symbol
stringlengths 1
9
| title
stringlengths 1
701
| text
stringlengths 1
140k
|
|---|---|---|
MS | Oil rebounds above 62 tracking broader markets | By Simon Falush LONDON Reuters Oil rose above 62 a barrel on Monday mirroring gains in equities as investors became confident there would be no further substantial price loss in the run up to the new year Saudi Arabia s powerful oil minister Ali al Naimi said on Sunday that lower crude prices would help demand by stimulating the economy and slow down supply growth Naimi said that the market would correct itself and was confident that the fall was temporary Michael Hewson chief market strategist at CMC Markets said The market has calmed down and it is forming a short term base above 60 and it s to be expected that there would be a bit of a rebound after such a sharp fall Brent rose 74 cents to 62 12 by 0854 GMT It is down 46 percent from the year s peak in June above 115 per barrel U S crude was up 66 cents at 57 79 a barrel OPEC s decision not to reduce production at a meeting in November sparked the recent rout in oil prices Prospects for a cut in the near future look remote Saudi Arabia is prepared to increase its oil output and claim a bigger market share to meet the demands of any new customers Monday s edition of the Saudi owned al Hayat newspaper quoted Naimi as saying While analysts said Brent would likely remain over 60 a barrel for the rest of the year they said further large jumps in price were unlikely Any oil relief rally is likely to be limited and short lived barring a major outage We see too many headwinds that must be addressed Morgan Stanley said on Monday in a report National Australia Bank said Given the lead time in permit approval and rig construction ahead of oil production a sizeable negative U S supply response given the price drop is unlikely to take place until late 2015 which places further downward pressure on oil prices in the first six months of next year The bank added that it expected Brent and U S crude to average 68 and 64 per barrel respectively in 2015
Analysts also said they expected relatively low price volatility for the rest of the year as traders begin to wind down their 2014 positions Additional reporting by Henning Gloystein in Singapore Editing by Dale Hudson |
MS | Ex minister Kudrin warns of full fledged crisis in Russia | By Darya Korsunskaya Lidia Kelly and Katya Golubkova MOSCOW Reuters Russia s government has pushed the country into an economic crisis by not tackling its financial problems fast enough former finance minister Alexei Kudrin said on Monday as evidence mounted of trouble spreading through the economy The central bank bailed out its first victim of the collapsing currency authorities announced a tax on grain exports to protect domestic stocks and a Reuters poll of 11 economists predicted that Russia s gross domestic product would fall 3 6 percent next year Russia has been hit by what Economy Minister Alexei Ulyukayev recently called a perfect storm of plummeting oil prices sanctions related to its military action in Ukraine and a flight of investors capital made worse by a lack of structural reforms that means the economy is overwhelmingly dependent on oil revenues Kudrin one of few to criticize President Vladimir Putin said he believed the decline in the rouble could be attributed primarily to the sanctions imposed following Russia s annexation of Ukraine s Crimea region and its subsequent support for loyalist fighters in the east Putin discussed the Ukraine crisis with the leaders of Germany France and Ukraine by telephone on Monday the Kremlin said noting that a ceasefire had largely held in eastern Ukraine in recent days It said the leaders had emphasized the importance of removing heavy weapons and exchanging prisoners but gave no indication of whether a breakthrough had been reached Government officials have tried to minimize the impact of sanctions on the country and its rouble currency which plunged 80 percent against the dollar last week despite a hike in interest rates to 17 percent Putin has claimed external factors like oil were the key culprit behind the country s tough times Kudrin a darling of investors who is credited with building Russia s 170 billion sovereign wealth funds warned that Russia risked having its debt downgraded to junk status in 2015 Today I can say that we have entered or are entering a real full fledged economic crisis Next year we will feel it clearly the former minister told a news conference The government has not been quick enough to address the situation I am yet to hear its clear assessment of the current situation Kudrin quit in 2011 in protest at proposals to increase defense spending although he and Putin are still believed to be close MOUNTING PROBLEMS Mounting evidence suggested that Russia s economic pain and isolation were starting to bite The country announced plans to impose a heavy tax on grain exports since rouble volatility and high global prices have caused exports to spike Russian news agencies reported Prime Minister Dmitry Medvedev told a meeting with officials that the country needed to hang on to its stocks And Russia s central bank said it would have to bail out mid sized Trust Bank with 30 billion rubles 540 million to stop it going bankrupt Trust held 145 billion rubles 2 63 billion in private personal deposits as of Dec 1 according to its accounts The country s largest lender Sberbank was forced to deny a report from RIA news agency that it had suspended taking new requests for auto loans and mortgages Though Russia s biggest oil firm Rosneft partially eased some worries by saying it had made a 7 billion debt repayment from its own cash reserves investors had been concerned it could default because the sanctions cut off its access to Western finance it announced separately that a deal to acquire an oil trading business from Morgan Stanley had been terminated due to a refusal by regulators in the United States to clear it The termination of the deal is another blow for Rosneft after its partners including ExxonMobil withdrew from projects to develop Arctic offshore oil deposits after the sanctions were introduced Kudrin forecast a series of defaults among both medium and large companies though he said banks would probably be supported by the state which was likely to result in rating agencies downgrading Russia s debt to junk status Most agencies have put Russia this year one notch above junk status Russia will get a downgrade Kudrin said It will enter the junk territory MISTRUST The rouble firmed against the dollar on Monday with exporters responding to Putin s urge to sell their foreign currency revenues on the market and Brent crude prices stood close to 60 a barrel While the currency down some 45 percent against the dollar so far this year may stabilize in the first quarter of next year its decline will likely help to push inflation to a rate of 12 15 percent in 2015 Kudrin said The central bank envisages next year s inflation at around 8 percent Economists polled by Reuters see it at 9 2 percent Kudrin said he believed that between 25 and 35 percent of the decline in the rouble could be attributed to sanctions The rest he said was down to a stronger dollar and investors mistrust of Russian authorities and their actions
His outlook for the economy next year was bleak Even if the price of oil rose to 80 per barrel gross domestic product was still likely to fall by more than 2 percent in 2015 Kudrin said At 60 per barrel GDP would decline by 4 percent or more he added echoing the central bank s latest assessment published last week Additional reporting by Vladimir Soldatkin Oksana Kobzeva and Polina Devitt Editing by Sophie Walker and Philippa Fletcher |
MS | Most Americans Still Await Wage Growth And Real Recovery | By
Like so many shiny presents piling up under the tree good economic news is suddenly abundant the Dow soared above 18 000 on Tuesday for the first time ever Third quarter GDP growth rang up at 5 percent Last month unemployment registered at 5 8 percent down from 7 percent in November 2013 And so far this year the U S economy has added 2 65 million jobs the largest gains in payrolls since we were prepping for Y2K at the turn of the century These are all welcome tidings of an economic recovery now five and a half years in the making Except for this a lot of Americans aren t seeing that growth reflected in their incomes Income is trying to claw it s way back but we re still down from where we were at the beginning of the recession and since the beginning of the last decade said Sentier Research partner Gordon Green a former chief of the governments division at the U S Census Bureau Green and his co author John Coder a former head of the income statistics branch at the Census Bureau track how median annual household income changes each month At the beginning of the recession in December 2007 households pulled in a median of 56 447 per year in inflation adjusted November 2014 dollars That fell to 55 434 by June 2009 technically the beginning of the recovery and then it kept falling Income did not bottom out until August 2011 said Green when the median figure finally came to rest at 51 652 Since then income has risen 4 3 percent as of November 2014 to 53 880 according to Sentier s data released Tuesday based on an analysis of the monthly Current Population Survey Still that s 4 5 percent lower than in December 2007 and 5 7 percent lower than in January 2000 when the median annual household income was 57 128 The bright spot is we re starting to come up from the August 2011 low point Green said We just have not fully recovered yet Take a look at the chart One reason for that flat wages Whereas household income encompasses sources such as Social Security payments and unemployment benefits hourly wages tell us how well the economy is converting growth in productivity into overall rising incomes for the vast majority said Josh Bivens research and policy director at the left leaning Economic Policy Institute EPI So how s that going for most people Pretty bad Bivens said In the short run since the recovery began in 2009 the bottom 90 percent have essentially gone nowhere Bivens s colleague Elise Gould crunched the numbers on EPI s blog last week In November private sector workers earned an hourly average of 24 66 in real inflation adjusted wages These wages are no better than we saw in the year ending November 2009 or November 2010 where average hourly earnings were 24 60 and 24 61 respectively she wrote Check out the chart Nor have the majority of workers fared much better since the late 1970s said Bivens In a sign of rising income inequality wages for the bottom 70 percent since 1979 have either grown trivially about 0 2 percent at most or less than that he said The stagnation Bivens argues reflects policy decisions that have shifted bargaining power away from low and moderate wage workers For example the share of workers covered by a union contract has been cut in half over the last three decades down from 26 5 percent in 1975 to 12 4 percent in 2013 The federal minimum wage at 7 25 an hour isn t worth nearly what it used to be either Adjusted for inflation the value is about 25 percent lower than it was in 1968 Bivens said That is during a period when productivity has grown 80 percent he added Jobs in low paying service sectors like retail and food have also become more of the norm in the post recession economy As Morgan Stanley analysts noted in September Since the labor market recovery began in early 2010 we estimate that roughly 65 percent of net new jobs created have been concentrated in low wage paying industries As of 2012 the U S outranked every other developed country for having the highest share of low paying jobs the same Morgan Stanley paper said citing the Organization for Economic Cooperation and Development By contrast In 2001 the U S ranked fifth wrote analysts Ellen Zentner and Paul Campbell Federal Reserve policymakers hold the key to a near term bump in pay Bivens argues prioritizing keeping unemployment low over keeping inflation low That s because low unemployment translates into a bigger bargaining chip for workers further down the income scale In order to get a raise from your boss you need to convince them that it would be hard to replace you if you quit Bivens said Case in point the best period of wage growth in the last 25 years occurred during the late 1990s when pay rose about 2 percent and unemployment averaged about 4 percent between 1999 and 2000 At one level the failure of wages to keep up with the country s economic output evidences a fundamental breakdown Bivens said It means the living standard of a great majority of American workers are going to lag overall economic growth That to me is the definition of a failing economy he added More broadly wage stagnation intertwined with income inequality might make it increasingly difficult to generate economic demand going forward As Morgan Stanley analsysts Zenter and Campbell pointed out some months ago despite the roughly 25 trillion increase in wealth since the recovery from the financial crisis began consumer spending the largest share of the U S economy remains anemic To lift all boats they wrote further increases in residential wealth and accelerating wage growth are needed |
