers replenishing inventories which were hard hit in recent months And there is another little known reason
Direct purchases from the U S Mint for Silver Eagles remain high because Authorized Purchasers APs have been reluctant to take anything less than their full allotment for fear of losing some ability to obtain supply when demand returns
Last summer and fall the APs were left scrambling for Silver Eagle inventory when soaring physical demand depleted stockpiles at the wholesale and retail levels That resulted in long delays and increased premiums for the world s most popular silver bullion coin
Therefore it makes sense for wholesalers to stock up on Eagles now while they can get their hands on them and save them for a rainy day
There may also be some large scale buying on behalf of bullion banks Some analysts including Ted Butler speculate that institutions such as JPMorgan Chase N JPM began building positions in the popular coins last year |
JPM | SPX Reverses Course USD Breaks Down | VIX rose above all near term resistance except the Cycle Top at 23 75 Most market watchers would not take alarm until the VIX exceeds 25 00 However the buy signal NYSE sell signal is confirmed The close above the neckline suggests a very robust follow through rally in the following week Traders are still sanguine after the market sell off following the jobs report
SPX reversed course
The SPX managed a slightly higher retracement on Monday before selling off It did not break beneath its Wednesday morning low keeping many investors looking for another rebound However corporate pension contributions appear to have run their course and the Cycles Model indicates weakness may prevail over the next week If so the neckline awaits the next downdraft which may come faster than expected
Reuters Global stock markets slumped and the U S dollar rallied on Friday after a key U S jobs report painted a mixed picture of the labor market and left investors with a muddled view on interest rate hike prospects
Oil prices dipped ending the week lower after two weeks of gains
Wall Street ended lower led by plunging technology shares after poor results from data company Tableau Software N DATA and networking platform LinkedIn N LNKD The S P 500 information technology sector fell 3 4 percent while the Nasdaq Composite Index slumped to its lowest close since October 2014
NDX declines to a Head Shoulders neckline
NDX also completed its retracement rally on Monday and sold off during the rest of the week It halted just above the Head Shoulders neckline at 3992 91 There is nothing bullish about this action Should panic develop NDX may decline well beneath 3000
WSJ The S P 500 posted its biggest weekly decline since the start of the year with technology shares suffering particularly sharp losses
Investors shied away from risky assets amid soft economic data Stocks fell and the dollar strengthened on Friday after a U S Labor Department report showed job growth slowed in January after a surge at the end of last year
It s not good because we re not having the job growth we want said Peter Costa president of brokerage Empire Executions That word recession is starting to pop up in conversation
Stocks fell to session lows in afternoon trade highlighting how volatility continues to be a markets fixture this year amid persistent concerns over tepid economic growth
High Yield Bond Index may have been saved by a rally in the oil patch
The High Yield Index may have had losses curbed by strength in the price of crude oil This resulted in only a marginal loss despite large swings in the index Nonetheless it may be ready for an imminent reversal to challenge the neckline of the Head Shoulders formation near 122 50 MUT remains on a sell signal
The euro breaks above its consolidation zone
The euro broke above its consolidation zone to new highs not seen since last October The minimum target for this breakout appears to be 117 14 last seen in late August This appears to be a take no prisoners short squeeze that may ramp very quickly
ZeroHedge It was just two days ago that Bloomberg implored officials to bring on a cashless future in an Op Ed that calls notes and coins dirty dangerous unwieldy and expensive
You probably never thought of your cash that way but increasingly authorities and the powers that be seem determined to lay the groundwork for the abolition of what Bloomberg calls antiquated physical money
We ve documented the cash ban calls on a number of occasions including most recently those that emanated from DNB Norway s largest bank where executive Trond Bentestuen said that although there is approximately 50 billion kroner in circulation the Norges Bank can only account for 40 percent of its use
EuroStoxx challenges the Head Shoulders neckline
EuroStoxx stopped short of violating its Head Shoulders neckline at 2855 44 However there was no bounce The decline may continue beneath the neckline and Cycle Bottom support next week The Cycles Model suggests a panic decline may develop