MS | Shake Shack Files For 100M IPO | By
Fast food burger joint Shake Shack Inc filed for a 100 million initial public offering Monday with the U S Security and Exchange Commission which could value the company at 1 billion The company applied to have its stock listed on the New York Stock Exchange under the symbol SHAK Shake Shack is owned by the Union Square Hospitality Group Restauranteur Danny Meyer opened the company s first location in New York s Madison Square Park in 2004 There are now 63 locations worldwide including the U K and the Middle East As part of the IPO Shake Shack will spin off into a separate company J P Morgan Morgan Stanley Goldman Sachs and Barclays are among the major underwriters for the IPO according to Shake Shack s preliminary S1 documents The number of shares to be offered and the price range for the proposed offering have yet to be determined Shake Shack plans to use a portion of the proceeds from this IPO to open new stores and renovate existing ones The company opened 10 domestic stores in 2014 and plans to open at least 10 new domestic stores each year beginning in fiscal 2015 for the foreseeable future According to the SEC filing the company plans to expand its footprint to at least 450 stores by opening stores in new and existing markets |
JPM | Bitcoin bounces 20 percent after dipping below 3 000 | By Jemima Kelly LONDON Reuters Bitcoin bounced by more than 20 percent in the space of just four hours on Friday having skidded below 3 000 earlier as Chinese authorities ordered Beijing based cryptocurrency exchanges to stop trading After a vertiginous climb to record highs close to 5 000 earlier this month bitcoin had plunged almost 40 percent in the 12 following days with the sell off driven in large part by fears of China cracking down on the market as well as a warning from JPMorgan NYSE JPM CEO Jamie Dimon that bitcoin was a fraud The rapidity of the fall matched by losses across the hundreds of other cryptocurrencies that now rival bitcoin had driven fears that a giant crypto bubble was finally bursting Bitcoin looked likely to record its worst week since 2013 But after seven consecutive days of falls bitcoin was up around 13 percent on the day by 1538 GMT at 3 637 on the U S Bitstamp exchange around 22 percent up from its earlier low and leaving it just 13 percent down on the week Chinese exchanges were told by authorities to immediately notify users of their closure and to stop allowing new user registrations as of Friday according to a government notice But although Chinese exchanges used to dominate bitcoin trading according to their reports because of the fact that they did not charge fees volumes have plunged since January when Chinese authorities made fees mandatory That industry experts said means that although China is still important the crackdown there would probably not be enough to cripple bitcoin unless it was followed by exchange shut downs in other parts of the globe Chinese volumes account for less than 10 percent of global volume they are no big deal said Charles Hayter founder of cryptocurrency analysis website Cryptocompare Beijing based platforms OkCoin and Huobi which are among China s biggest exchanges said on Friday that they planned to stop yuan based trading by Oct 31 confirming earlier reports Waiting for the axe to fall is worse than the actual event leaked documents seem to be clearing up uncertainty said Hayter But also a bounce of this magnitude was on the cards after such steep losses
Shanghai based BTCChina a major Chinese bitcoin exchange had said on Thursday it would stop all trading from Sept 30 citing tightening regulation Smaller Chinese bitcoin exchanges ViaBTC YoBTC and Yunbi also announced similar closures on Friday |
JPM | Gundlach on Bitcoin I m going to let this mania go on without me | Just about everyone has questions about bitcoin these days including Jeffrey Gundlach s 86 year old mom Gundlach DoubleLine Capital s founder said she texted with a link to a story urging readers to buy bitcoin She wanted to know whether she should get in the game But the cryptocurrency is not something that Gundlach himself is ready to participate in I m going to let this mania go on without me Gundlach said during a webcast with clients on Tuesday He did devote the first slide in his section on Fed policy to a I philosophically don t believe it s unhackable he said adding that he s received pushback from smart 20 somethings Bitcoin was near 4 500 per dollar when Gundlach got the text from his mom It crossed the 5 000 mark briefly but has since rolled back to about 3 765 on Wednesday So I m sure she s not interested in buying it now that it s falling Gundlach said He added that he didn t have a price target on bitcoin Although bitcoin could run into regulatory hurdles in key markets like China where some investors are betting that it will only get more popular Tom Lee the co founder of Fundstrat forecasts that by mid 2018 Not everyone agrees including Mohamed El Erian Allianz DE ALVG s chief economic adviser He told on Wednesday that he didn t think governments would allow the massive adoption that traders have priced in Bitcoin should be worth at least half of its current price he said Gundlach spoke a few hours after Jamie Dimon JPMorgan NYSE JPM s CEO said he would fire any trader who was transacting bitcoin Bitcoin is worse than Dimon said referring to the infamous speculative market for tulips in 17th century Europe It s interesting that somebody that high profile is out there with such an interesting statement Gundlach said about Dimon |
JPM | MBS investors nonchalant about Fed tapering JPMorgan | Nearly 50 of those surveyed see no impact to MBS spreads from what s expected to be the Fed s balance sheet reduction announcement this week In fact 10 of respondents expect spreads to tighten not an absurd expectation given that investors have had many weeks to price in the news
Forty six percent see a modest increase in spreads
The survey also shows 60 of investors as being overweight MBS one of the highest levels in years according to JPMorgan NYSE JPM
Source Bloomberg s Alexandra Harris
ETFs MORL REM MORT DMO TSI JLS PGZ CMBS FMY JMT LMBS MBSD
Now read |
JPM | Cryptos Bitcoin Prices Jump Back Above 4K in Impressive Turnaround | Investing com Bitcoin the world s biggest digital currency by market cap surged back above the 4 000 level on Monday in an impressive bounce back from last week s heavy losses
Bitcoin was last up about 400 or around 11 at 4 068 60 by 9 45AM ET 1345GMT
The digital currency lost more than 1 000 in value last week and dropped below 3 000 per coin for the first time in over a month with the sell off driven in large part by fears of China cracking down on the market as well as a warning from JPMorgan NYSE JPM CEO Jamie Dimon that bitcoin was a fraud
Despite the recent fall the digital currency is still enjoying a remarkable year with prices up almost 350 since the start of the year beating just about every other asset class
Ethereum Bitcoin s closest rival in terms of market cap gained 15 6 or 40 10 to 297 25
Other prominent cryptocurrencies such as Litecoin Ripple and Bitcoin Cash also traded higher
The total value of all publicly traded cryptocurrencies was approximately 139 billion |
C | Citigroup CFO says U S tax rate cut could bring 4 billion charge | NEW YORK Reuters If federal corporate tax rates decline 20 percent under President elect Donald Trump Citigroup Inc N C may have to take a 4 billion charge to profits to reflect lower values for its deferred tax assets the bank s chief financial officer said on Wednesday However a charge of that size and nature would not hurt the amount of capital that Citigroup reports to regulators under rules designed to ensure the soundness of banks CFO John Gerspach said at an investor conference that was webcast After the U S election results last week were viewed by Wall Street as increasing the chances of lower tax rates the KBW bank stock index BKX climbed 13 6 percent through Tuesday while Citigroup shares rose 11 1 percent Analysts have said that Citigroup has lagged other bank stocks partly because of the chance that tax reform would reduce the value of the company s deferred tax assets A corporate tax rate of 28 percent would amount to a 20 percent reduction from current rates Gerspach said Citigroup has 45 billion of deferred tax assets far more than any other U S bank They are largely left over from the tax treatment of losses during the financial crisis The bank had used up about 10 billion in the last four years Gerspach called the estimated 4 billion charge part of a rough top level assessment of consequences of possible tax reforms If tax reforms were to make a big change in the treatment of liabilities outside of the United States the bank might have to take a charge of as much as 12 billion and report a 4 billion reduction in regulatory capital he said There are a lot of moving pieces Gerspach said To the extent these changes were implemented over time those impacts would likely be lower Citigroup expects its capital markets business in the fourth quarter to be meaningfully better than a year earlier but down seasonally from the third quarter Jamie Forese chief executive for the Institutional Clients Group said at the conference
Citigroup shares fell 1 7 percent early Wednesday afternoon slightly less than the 2 percent decline in the KBW index |
C | Citi makes Aussie branches cashless | Citi s NYSE C Australian arm is going cashless telling customers that it will no longer handle notes and coins as of Nov 24 because fewer than 4 of customers have used them in the last year While Citi is a small force in domestic retail banking the move is a sign of how banks are being forced to reinvent branches in the face of a boom in digital transactions and contactless payments |
C | What s Going On In Saudi Arabia | Major political upheaval is underway in Saudi Arabia after dozens of top officials were arrested on Saturday along with a series of other events that are unlikely to be a coincidence The Canadian dollar was the top performer last week while the pound lagged CFTC positioning showed a shift against commodity currencies
Thirty two year Prince Mohammed bin Salman continues to tighten his grip following his rise to Crown Prince in June A series of arrests on Saturday ostensibly for corruption threaten major turmoil in the Kingdom The arrests included 11 senior princes a former finance minister and Prince al Waleed bin Talal who is the richest man in the Arab world and the largest shareholder of Citigroup NYSE C The head of the National Guard was also removed
Also on Saturday a missile was shot down near Riyadh while on Sunday a helicopter carrying Mansour bin Muqrin crashed His father had been in line to succeed King Salman until 2015
This all comes just a week after Trump s son in law Jared Kushner made an unannounced trip to Saudi Arabia and on Saturday Trump tweeted asking Aramco to launch its IPO in New York Lebanese PM Hariri s announced resignation on Friday on the grounds that it is no longer safe to remain in the post may be related to the Saudi equation as the Kingdom has long served as a safe haven to the PM and his family
We struggle to believe this is all a coincidence but what comes next is equally opaque The turmoil could be followed by assassinations and internal strife or Bin Salman could successfully tighten his grip on all the levers of power For now the present is developing quickly and the future highly uncertain