CNBC European markets finished lower on Friday after the latest U S jobs data showed a slowdown in employment in January
The pan European STOXX 600 ended around 0 9 percent lower with all major bourses in negative territory as investors digested weaker than expected U S employment data
The yen challenges a Cup with Handle formation
The yen rallied to the Lip of its Cup with Handle formation but did not break through The immediate implication of a breakout is a probable rise to an average near 92 50 or higher The yen just completed a Master cycle low which allows the rally to resume in strength into mid February or longer The short term pennant target may come in a matter of weeks while the Cup with Handle target may take months
Bloomberg The yen is set for its biggest weekly advance against the dollar in more than six years amid concern global economic growth is slowing as traders cut bets on whether the U S will raise interest rates this year overshadowing the impact of Japan adopting negative rates
The Japanese currency has more than recouped the tumble triggered when the Bank of Japan last week unexpectedly decided to charge lenders for some of their excess reserves held at the central bank Prospects for higher interest rates in the U S are receding on speculation the Federal Reserve can t tighten monetary policy further against a backdrop of global turmoil The euro is heading for its biggest weekly advance since 2011 even as the European Central Bank reviews its monetary stance
The Nikkei completes its retracement begins another decline
The Nikkei topped off its retracement beneath weekly Short term resistance at 18020 24 on Monday then reversed course It overcame the mid Cycle support at 17320 53 The sell signal has been reinstated with the final support to overcome at the Head Shoulders neckline Weakness may intensify next week
U S dollar breaks down
After a failed rally last week the US dollar fell beneath weekly Long term support at 97 02 closing the week just above it The Cycles Model calls for a fast decline possibly falling as far as the lower trendline of the Broadening formation Bullish speculators have been caught the wrong way in their positions causing a panic among the longs as this decline has the potential of wiping out all 2015 gains
AFR The United States dollar is still king in the global financial system
China may generate more headlines with a 2 per cent devaluation but while the world was watching Beijing last year the US dollar staged an incredible bull run
All of a sudden that s over And as the US dollar took a pummeling this week other currencies and other markets responded violently proving once again the central place of the greenback
The key to understanding what s happening in global markets is to understand what s happening to the US dollar And the key to that is to know what s happening to the US economy The greenback is on the cusp of a correction because currency traders have become convinced by what the rates market has been thinking for a long time the Federal Reserve will struggle to raise interests this year As 2016 gathers pace the optimistic view the US Fed took on the economy only last December suddenly looks overconfident
USB extends its rally
The Long Bond continued to gain strength in its uptrend as Treasury shorts are being squeezed USB appears to be capable of attaining Cycle Top resistance currently at 167 57 in the next two weeks After that we ll be looking for the 34 4 year high in Treasuries
CNNMoney Good news if you still haven t refinanced your mortgage The 10 year Treasury yield is hovering near its lowest levels since April of last year
But that s not necessarily a great sign for the stock market or broader economy
The benchmark 10 year Treasury is now just 1 82 It was 2 33 as recently as late December shortly after the Federal Reserve raised short term rates for the first time in nine years
What s going on Bond yields stop us if you ve heard this Fixed Income 101 spiel before fall as bond prices rise In other words when people buy bonds rates go down
And people have been buying boatloads of bonds this year because they re scared out of their minds as oil prices collapse and China s economy slows down
Gold surges in a probable throw over
Gold rallied beyond Long term support resistance at 1134 10 in a throw over of an Ending Diagonal It appears that gold had a delayed inverted Trading Cycle high as of this week A decline beneath Long Term support may signal a change in trend
Reuters Gold rose to a three month high in volatile trade on Friday as a mixed U S jobs report prompted investors to reassess the outlook for U S interest rates this year putting bullion on track for its strongest weekly performance in more than a year
U S employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded but rising wages and an unemployment rate at an eight year low suggested the labor market recovery remains firm
The futures curve is showing that the probability of a March rate hike has fallen to around 10 percent around the lowest levels last seen in October but there is a greater than 50 percent probability there will be an additional hike this year said Suki Cooper precious metals analyst for Standard Chartered L STAN Bank in New York