Domestic market signals may also be tough to interpret Saudi stocks fell 2 2 early but finished up 0 3 in what was likely government buying
On Friday WTI crude broke out to its highest level since January 2015 and once again we re hard pressed to call it a coincidence We will be watching very closely in the days ahead
FX Commitments Of Traders
Speculative net futures trader positions as of the close on Tuesday Net short denoted by long by
EUR 72K vs 84K prior GBP 1vs 1K prior GBP 119K vs 116K prior CHF 21K vs 12K prior CAD 58K vs 72K prior AUD 52K vs 57K prior NZD 6K vs 1K prior
The head and shoulders pattern in EUR USD along with the resurgent US dollar placed substantial euro positions in jeopardy Commodity currencies also remain in a precarious position despite last week s bounce With the BoE decision out of the way and no more hikes coming in the near term expect to see a slow build in GBP shorts unless the Brexit rhetoric improves in the coming 6 weeks |
JPM | Fixing The Fixes Can Silver Gold Be More Transparent | It seems everyone is clamoring to provide a Silver fix when the current collaborative bank decided arrangement ceases after 117 years on August 14
According to Reuters the front runner might be the London Metal Exchange in spite of it being mired in controversy itself over the warehouse debacle and resulting sky high aluminum physical delivery premiums
Admitting The Problem is the First Step
Recognizing the old system is broken is one thing agreeing on what form the new system should take is entirely another A new benchmark to set silver prices is certainly required and the London Bullion Market Association LBMA along with the wider silver market community is keen to see a system to allow daily prices to take shape
The problem at the risk of sounding like a pun is precious little time is available The LME has three proposals The first is simply an alternative telephone based arrangement similar to the current three bank process in which HSBC Scotia Bank and Deutsche Bank get together to negotiate a price where sellers are willing to sell and buyers are willing to buy and can be used as a reliable benchmark for contracts around the world
The LME promises better auditing and compliance drawing on its years of experience in market making The second proposal is an extension of its open cry ring based process as used for base metals minor metals and steel billets although the exchange acknowledges creating sufficient liquidity may be an issue as currently few of the ring dealers also have any significant exposure to precious metals
The third and preferred option of the silver users apparently is for an electronic auction based system Although the LME would use its existing infrastructure in it s LME Select electronic platform it still feels this would be the most challenging to have running by August 15 Nevertheless if that is what the LBMA decide they want at a meeting planned for June 20 then the LME would work to the August date LME Select does have the advantage that some LBMA market makers such as J P Morgan Chase Co NYSE JPM and Societe Generale PARIS SOGN are already using it as they are also involved in base metals
None LME Solutions
The LME is not alone in offering solutions though the LBMA will be evaluating up to 10 options at their meeting including proposals from the Intercontinental Exchange ICE which has been running the LIBOR interbank interest rate benchmark service since February and the Chicago Mercantile Exchange CME which is proposing an electronic system and recently launched a rival physically settled aluminum contract to rival the LME s US 51 billion per annum market
The prize could be not just the silver fix but ultimately the Gold fix too as Deutsche Bank s NYSE DB exit from both metals price fixing agreements leaves the gold fix in well a fix Down to four participants and under intense scrutiny over rate fixing and transparency a change is almost certainly in the air and a move to an electronic auction seems the most likely
The importance of getting this right cannot be overplayed not just for the trade but for investors A price that enjoys everyone s unquestioning acceptance and trust is imperative to ensure continued liquidity and support
by Stuart Burns |
JPM | Bonus Trade Idea J P Morgan Chase Co | J P Morgan Chase Co NYSE JPM
JP Morgan has been rising off of a double bottom at 53 The last two weeks it has consolidated under 58 and above the 100 day SMA The RSI is in the bullish range and the MACD is leveling after a rise but looks to be avoiding a cross down A break of consolidation to the upside has a short term target of 59 50 and resistance there and at 61 25 There may be support lower at 56 70 and below that at 56 25 and 55 before a return to the 53 floor
Trade Idea 1 Enter long on a move over 58 with a stop at 57 25
Trade Idea 2 Buy the July 11 Expiry 58 Calls offered at 42 cents late Friday on the same trigger
Trade Idea 3 Buy the July 11 Expiry 56 58 bullish Risk Reversal 9 cents on the same trigger this uses margin
Trade Idea 4 Sell the stock short on a move under 56 75 with a stop at 57 50
Trade Idea 5 Buy the July 11 Expiry 56 5 Puts 49 cents on the same trigger
Trade Idea 6 Buy the July 11 Expiry 56 5 54 Put Spread 38 cents on the same trigger
Trade Idea 7 Buy the July 11 56 5 55 54 1 2 Put Spread 20 cents on the same trigger this uses margin
Disclosure I have a long position for some clients in the stock at the time of this writing
After reviewing over 1 000 charts I have found some good setups for the week These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which as the last full week of June kicks off into Summer sees the equity markets looking strong Elsewhere look for Gold to continue higher while Crude Oil joins it to the upside The US Dollar Index has a short term downward bias while US Treasuries consolidate but also are biased lower The Shanghai Composite looks like it has more consolidation in store for it while Emerging Markets are biased to the upside with possible consolidation Volatility looks to remain very low keeping the bias higher for the equity index ETF s SPY IWM and QQQ Their charts are also biased to move higher on the longer timeframe with the shorter timeframe strongest in the IWM and with the SPY and QQQ looking like they could consolidate in the short term Use this information as you prepare for the coming week and trad em well
Disclaimer The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment I or my affiliates may hold positions or other interests in securities mentioned in the Blog please see my page for my full disclaimer |
JPM | Bonds Bubble Bubble Toils And Troubles | A funny thing happened on the way to inflation Long term Treasury yields failed to rise as well And although the shadow of the markets reaction is short relative to the daylight provided the conundrum that became the long term US Treasury market over the past 20 years appears to be penning a new chapter in how to fool the consensus at the expense of conventional market wisdom That being said we do sympathize with those participants perennially hood winked trying to connect the dots in a market environment under the influence of multi generational trends and a transparent Fed navigating difficult and esoteric terrain
While it likely comes as a surprise to most participants and we suspect many remain bias towards a rising yield environment in the face of inflation to a large degree the market climate running into 2014 provided the conditions necessary to illicit what we perceive to be a rational market reaction of what some might describe as an irrational market response The bottom line is that the perception of rationality like time is a relative expression A basic understanding of the phenomenon of inflation is that it is to the bond market as kryptonite is to Superman The greater inflation risk the worst the bond market performs as investors will demand a higher yield to compensate for greater inflation risk Last week we received the May CPI data that further confirmed what we had already suspected that inflation was beginning to accelerate From Deutsche Bank Janet Yellen dismissed the recent rise in inflation as noisy data But if randomness is at play we can calculate some odds It is ten years since American consumers have seen core prices rising faster than the current 0 3 per cent monthly rate double the average over this period Based on the volatility of the data there was only a 5 per cent chance of inflation being this high For context an equivalent 1 7 sigma event would be 6 per cent annualized growth in quarterly output or payrolls adding 500 000 jobs in one month both occurring just once in the last decade
So why wasn t there a strong reaction in the bond market if inflation is starting to surprise on the upside We believe that where a complicated market becomes even more so is when one considers 1 the relative extreme in yields that was reached at the end of last year 2 the uniqueness of the capital markets relative to what the Fed has provided over the past five years and 3 the rear view proximity density and casualties in participants memories to the spectrum of financial bubbles and crises from LTCM to GFC All told we believe current market conditions will at the very least place a governor on the impetus for rising long term yields despite the fact that inflation is starting to pulse strongly through the system 1 Relative Extreme
While we have never claimed to be experts on the nuances and intricacies of the US Treasury market we do bring a thorough historic evaluation of trend and performance of some of the larger asset pistons and gear exchanges that help propel the system forward Broadly speaking this provides a comparative bearing to triangulate market strategy from of what we believe lies just ahead on the horizon Going into 2014 we anticipated that long term Treasury yields would pull back from the relative extreme they notched at the end of last year Despite their historically low disposition the talk of the taper that began in earnest last May spooked the bond market and elicited a rally in yields the surprisingly magnitude of which was likely discretely lost on many Here s a quick snippet from a previous note that sets the stage
Even when contrasting the bond market carnage in 1994 brought on by the commencement of an unexpected Fed tightening cycle the move in 10 year yields over the past year has been twice its magnitude When viewed as a comparative study between these two time periods normalized below by the month over month performance you can see that even during an actual Fed rate tightening period in which the fed funds rate doubled from 3 in February of 1994 to 6 in February of 1995 10 year yields crested only 40 above the previous years low and started breaking down during the Fed s final rate hike in February of 1995 To put the move in even greater context 10 year yields appreciated just shy of 70 from the entirety of the previous cycle low in June 2003 to the cyclical peak in June 2006 This encompassed a Fed rate tightening cycle which took the fed funds rate gradually from 1 0 in June 2004 to 5 25 in June 2006 Perspective 4 30 2014
Where that leaves us currently is in the doldrums between the downside pivot in long term yields
that began at the start of this year and the next move we still expect will be lower along the arc of the 1995 return Helping things through the pivot this year has been a consistent imbalance extreme with respect to sentiment and positioning in the long term Treasury market E g at the start of the month with the move in the 10 year yield falling close to 20 to 2 40 for the year a J P Morgan Chase Co NYSE JPM client survey indicated the difference between the number of investors who said they are bearish on US long term Treasuries exceeded those who are bullish grew to its highest level since May 2006 one month prior to the previous cycle peak for yields in June of that year
2 The Hand of the Fed While most market research has been fixated on comparative bearings with more recent Fed rate tightening cycles and when the Fed would commence this rate tightening regime they have largely