This has buoyed the risk off sentiment that has boosted gold prices
Crude had a wild week
Crude bounced below the Head Shoulders neckline and weekly short term resistance at 34 10 The rally came as a large hedge fund unloaded its short positions The aftermath has created wide price swings bearing almost no relationship to the news Crude appears to resume the decline with Cycle Bottom Support continuing to fall away at 18 88 supporting this view
CNBC Oil prices ended the week lower in choppy trading on Friday snapping two weeks of gains as a frenzy of speculation about a possible deal between top oil producers clashed with concerns about a growing supply glut
After a volatile week s trading much is riding on Sunday s meeting between Venezuelan Oil Minister Eulogio Del Pino and his Saudi counterpart Ali al Naimi in Riyadh after Del Pino s discussions with the Qatari and Omani ministers this week
Shanghai Index bounces for the holiday
The Shanghai Index bounced this week as the Peoples Bank of China PBOC pulled out all the stops to prevent the yuan devaluation and capital leaving the country This weekend starts the week long Chinese Spring Festival and Monday begins the Chinese New Year The Chinese markets remain closed for the duration
ZeroHedge In early December Ding Ning and his girlfriend Zhang Min were planning to make a run for it
The couple had come to the end of the road with the massive fraud they were running through P2P lender Ezubo which bilked some 900 000 people out money making it the largest ponzi scheme by number of victims in history
Ultimately the amount of money coming in was no longer sufficient to cover interest payments to existing clients The pair attempted to bury the evidence in the backyard literally but police using two excavators managed to dig up 80 bags of documents buried 20 feet underground
The Banking Index breaks down again
BKX made a new low on Wednesday then made a partial retracement remaining beneath its Cycle Bottom resistance at 64 70 The Cycles Model shows the next probable significant low the second week of February Remember BKX is a leading index
ZeroHedge Last summer we outlined how Chinese banks obscure trillions in credit risk
The powers that be in Beijing aren t particularly keen on allowing the banking sector to report real data on souring loans especially given the fragile state of the country s economy In some cases the Politburo will pressure banks to simply roll over bad debt effectively kicking the can In addition banks carry around 40 of their credit risk outside of official loans
ZeroHedge Want to deposit cash at JPMorgan Chase N JPM Then prepare to be treated if not like a criminal then certainly a suspect of a very serious crime The charge being in possession of that barbarous relic known as cash
Soon as cash becomes increasingly frowned upon cash deposits will be slowly but surely phased out in their entirety forcing those few savers left in Obama s grand economic recovery experiment to engage in commerce only in a way that allows the government to keep track of every single transaction
ZeroHedge While there are numerous financial institutions in the world that are full of hidden NPLs and over leveraged trading at extreme levels of risk the FSA s Too Interconnected To Fail list of systemically critical banks is where global investors attention is really focused
BMO Capital Markets breaks down the world s most systemically critical financial institutions using their own special sauce of CDS levels CDS term structure equity price liquidity and spread trends
ABCNews Italian banking shares are getting battered this year as the government tries to bundle and dispose of billions of euros in bad loans while attempting to reform and consolidate the ailing sector
Since the start of the year Italian banks have lost more than 35 billion euros 39 billion in market capitalization as investors sold their shares amid concern about some 300 billion euros in soured loans more than 30 percent of the eurozone s total
Economy Minister Pier Carlo Padoan told the Senate on Thursday that the banks had been caught up in volatility hitting the global markets with high level of bad loans on Italian banks balance sheets attracting investors wrath He argued that the reaction doesn t reflect the economic reality of Italian credit institutes
WSJ Soon after his appointment last year Deutsche Bank AG DE DBKGn Co Chief Executive John Cryan pleaded with shareholders for time The overhaul of the big German bank will not be easy and will take years to deliver he said
Investors are already running out of patience and not just with Deutsche After years of lackluster results financial scandals painful share sales disruptive management changes onerous regulations and strategic U turns many investors are throwing in the towel on European banks |
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