panned the one historic market environment that shares the closest parallels with the long term yield cycle a market the Fed has little control over and the underlying skeptical and skittish market psychologies that defined the body politic of the market in the 1940 s Why Ignoring the fact that it was the last time the Fed conspicuously supported the Treasury market and when long term yields were troughing on the mirror of the cycle it falls across the narrow window of WWII and the signing of the Treasury Fed accord of 1951 A period apparently too dissimilar for economists who have collectively been taught to build their reference coordinates of peacetime market stability from periods after the Bretton Woods system was scuttled by Nixon in 1971 Moreover it was a period where the Fed did not raise rates as market expectations gradually normalized from a time period defined by repeated Fed and Treasury interventions
Over the past several months we have drawn parallels to both the equity and Treasury markets of the 1940 s see and and believe the current market environment rhymes much closer with this time period than the more recent Fed tightening regimes we see referenced daily On one hand we are reminded that this isn t the 70 s where long term yields rose rapidly with inflation expectations and this isn t the pre ZIRP periods of the 80 s 90 s or even this centuries first decade which enjoyed a fed funds rate that could maneuver on both sides of the road No this is a place we have playfully referred to as Esoterica an unfamiliar territory for several participant generations that we have found the closest parallels with the troughing long term yield environment of the mid 1940 s Another major parallel which dovetails into our third point is the fact that the only other period in which the Fed actively intervened and bought the Treasury market in support of the broader system was in the 1940 s Similar with the current lackluster fundamental backdrop that has diverged over recent years from the stoic strength of the equity markets the massive bond buying program in the 1940 s had a much stronger correlation to the capital markets it directly affected than the macro climate that most economists appraise
In an effort to keep interest rates low during and directly following WWII and avoid another chapter of the near view Great Depression the Fed purchased all available short term US Treasuries and virtually all long term US Treasuries from the market starting in April of 1942 When all was said and done the US had a debt to GDP ratio that was almost 20 larger than where it currently resides today In Milton Friedman and Anna Schwartz s A Monetary History of the United States 1867 1960 the market climate in the 40 s is described as being so sensitive and suspect of the Fed and Treasury s very visible hand that the entire equity market rally 150 from the April 1942 low through the cyclical high in 1946 was viewed with great skepticism and likely to end with another pronounced economic contraction The fresh scars of the Great Depression provided abundant fear for market participants of a possible revival of kindred economic instabilities despite the countervailing strength of the equity markets that continued to rally more than 20 even through the recession in 1945 What happened in 1946 when the Fed and Treasury stepped away from their extraordinary support of the Treasury markets Similar to the air pockets experienced with the Fed pauses in QE I and QE II the equity markets swiftly revalued expectations From our perspective a similar fate awaits the current equity market rally which in turn should continue to support the Treasury market despite rising inflation expectations and the calls by many that the Fed will begin raising rates as early as next year 3 Bubble Bubble Toils And Troubles The paradoxical market conditions that we describe in which the long term Treasury market continues to be bid while inflation expectations strengthen can be traced directly to swell of skepticism imparted by participants over the last two decades Across this tumultuous period where the Fed has taken such an active role in intervening in the markets in times of crisis following periods of exuberance investors have stepped further out on a cynical continuum of distrusting the underlying conditions that a previous generation of participants had utilized to navigate the markets To a great degree the most successful investors of this generation have been the greatest game theorists willing to ignore the economic backdrop for the sake of the hand at play That hand both metaphorically and literally has been the Fed When they step away this fall the next hand played in the markets will derive motivation from this underlying skepticism that despite the current ebullient character of the equity markets we believe is right below the surface In the mid to late 1940 s when inflation started strongly pulsing through the system Treasury investors largely ignored the data for the sake of the safe haven shores of the Treasury market Friedman described this dynamic between inflation and bond and equity yields in the following excepts from A Monetary History of the United States That factor was a continued fear of a major contraction and a continued belief that prices were destined to fall A rise in prices can have diametrically opposite effects on desired money balances depending on its effect on expectations If it is interpreted as the harbinger of further rises it raise the anticipated cost of holding money and leads people to desire lower balances relative to income than they otherwise would In our view that was the effect of prices rises in 1950 and again in 1955 to 1957 On the other hand if a rise in prices is interpreted as a temporary rise due to be reversed as a harbinger of a likely subsequent decline it lowers the anticipated cost of holding money and leads people to desire higher balances relative to income than they otherwise would In our view that was the effect of the price rises in 1946 to 1948 An important piece of evidence in support of this view is the harbinger of yields on common stocks by comparison with bond yields A shift in widely held expectations toward a belief that prices are destined to rise more rapidly will tend to produce a jail in stock yields relative to bond yields because of the hedge which stocks provide agains inflation That was precisely what happened from 1950 to 1951 and again from 1955 to 1957 A shift in widely held expectations toward a belief that prices are destined to fall instead of rise or to fall more sharply will tend to have the opposite effect which is precisely what happened from 1946 to 1948 Despite the extent to which the public and government officials were exercised about inflation the public acted from 1946 to 1948 as if it expected deflation
Although a contraction in the US equity markets has so far failed to materialize we do expect one to gain traction as the Fed steps further away from their extraordinary measures this fall Similar to expectations in the mid to late 1940 s we anticipate that investors will continue to support the Treasury market even in the face of inflation as the broader underlying skepticism of their collective anxieties will finally be realized when equity market conditions pivot lower without extraneous assistance A self fulling prophesy indeed and one that we expect will lead the current bubble prognosticators to extend themselves another link of rope just as market expectations normalize in the wake of extraordinary support In the meantime we continue to like long term Treasuries and the commodity markets relative to equities headlined by the precious metals sector that should receive a disproportionate bidding as inflation seeps and the equity markets stumble |
JPM | JPM Slides Watch This Level | Today s leading global bank stock J P Morgan Chase Co NYSE JPM is trading lower by 0 09 cents to 55 66 a share Traders and investors should note that JPM is the most important financial stock in the industry group The stock has now made a lower high on the daily chart after topping out in March 2014 at 61 48 a share Lower highs should always be viewed as a sign of weakness when looking at the charts Today day traders should watch the 55 level which should be solid intra day support This was a former resistance level in early June that will now be support when price retests the level |
MS | Italy Downgrade Casts Gloom Over Euro Zone | By
Reuters European stocks and government bonds dipped on Monday as weak data from Asia a rating downgrade for Italy and the slump in oil prices stoked concerns about global growth
The U S dollar bucked the trend extending gains after a surprisingly strong U S labor data on Friday and adding further pressure on the Russian ruble which has been hurt as oil prices fall back toward five year lows
Europe s index of top shares the FTSEurofirst opened down 0 4 percent mirroring a move in Asia after China s trade performance in November was much weaker than expected while Japan s economy in the third quarter shrank even more than initially reported
The Italian bourse started the day as the worst performer before recovering after S P downgraded the credit rating of the euro zone s third largest economy to just one notch above junk on Friday underscoring the limited progress made by Italy s Prime Minister Matteo Renzi
Italian government bond yields which move in the opposite direction to prices shot higher pulling up borrowing costs across the bloc
The euphoria from Friday s U S payrolls is dissipating we re seeing a bit of profit taking said Pierre Martin a trader at Saxo Bank Italy s downgrade is a good reminder that Europe is far from being out of the woods
One of ECB s longest standing policymakers said the euro zone economy was experiencing a massive weakening a development that has pushed the central to look closer at sovereign bond purchases
In Asia MSCI s broadest index of Asia Pacific shares outside Japan slipped 0 3 percent Tokyo s Nikkei edged up 0 1 percent with the downward revision to Japan s GDP neutralizing much of the positive impact from a weaker yen South Korea s Kospi lost 0 2 percent while Singaporean and Malaysian shares also dipped
The Shanghai composite index gained 2 9 percent after the downbeat Chinese data added to hopes that China will implement more stimulus to shore up its economy
Shockingly China s imports contracted by 6 7 percent year on year their weakest performance since the Lehman crisis except the volatile Lunar New Year related period said Dariusz Kowalczyk economist at Credit Agricole in Hong Kong
This is partly a reflection of lower commodity prices and base effects but these two factors cannot fully explain the weak import number and we have to assume that poor domestic demand has played a part This means that pressure will rise on the government to do more to stimulate growth he said
The Australian and the New Zealand dollars sensitive to the economic fortunes of China were the main losers among major currencies touching new 4 1 2 year and 2 1 2 year lows respectively
The disappointing Chinese and Japanese data contrasted sharply with Friday s U S non farm payrolls that showed employment in November surged by 321 000 easily topping forecasts for 230 000 new jobs
Brent crude fell around 1 5 percent to 68 07 a barrel approaching a five year low of 67 53 hit last week with a forecast cut by Morgan Stanley exacerbating the fall |
MS | Brent oil futures crash to lowest since October 2009 | Investing com Brent oil futures tumbled to the lowest level since 2009 on Monday as concerns over the global economic outlook and the impact on future oil demand prospects continued to dampen the appeal of the commodity On the ICE Futures Exchange in London Brent oil for January delivery fell by as much as 3 28 to touch a session low of 66 80 a barrel the weakest level since October 2009 before trading at 67 19 during U S morning hours down 1 89 or 2 73 On Friday London traded Brent prices lost 57 cents or 0 82 to settle at 69 07 a barrel Data released earlier showed that China s exports climbed 4 7 from a year earlier in November missing expectations for a 7 9 increase while imports fell 6 7 compared to forecasts for a gain of 3 5 The country s trade surplus widened to 54 5 billion last month from 45 4 billion in October compared to estimates for a surplus of 43 2 billion Separately revised data showed that Japan s economy shrank by an annualized 1 9 in the third quarter more than the preliminary estimate of a 1 6 decline On a quarter over quarter basis the economy contracted by 0 5 in the three months to September compared to a preliminary estimate of a 0 4 contraction Wall Street investment bank Morgan Stanley cut its price forecast for Brent crude to 70 from 98 and for 2016 to 88 from 102 Without OPEC intervention markets risk becoming unbalanced with peak oversupply likely in the second quarter of 2015 the bank said in a report on Monday Elsewhere on the New York Mercantile Exchange crude oil for delivery in January dropped 1 38 or 2 09 to trade at 64 47 a barrel after hitting a daily low of 64 11 Nymex oil futures declined 97 cents or 1 45 on Friday to end at 65 84 a barrel Prices hit 63 72 on December 1 a level not seen since July 2009 The US dollar index which measures the greenback against a basket of six major currencies traded near the strongest level since March 2009 as upbeat U S employment data added to expectations that the Federal Reserve could raise interests sooner and faster than previously expected Oil prices typically weaken when the U S currency strengthens as the dollar priced commodity becomes more expensive for holders of other currencies London traded Brent prices have fallen nearly 42 since June when it climbed near 116 while WTI futures are down almost 40 from a recent peak of 107 50 in June Saudi Arabia s state run oil company lowered official selling prices for its crude in January last week to the lowest in at least 14 years for buyers in the U S and Asia The move suggested that the kingdom is stepping up a battle for market share with cheaper U S shale oil after last week s OPEC decision to keep production quotas unchanged The Organization of Petroleum Exporting Countries said on November 27 that it would maintain its output target at 30 million barrels a day disappointing hopes the oil cartel would lower production to support the market as a surplus develops amid the shale boom in the U S which is pumping at the fastest pace in more than 30 years |
MS | NYMEX crude weaker in early Asia with focus on upcoming U S stocks data | Investing com Crude oil prices dipped further in early Asia on Tuesday as investors turn focus to industry and government data on U S stocks Later Tuesday the American Petroleum Institute will release data on industry estimates of stocks last week The more closely watched Department of Energy data for the same period is due on Wednesday On the New York Mercantile Exchange crude oil for delivery in January traded at 62 85 a barrel down 0 27 after hitting a daily low of 64 11 overnight Brent crude the global benchmark fell 4 to 66 33 a barrel on Monday Brent was down 38 year to date through Friday and to the lowest level since 2009 Wall Street investment bank Morgan Stanley on Monday cut its price forecast for Brent crude to 70 from 98 and for 2016 to 88 from 102 Without OPEC intervention markets risk becoming unbalanced with peak oversupply likely in the second quarter of 2015 the bank said in a report on Monday Saudi Arabia s state run oil company lowered official selling prices for its crude in January last week to the lowest in at least 14 years for buyers in the U S and Asia The move suggested that the kingdom is stepping up a battle for market share with cheaper U S shale oil after last week s OPEC decision to keep production quotas unchanged The Organization of Petroleum Exporting Countries said on November 27 that it would maintain its output target at 30 million barrels a day disappointing hopes the oil cartel would lower production to support the market as a surplus develops amid the shale boom in the U S which is pumping at the fastest pace in more than 30 years |
MS | Fiat Chrysler prices share offering at 11 each | Reuters Fiat Chrysler Automobiles NV MI FCHA N FCAU said it had priced an offering of 87 million common shares at 11 00 each as the carmaker seeks funds to cut debt and pay for an ambitious investment plan FCA is also offering 2 5 billion of mandatory convertible securities due 2016 with a coupon of 7 875 percent per annum These securities will be converted at a rate of 7 7369 to 9 0909 common shares the company said in a statement The mandatory convertible securities will be issued in denominations of 100 each and will be converted into FCA common shares on Dec 15 2016 it said
J P Morgan Goldman Sachs Barclays UBS Citigroup BofA Merrill Lynch and Morgan Stanley are acting as joint bookrunning managers for both offerings Reporting by Supriya Kurane in Bengaluru and Agnieszka Flak in Milan Editing by Gopakumar Warrier |
MS | Standard Chartered In Deal To Sell HK Shenzhen Consumer Finance Units | By
Reuters Standard Chartered is selling its Hong Kong and Shenzhen consumer finance businesses to a consortium that includes a Chinese state firm helping the emerging markets focused lender to clinch its biggest asset disposal as part of a restructuring
In what is expected to be the first of many divestitures Standard Chartered has agreed to sell the units for between 600 million 383 million to 700 million people familiar with the matter told Reuters Standard Chartered announced the sale deal on Tuesday but did not disclose the value of the transaction
The buying consortium includes China Travel Financial Holdings U S hedge fund York Capital Management Global Advisors and financial firm Pepper Australia Pty Ltd
The consortium will sell a portfolio of residential mortgages with a book value of approximately HK 5 9 billion 485 94 million to The Bank of East Asia on completion of the deal Standard Chartered said
China Travel is a state owned enterprise operating in the travel business and is seeking to expand into the financial services sector hoping to cross sell products to its existing clients one of the people said
Bankers expect Chinese financial services sector firms to step up overseas acquisitions Last week Haitong Securities agreed to buy Portugal s Banco Espirito Santo de Investimento SA for 379 million euros
Standard Chartered s shares have come under pressure due to slower growth in Asia and after being set costly fines by U S regulators for breaching Iran sanctions in 2012
Standard Chartered like its regional peers is focusing on shoring up its main corporate banking business to better absorb a slowdown in economic growth and lending in emergingmarkets
Morgan Stanley is advising Standard Chartered on the sale of the Hong Kong and Shenzhen consumer finance businesses sources have said earlier
Pepper is a specialty mortgage lender third party loan servicer and an asset manager with businesses in the United Kingdom and Australia |
JPM | Bitcoin exchange BTCChina says to stop trading sparking further slide | By Brenda Goh and Jemima Kelly BEIJING SHANGHAI LONDON Reuters Chinese bitcoin exchange BTCChina said on Thursday that it would stop all trading from Sept 30 setting off a further slide in the value of the cryptocurrency that left it over 30 percent away from the record highs it hit earlier in the month China has boomed as a cryptocurrency trading location in recent years as investors and speculators flocked to domestic exchanges that formerly allowed users to conduct trades for free boosting demand But that has prompted regulators in the country to crack down on the cryptocurrency sector in a bid to stamp out potential financial risks as consumers pile into a highly risky and speculative market that has seen unprecedented growth this year Just hours after BTCChina announced its closure Chinese news outlet Yicai reported that the country plans to shut down all bitcoin exchanges by the end of September citing financial sources in Shanghai BTCChina said its decision was based on a Sept 4 directive from Chinese authorities that expressed concern over investment risks involved in cryptocurrencies and ordered a ban on so called initial coin offerings or ICOs the practice of creating and selling digital currencies or tokens to investors to finance start up projects That ban as well as warnings by regulators in other countries has driven fears of a wider crackdown and prompted a sell off that has helped wipe almost 60 billion off the total value of cryptocurrencies since they hit record highs at the start of the month according to industry website Coinmarketcap The Chinese ban is causing a panic in the market as mixed messages and lack of clarity has turned sentiment negative said Charles Hayter founder of data analysis site Cryptocompare BTCChina one of China s largest bitcoin trading platforms which also runs an international exchange out of Hong Kong will stop registration of new users from Thursday it said on its official microblog We will stop all trades on the digital trading platform starting Sept 30 it said Its co founder Bobby Lee told Reuters the move would not affect trading on the BTCC international exchange however The price of bitcoin tumbled particularly sharply on BTCChina after the news By 1233 GMT it was down 18 percent on the exchange at 20 510 yuan On U S exchange Bitstamp it slid as much as 10 percent to a five week low of 3 426 92 having hit a record high of nearly 5 000 on Sept 2 PANIC SPREADS Panic also spread to other cryptocurrencies with bitcoin s main rival ether sometimes called ethereum also down around 10 percent according to Coinmarketcap Reuters and other media had reported this week citing sources that China planned to further ban exchanges that allowed virtual currency trading but the regulator has yet to make an announcement Spokeswomen for OkCoin and Huobi BTCChina s main rivals in China declined to say whether they would announce similar moves Huobi said it had not received any clear directives from regulators to do so Investors in China contributed up to 2 6 billion yuan or 397 million worth of cryptocurrencies through initial coin offerings in January June state run media have said citing data from the National Committee of Experts on Internet Financial Security Technology Adding to bitcoin s woes this week was a warning by Jamie Dimon chief executive of JPMorgan NYSE JPM that the cryptocurrency was a fraud and was set to blow up comments that helped fuel a slide of as much as 11 percent in bitcoin on Wednesday
Bitcoin is on track for its worst month since January 2015 |
JPM | Gasoline rents boost U S consumer inflation weekly jobless claims fall | By Lucia Mutikani WASHINGTON Reuters U S consumer prices accelerated in August amid a jump in the cost of gasoline and rental accommodation signs of firming inflation that boosted the probability of an interest rate increase from the Federal Reserve in December Other data on Thursday showed an unexpected drop in the number of Americans filing applications for unemployment benefits last week Though the data was impacted by hurricanes Harvey and Irma the labor market remains healthy with increasing reports of worker shortages in some industries August s inflation readings support the views of some Fed officials that a cooling in price pressures in the past months was temporary Today s report should ease some of the low inflation concerns among wavering Fed officials and we continue to expect the leadership will prevail in getting another hike in at the December meeting said Michael Feroli an economist at JPMorgan NYSE JPM in New York The Labor Department said its Consumer Price Index rose 0 4 percent last month after edging up 0 1 percent in July August s gain was the largest in seven months and lifted the year on year increase in the CPI to 1 9 percent from 1 7 percent in July Economists had forecast the CPI rising 0 3 percent in August and climbing 1 8 percent year on year The Labor Department said Harvey had a very small effect on survey response rates in August Gasoline prices surged 6 3 percent the biggest gain since January after being unchanged in July Further increases are likely in September after Harvey forced temporary closures of some refineries on the Gulf Coast Stripping out the volatile food and energy components consumer prices increased 0 2 percent in August The increase which followed four straight monthly increases of 0 1 percent was driven by a 0 4 percent jump in the cost of rental accommodation Rents gained 0 2 percent in July Owners equivalent rent of primary residence rose 0 3 percent in August after advancing by the same margin in July In the 12 months through August the so called core CPI rose 1 7 percent increasing by the same margin for four straight months While Fed officials are likely to treat the gasoline driven rise in the CPI as temporary they could take comfort in the pickup in the monthly core CPI The Fed s preferred inflation measure is the personal consumption expenditures PCE price index excluding food and energy The annual increase in the core PCE has consistently undershot the U S central bank s 2 percent inflation target since mid 2012 RATE HIKE CHANCES INCREASE In the wake of the inflation data the probability of a December rate hike increased to 50 9 percent from 41 3 percent on Wednesday according to CME Group s FedWatch program Prices for U S Treasuries fell while stocks were largely unchanged after hitting record highs on Wednesday The dollar slipped against a basket of currencies Economists expect the Fed will announce a plan to start reducing its 4 2 trillion portfolio of Treasury bonds and mortgage backed securities at its Sept 19 20 policy meeting The Fed however is expected to delay until December its third rate increase this year because inflation remains low despite the labor market being near full employment In a second report on Thursday the Labor Department said initial claims for state unemployment benefits declined 14 000 to a seasonally adjusted 284 000 for the week ended Sept 9 Claims have now been below 300 000 a threshold associated with a robust labor market for 132 consecutive weeks That is the longest such stretch since 1970 when the labor market was smaller Economists had forecast claims rising to 300 000 in the latest week In addition to higher gasoline prices and rents inflation in August was also lifted by increases in the cost of food doctor and hospital visits and prescription medication Prices for apparel rose last month as did the cost of household furnishings motor vehicle insurance and recreation Inflation isn t dead said Chris Rupkey chief economist at MUFG in New York With this steady expansion of the economy in its ninth year bumping up against full employment this is just the time that inflation should start firming
But prices for used cars and trucks continued to fall as did the cost of mobile phone services Price wars by mobile phone service providers have contributed to restraining inflation growth Airline fares also dropped last month |
JPM | China s JD com unit eyes 1 5 billion stake in First Capital sources | By Julie Zhu HONG KONG Reuters JD Finance a unit of China s No 2 e commerce firm JD com O JD is in talks to buy a 24 percent stake worth about 1 5 billion in domestic brokerage First Capital Securities Co Ltd SZ 002797 people with knowledge of the matter said If the deal goes through it would be a precursor to JD Finance venturing into financial sectors such as securities banking and insurance that are seeing the entry of several new technology focused players Currently it mainly offers online financial services and products in China JD Finance is looking to buy the stake from First Capital s top and third largest shareholders Bloomage Xinyu Investment and Nengxing Holdings Group that own 15 4 percent and 8 5 percent respectively one of the sources added Based on First Capital s market value of about 6 billion as of Friday a 24 percent stake in the company which was JPMorgan Chase s N JPM former China securities joint venture partner would be worth about 1 5 billion The deal however is yet to be finalized as no agreement has been reached over valuation the sources said JD com declined to comment about its or JD Finance s plans First Capital Bloomage Xinyu and Nengxing did not respond to Reuters request for comment JD com which owned 68 6 percent of its finance unit before it was spun off this year sold 28 6 percent of the unit for 2 2 billion to a couple of undisclosed investors An acquisition of a First Capital stake will take JD Finance into a territory that has traditionally been dominated by large and state owned groups but which is now seeing an influx of new entrants such as technology giants Alibaba Group N BABA finance affiliate Ant Financial and Tencent HK 0700 JD Finance which only owns a few small financial licenses such as a third party payment license in China will likely get access to some lucrative businesses of First Capital and its units including those of securities funds and stock futures after the stake acquisition one of the sources said The company aims to gain relevant financial licenses either through fresh applications or equity investments in domestic firms JD com CEO Richard Liu told staff earlier this year Liu owns 4 3 percent of JD Finance but holds a majority of voting rights through proxy agreements
First Capital one of China s few listed private brokers tied up with JPMorgan to set up JP Morgan First Capital Securities Co in 2010 JPMorgan sold its 33 3 percent stake in the JV to First Capital in December 2016 |
JPM | Beijing cryptocurrency exchanges told to announce trading halt source | By Brenda Goh SHANGHAI Reuters Chinese authorities have ordered Beijing based cryptocurrency exchanges to stop trading and immediately notify users of their closure signaling a widening crackdown by authorities on the industry to contain financial risks Exchanges were also told to stop allowing new user registrations as of Friday according to a government notice The notice was signed by the Beijing city group in charge of overseeing internet finance risks and circulated online A government source verified it to Reuters Platforms should also tell the government by Wednesday Sept 20 how they will allow users to make withdrawals in a risk free manner and handle funds to make sure investor interests are protected according to the notice which was also reported by state newspaper Securities Times All trading exchanges must by midnight of Sept 15 publish a notice to make clear when they will stop all cryptocurrency trading and announce a stop to new user registrations the government notice said China is cracking down on the cryptocurrency business to try to limit risks as consumers pile into a highly speculative market that has grown rapidly this year Reuters and other media reported earlier this week that it planned to shut down the exchanges Shanghai based BTCChina a major Chinese bitcoin exchange said on Thursday it would stop all trading from Sept 30 citing tightening regulation Smaller Chinese bitcoin exchanges ViaBTC YoBTC and Yunbi on Friday announced similar closures Beijing based platforms OkCoin and Huobi which are among China s biggest exchanges said late on Friday that they planned to stop yuan based trading by Oct 31 By 10 06 a m ET 1406 GMT BTC s price was down 7 63 percent at 19 797 00 yuan 3 024 71 The bitcoin price was down 5 percent at 3 071 at 1036 GMT on U S exchange Bitstamp The bitcoin price index on trade website Coindesk slid below 3 000 for the first time in six weeks Bitcoin fell by more than 10 percent on Wednesday after a warning by JPMorgan NYSE JPM Chief Executive Jamie Dimon that it is a fraud and will eventually blow up ILLEGAL FLOWS Li Lihui a senior official at the National Internet Finance Association of China and a former president of the Bank of China told a conference in Shanghai that global regulators should work together to supervise cryptocurrencies Digital tokens like bitcoin ethereum that are stateless do not have sovereign endorsement a qualified issuing body or a country s trust are not legal currencies and should not be spoken of as digital currencies he said They can become a tool for illegal fund flows and investment deals He said there should be a distinction between digital currencies which were being studied and developed by authorities such as the Chinese central bank and digital tokens such as bitcoin Digital currencies developed by authorities could be used for good with the right regulation he said The state backed internet finance body was set up by the central bank and its members include banks brokerages funds and consumer finance companies On Wednesday it urged members to abide by Chinese laws and not deal in cryptocurrencies Since January Chinese bitcoin exchanges have rolled out a series of changes to comply with increased scrutiny by Beijing But they were thrown into chaos on Sept 4 when China issued a directive banning initial coin offerings ICOs China s crackdown is all about protecting market stability and protecting the interest of investors so halting these kinds of initial coin offerings is a very necessary action Li said
Vlad Zamfir a researcher at the Switzerland based Ethereum Foundation told Reuters that it was no surprise China is moving against such currencies Beijing has capital controls he said that are in direct tension with the free ability to send any amount of money anywhere without any kind of delay |
C | Harmony Gold 15 after Q3 results Citi downgrade to Sell | Harmony Gold HMY 14 8 plunges despite reporting a production profit of 1 4B rand 97M on its highest ever quarterly revenue of 5 25B rand 374M up 9 Q Q and 16 Y Y HMY says its Q3 production rose 10 Y Y to more than 277K oz and that it is on track to achieve its full year output guidance of 1 05M oz Q3 cash operating costs rose by 12 Q Q in rand terms 19 increase in U S dollar terms mainly due to higher costs in labor and electricity Shares are downgraded to Sell from Neutral at Citigroup NYSE C which says rising costs a roll off in currency and gold price hedges will sharply lower earnings post FY 2017 |
C | Citi preparing to move 900 staff to Dublin from London Sunday Times | LONDON Reuters U S bank Citi N C is preparing to move up to 900 jobs from London to Dublin as part of its contingency plans for Britain s exit from the European Union the Sunday Times reported The newspaper said the bank held a board meeting in Dublin last month and cited sources in the Irish capital as saying Citi was exploring options for office space there They have been testing the Irish political and regulatory regime on a macro level it quoted one source as saying
Last month the UK head of Citi which has 9 000 UK employees said jobs in London s financial sector would move to other EU countries regardless of what deal Britain strikes on access to the EU s financial services market |
C | Brexodus Citi to move 900 staff to Dublin | Citigroup NYSE C is preparing to move up to 900 jobs from London to Dublin as part of its preparations for Britain s exit from the EU the Sunday Times reports They have been testing the Irish political and regulatory regime on a macro level sources added saying that Citi was exploring options for office space and held a board meeting in the Irish capital last month |
C | Seth Klarman s new Q3 positions | Baupost Group new positions as of Sept 30 4 4M shares of Colony Capital NYSE CLNY 5 5M of Northstar Realty Finance NYSE NRF 9 9M of Northstar Asset Management NYSE NSAM 13M of Office Depot NYSE ODP and 17 6M of Synchrony Financial NYSE SYF Klarman also raised his stake in 21st Century Fox NASDAQ FOXA to 7 7M shares and eliminated holdings of Avis Budget NASDAQ CAR Och Ziff NYSE OZM and the common stock of Citigroup NYSE C he still holds 102M TARP warrants SEC Form 13F |
C | Energy Transfer seeks court intervention on Dakota Access | Energy Transfer Partners ETP 0 5 and its Sunoco Logistics Partners SXL 0 4 subsidiary file papers in U S district court in Washington D C seeking declaratory relief to end the Administration s political interference in the Dakota Access Pipeline review process and noting government delays already have cost more than 100M The companies are seeking an easement to tunnel under Lake Oahe the water source at the heart of accelerating protests against the pipeline but yesterday the U S Army Corps of Engineers again delayed approval saying it plans to get more input from the Standing Rock Sioux in light of the tribe repeatedly being dispossessed from its lands in the past More protests against the pipeline are taking place taking outside Army Corps offices and major banks financing construction of the pipeline such as TD Bank and Citigroup NYSE C police used mace and arrested several protesters in Cannon Ball N D near the path of the pipeline Analysts still expect the pipeline to be completed but what is less clear is the startup date and the exact routes says an analyst at Wood MacKenzie |
C | CIT Group s CIT Stock Down 3 9 Despite Q3 Earnings Beat | CIT Group Inc s NYSE C third quarter 2017 adjusted earnings from continuing operations of 1 02 per share beat the Zacks Consensus Estimate of 84 cents Further the reported figure was up 88 9 year over year Lower expenses and a fall in provision for credit losses helped the company deliver exceptional results A strong balance sheet lent further support However a decline in revenues hurt results to quite an extent and perhaps caused the stock to lose 3 9 after the results were announced Upon considering several non recurring items net income was 220 million or 1 61 per share compared with 131 million or 65 cents per share in the prior year quarter Revenues and Expenses DeclineTotal net revenues GAAP basis were 593 million reflecting a decline of 5 from the prior year period However the figure surpassed the Zacks Consensus Estimate of 488 million Net interest revenues were 277 million down 4 from the prior year quarter Also total non interest income was 316 million reflecting a decline of 7 year over year Net finance margin decreased 2 basis points year over year to 3 53 Operating expenses excluding restructuring costs and intangible assets amortization were 268 million down 9 from the prior year quarter Credit Quality A Mixed BagNet charge offs were 42 million 96 higher than the prior year quarter Provision for credit losses came in at 30 million decreasing 33 year over year Further non accrual loans decreased 7 year over year to 265 million Balance Sheet Strengthens Capital Ratios DeteriorateAs of Sep 30 2017 interest bearing cash and investment securities amounted to 8 4 billion comprising 2 7 billion in cash and 5 7 billion in investment securities As of Sep 30 2017 Common Equity Tier 1 and Total Capital ratios were 14 and 15 7 respectively as calculated under the fully phased in Regulatory Capital Rules comparing unfavorably with 14 4 and 16 2 in the prior quarter Our ViewpointThe company s business streamlining initiatives are expected to improve efficiency going forward Also its efforts toward becoming a leading regional commercial banking institution through restructuring are commendable A solid balance sheet position is another tailwind for the company However despite certain cost savings measures expenses are expected to increase in the long term due to the company s strategic initiatives and continued investments in the franchise Also sluggish growth in the industries where CIT Group provides finance continues to be a concern CIT Group Inc DEL Price Consensus and EPS Surprise Currently CIT Group carries a Zacks Rank 1 Strong Buy You can see Performance of Other Stocks in the Same Space Upcoming ReleasesAmong other stocks in the finance space Citigroup Inc NYSE C delivered a positive earnings surprise of 7 6 in third quarter 2017 on prudent expense management Earnings per share of 1 42 easily outpaced the Zacks Consensus Estimate of 1 32 and compared favorably with the year ago figure of 1 24 On Deck Capital Inc NYSE ONDK is slated to report results on Nov 6 while StoneCastle Financial Corp NASDAQ BANX is expected to report its numbers on Nov 9 Zacks Hidden TradesWhile we share many recommendations and ideas with the public certain moves are hidden from everyone but selected members of our portfolio services Would you like to peek behind the curtain today and view them Starting now for the next month I invite you to follow all Zacks private buys and sells in real time from value to momentum from stocks under 10 to ETF to option movers from insider trades to companies that are about to report positive earnings surprises we ve called them with 80 accuracy You can even look inside portfolios so exclusive that they are normally closed to new investors |
JPM | Is That It For Housing s Dead Cat Bounce | I have been saying this for a while You can t have a housing recovery unless actual home buyers are involved
We are very far away from seeing the housing market reach its 2005 highs and as time passes it becomes clearer that this generation may never see them again
How can I say that
What we have seen in the housing market since then but mostly since 2012 in my opinion is nothing more than a dead cat bounce scenario an increase in prices after a massive decline The chart below shows how far off we are from the housing prices of 2005
Chart courtesy of
One of the key indicators I follow in respect to the state of the housing market is mortgage originations This data gives me an idea about demand for homes as rising demand for mortgages means more people are buying homes And as demand increases prices should be increasing
But the opposite is happening
In the first quarter of 2014 mortgage originations at Citigroup NYSE C declined 71 from the same period a year ago The bank issued 5 2 billion in mortgages in the first quarter of 2014 compared to 8 3 billion in the previous quarter and 18 0 billion in the first quarter of 2013 Source Citigroup Inc web site last accessed April 14 2014
Total mortgage origination volume at JPMorgan Chase Co NYSE JPM declined by 68 in the first quarter of 2014 from the same period a year ago At JPMorgan in the first quarter of 2014 17 0 billion worth of mortgages were issued compared to 52 7 billion in the same period a year ago Source JPMorgan Chase Co web site last accessed April 14 2014
I still see too much optimism around the housing market Let me make this very clear I don t expect an outright collapse in home prices like the one we saw when the housing market bubble burst in 2007 but I do see the momentum slowing down in the housing market and this may result in lower home prices
The bottom line with the housing market is that its rebound over the past couple of years has been sustained by institutional investors who have invested billions in buying homes at cheap prices fixing them up and then renting them for a return on investment Actual participation by people who buy the homes to live in them especially first time home buyers is very weak as evidenced by the collapse in mortgage originations at the big banks
The news that home buyers are shying away from the housing market via the collapse in mortgage demand comes just as the Federal Reserve pulls back on its money printing Not great timing at all for the housing market |
JPM | Dow Retakes Triple Digit Slide | Stocks finished higher Monday overcoming initial weakness after a measure of the U S sector showed better than expected growth during April Most sectors in the S P 500 closed with gains paced by advances by shares of utility and healthcare companies Financial stocks led decliners falling about 0 4 as a group after J P Morgan NYSE JPM warned its Q2 trading revenue could fall as much as 20 compared to year ago levels
Equities started Monday underwater after Chinese manufacturing data fell for a fourth month in a row and more reports of bloodshed in Ukraine this weekend Things started turning around however after the Institute for Supply Management said its non manufacturing index rose to a 55 2 reading in April beating Street estimates looking for a smaller gain to a 54 2 The better than expected ISM numbers also overshadowed a decline in the purchasing managers index for the services sector to a 55 0 reading last month from a 55 3 score during the prior month Analysts had been expecting the PMI index to remain unchanged Commodities were mostly higher Monday Crude Oil for June delivery settled 28 cents lower at 99 48 per barrel while June Natural Gas was up a penny at 4 69 per 1 million BTU June Gold rose 6 40 to 1 309 40 per ounce while July Silver added a penny to settle at 19 57 per ounce July Copper fell 2 cents to 3 05 per pound
Here s Where The Markets Stood At Day s End
Dow Jones Industrial Average up 17 66 0 11 to 16 530 55
S P 500 up 3 52 0 19 to 1 884 66
Nasdaq Composite Index up 14 16 0 3 to 4 138 06
GLOBAL SENTIMENT
Hang Seng Index down 1 28
Shanghai China Composite Index up 0 05
FTSE 100 Index unchanged
UPSIDE MOVERS
LDL Beats Q1 earnings estimates
HDY Production partner Tullow lifts force majeure at offshore project in Guinea
ARIA Jefferies upgrade to Buy raises price target
DOWNSIDE MOVERS
TREX Misses both revenue and earnings estimates
RLGY Net loss of 0 32 per share was 0 11 wider than analyst estimates
TSN Q2 EPS misses Street view
After Hours Stock News From Copyright 2014 MT Newswires a Division of MidnightTrader Inc |
JPM | Will We Hold It Wednesday S P 1 920 Edition | Yesterday was a close one
We briefly failed our first test of 1 920 but another low volume rescue kept us from fulfilling the Wave C predicion on this Elliot Wave chart for now
Not that I m an Elliot Wave person of course my theory is that if you are going to draw 5 points on a graph you can imagine all sorts of random patterns and SOMETIMES you will be right About half the time in fact
I believe in bigger numbers and our own EXCLUSIVE 5 Rule says the S P 500 bottomed out at 800 in 2009 doubled to 1 600 last Spring consolidated there for a quarter and now has made a 20 move to 1 920 just like it was supposed to since it bottomed in 2009 In fact with the S P at 1 404 when we set our new goals for the S P to 1 600 As I said at the time
That s right it turns out our 10 line is still pretty much right on the money only now we switch our focus to our goal of 1 600 and begin running our numbers off there rather than from 800 I know I have been and still am Fundamentally bearish on the market at the moment I just think we are making this move too soon but that is not to say I think the move is unmakeable
Once we did get the dip in June that we expected at the time down 10 back to 1 278 and fortunately we were happy to go gung ho bullish with our Buy List In fact right in that 3 17 12 post I laid out this play to profit from our prediction
For example we expect the S P to work it s way up to 1 600 and that s SPY 160 and the Jan 2013 146 154 bull call spread is 3 and you can sell the 110 puts for 3 15 so a 15 credit on the 8 spread and all we need is that 1 550 that everyone is predicting to make 5 433 on cash TOS says the margin on the short 110 puts is net 11 so a very nice return on cash too if it works As we can stop out the spread at 2 it s worth our while as long as we don t believe the S P will fail 1 100 this year
That one was actually disappointing as SPDR S P 500 ARCA SPY closed on 1 18 13 expiration day at 148 33 for net 2 33 and a profit of 2 48 on the 15 credit only a 1 553 gain for the year But the good news is we were able to flip to about the same spread for 2014 and THAT ONE worked out just fine Our other bullish spread from that post was less of a disappointment returning the full 3 100
Financial Select Sector SPDR Fund ARCA XLF should also fly if we make it through this quarter without slipping into another financial crisis The Jan 13 16 bull call spread is 2 and you make 50 in 10 months on that just by getting it right You can also sell J P Morgan Chase Co NYSE JPM Jan 30 puts for 1 to knock the net down to 1 and making it a 200 potential upside or sell the JPM 2014 28 puts for 2 10 and get a net 10 credit and a 3 100 upside potential gain on cash
While we wait for the correction we shorted the Index Futures again in our Live Member Chat Room this morning at Dow 16 700 YM S P 1 920 ES Nasdaq 3 725 NQ and Russell 1 120 TF because we re not anticipating good data today NKD 15 000 is also a good short when it breaks and of course we shorted oil at 103 50 CL We ll take the money and run ahead of the Beige Book 2pm but I m pretty sure that will not show the improvement that is expected now that the weather is no longer an excuse Nonetheless I d rather wait and see than make any big bets on the outcome |
JPM | Long Setups RARE JPM And TWTR | Here are a few setups I m watching These are longs that assume a trending to sideways market and no black swan events
Ultragenyx NASDAQ RARE is a biotech all potential widow makers so if drinking Ensure is part of your daily diet then avoid Anyhoo the stock has been basing for a while now and is seeing two closes above its 50 day moving average Possible target 45 50
J P Morgan Chase Co NYSE JPM looks ready Get long at 58
Twitter Inc NYSE TWTR is getting interesting again It seems to be trying to come out of a base and the volume is improving It has now closed two days straight over its 50day moving average Just below that level should be your stop unless you have a much longer term view
Still playing longs but with my Kevlar propeller hat on |
MS | Aviva agrees to terms of 8 8 billion Friends takeover | By Huw Jones and Carolyn Cohn LONDON Reuters British insurer Aviva L AV agreed terms on Tuesday for a 5 6 billion pound 8 8 billion all share takeover of rival Friends Life L FLG responding to pressures caused by pension industry reform Pension providers are rushing to revise their product ranges after the government in March surprisingly removed obligations for people to buy an annuity or income for life at retirement hurting sales Aviva said the merger creates a market leader with 16 million life insurance customers It is expected to generate 600 million pounds in excess cash flow a year and about 225 million pounds in annual cost savings by the end of 2017 Andy Briggs current group chief executive of Friends Life will become CEO of Aviva UK Life with Mark Wilson continuing as CEO of the enlarged Aviva Group Briggs told reporters that the two businesses worked well together Friends Life s corporate pension business is skewed to larger firms while Aviva focused on smaller ones alleviating any concerns about a reduction in competition There s a very good complementary fit he said After the changes announced by the government in March insurers have focused on alternative products such as pensions drawdown which allow savers more freedom over the amount of money they withdraw each year or bulk annuites taking on the risk of company defined benefit pension schemes WILSON S STRATEGY Wilson said there would likely be job losses among the combined staff of more than 15 000 and savings from office moves but would not give any specific details Analysts have speculated that Friends Life would close its London office The deal is a significant step for Wilson who was hired as CEO of general and life insurer Aviva from Asian rival AIA HK 1299 two years ago He has pushed through a restructuring selling off businesses and cutting costs Analysts said the cost savings from the Aviva Friends Life combination were higher than expected but would take several years to be achieved The merger has the backing of Clive Cowdery who founded Friends Life in 2008 when it was known as Resolution Aviva is the product of a 2000 merger between CGU and Norwich Union Holders of Friends Life shares will receive 0 74 new Aviva shares valuing the company at 5 6 billion pounds unchanged from last month s initial announcement Aviva shares fell after last month s announcement due to uncertainties over the savings numbers They were up 2 7 percent at 513 pence at 1035 GMT while Friends Life was up 4 8 percent at 384 1 pence The deal values Friends Life shares at 394 pence based on the closing price on Nov 20 Credit Suisse analysts said they were neutral on the deal While it accelerates near term cash generation and thus dividend recovery it raises longer term questions about growth once initial synergies are extracted they said Friends Life shareholders will also receive a second interim dividend of 24 1 pence per share Aviva plans to pay a final dividend of 12 25 pence for 2014 up 30 percent on last year
Morgan Stanley JPMorgan Cazenove and Robey Warshaw advised Aviva Friends Life was advised by Barclays Goldman Sachs and RBC Capital Markets Reporting by Huw Jones and Carolyn Cohn editing by Jason Neely Keith Weir |
MS | Morgan Stanley to defer less of employees future bonuses | NEW YORK Reuters Morgan Stanley said on Friday it will pay more of its bonuses to employees upfront and defer less because the bank is on a better financial footing and can move its pay practices more in line with those of competitors The step will increase its fourth quarter compensation by roughly 1 2 billion The bank said in a filing with the U S Securities and Exchange commission that only around 50 percent of the bonuses Morgan Stanley employees are due in 2015 for their performance in 2014 would be deferred on average down from about 80 percent previously Now that our business strategy is in place and the firm s performance has stabilized it is time to bring our deferral policy to an appropriate long term level in line with the rest of the industry Morgan Stanley Chief Executive James Gorman said in a memo to employees that was reviewed by Reuters Its contents were confirmed by a Morgan Stanley spokesman Morgan Stanley also said in the filing that the board s compensation committee approved a proposal that allowed outstanding cash bonuses that had been deferred to vest as of Dec 1 After coming close to failure during the financial crisis Morgan Stanley has rebounded The bank earned 4 9 billion in the first nine months of 2014 compared with a loss of 599 million in the same period of 2012
The period of fragility Morgan Stanley faced from 2008 to 2012 has thankfully ended Gorman said in the memo Reporting by Peter Rudegeair Editing by Bernard Orr and Steve Orlofsky |
MS | Asia stocks dip somber data offsets strong U S job numbers | By Shinichi Saoshiro TOKYO Reuters Asian shares were mostly lower on Monday after sobering data highlighted the sluggishness of the region s key economies and tempered the lift from much stronger than expected U S employment numbers Spreadbetters expected a subdued start for European stocks forecasting Britain s FTSE FTSE Germany s DAX GDAXI and France s CAC FCHI to open effectively flat The dollar hovered at multi year highs against the yen after Treasury yields spiked on the robust U S employment report Indicators released on Monday showed that China s trade performance in November was much weaker than expected while Japan s economy in the third quarter shrank even more than initially reported MSCI s broadest index of Asia Pacific shares outside Japan MIAPJ0000PUS slipped 0 2 percent Tokyo s Nikkei N225 edged up 0 1 percent with the downward revision to Japan s GDP neutralizing much of the positive impact from a weaker yen South Korea s Kospi KS200 lost 0 4 percent while Singaporean and Malaysian shares also dipped The Shanghai composite index SSEC gained 2 9 percent after the downbeat Chinese data added to hopes that China will implement more stimulus to shore up its economy Shockingly China s imports contracted by 6 7 percent year on year their weakest performance since the Lehman crisis except the volatile Lunar New Year related period said Dariusz Kowalczyk economist at Credit Agricole in Hong Kong This is partly a reflection of lower commodity prices and base effects but these two factors cannot fully explain the weak import number and we have to assume that poor domestic demand has played a part This means that pressure will rise on the government to do more to stimulate growth he said The Australian dollar sensitive to the economic fortunes of China its main export destination touched a new 4 1 2 year low of 0 8288 The disappointing Chinese and Japanese data contrasted sharply with Friday s U S non farm payrolls that showed employment in November surged by 321 000 easily topping forecasts for 230 000 new jobs The dollar was steady at 121 515 yen after touching a new seven year high of 121 860 The dollar index DXY hovered near a 5 1 2 year high of 89 467 A bullish dollar worked against crude oil with the stronger greenback making commodities denominated in the U S currency less affordable for holders of other currencies Brent crude lost 92 cents to 68 15 a barrel approaching a five year low of 67 53 hit last week with a forecast cut by Morgan Stanley exacerbating the fall The dollar stood tall against the euro which languished near a two year low of 1 2270 The euro and yen are expected to remain on the defensive against the dollar indefinitely as the strong U S jobs data further contrasted the divergent monetary policy paths of the Fed and its European and Japanese counterparts which are mired in underwhelming easing schemes The Malaysian ringgit and Indonesian rupiah fell against the dollar to lows not seen since the 2008 9 global financial crisis after the upbeat U S jobs data lifted expectations for an early Fed rate hike
Higher U S interest rates are seen eroding the attractiveness of higher yields in the region Additional reporting by the China economics team Editing by Eric Meijer |
MS | Oil futures trade near 5 year lows amid supply glut concerns | Investing com Oil futures were down for the third consecutive session on Monday as investors piled on to their short positions in anticipation of lower prices
On the ICE Futures Exchange in London Brent oil for January delivery fell by as much as 1 94 to touch a session low of 67 73 a barrel before trading at 68 27 during European morning hours down 80 cents or 1 16
On Friday London traded Brent prices lost 57 cents or 0 82 to settle at 69 07 a barrel Futures hit 67 57 a barrel on December 1 the weakest level since October 2009
Elsewhere on the New York Mercantile Exchange crude oil for delivery in January dropped 65 cents or 0 99 to trade at 65 19 a barrel after hitting a daily low of 64 63
Nymex oil futures declined 97 cents or 1 45 on Friday to end at 65 84 a barrel Prices hit 63 72 on December 1 a level not seen since July 2009
London traded Brent prices have fallen nearly 42 since June when it climbed near 116 while WTI futures are down almost 40 from a recent peak of 107 50 in June
Saudi Arabia s state run oil company lowered official selling prices for its crude in January last week to the lowest in at least 14 years for buyers in the U S and Asia
The move suggested that the kingdom is stepping up a battle for market share with cheaper U S shale oil after last week s OPEC decision to keep production quotas unchanged
The Organization of Petroleum Exporting Countries said on November 27 that it would maintain its output target at 30 million barrels a day disappointing hopes the oil cartel would lower production to support the market as a surplus develops amid the shale boom in the U S which is pumping at the fastest pace in more than 30 years
The US dollar index which measures the greenback against a basket of six major currencies hit a peak of 89 53 the strongest level since March 2009 as upbeat U S employment data added to expectations that the Federal Reserve could raise interests sooner and faster than previously expected Oil prices typically weaken when the U S currency strengthens as the dollar priced commodity becomes more expensive for holders of other currencies
Wall Street investment bank Morgan Stanley cut its price forecast for Brent crude to 70 from 98 and for 2016 to 88 from 102
Without OPEC intervention markets risk becoming unbalanced with peak oversupply likely in the second quarter of 2015 the bank said in a report on Monday |
MS | Oil slips towards 68 after Morgan Stanley cuts price forecast | By Jack Stubbs
LONDON Reuters Brent crude oil fell more than a dollar to around 68 a barrel on Monday just above five and a half year lows after Morgan Stanley cut its forecasts saying oversupply would peak next year after OPEC decided not to cut output
Without OPEC intervention markets risk becoming unbalanced with peak oversupply likely in the second quarter of 2015 Morgan Stanley analyst Adam Longson said
In a report dated Dec 5 the investment bank cut its average 2015 Brent base case outlook by 28 to 70 per barrel and for 2016 by 14 to 88 a barrel
Brent crude for January was down 90 cents at 68 17 a barrel by 0900 GMT 04 00 a m EST having fallen more than a dollar to an intraday low of 67 73 near last week s trough of 67 53 which was its weakest since October 2009
U S crude was down 70 cents at 65 14 a barrel after hitting a session low of 64 63 The U S contract also known as West Texas Intermediate touched 63 72 last week its lowest since July 2009
At a meeting last month top oil exporter Saudi Arabia resisted calls from poorer members of the Organization of the Petroleum Exporting Countries to reduce production fuelling a further slide in prices which have lost more than 40 percent since June
Brent is moving into the 60 to 70 trading range said Olivier Jakob oil analyst at Petromatrix in Zug Switzerland
There is nothing really providing strong support for crude oil right now he added
Mixed Chinese trade data further unsettled prices
China s imports shrank unexpectedly in November falling 6 7 percent while export growth slowed fuelling concerns the world s second largest economy could be facing a sharp slowdown
China s crude oil imports rose 9 percent in November from October to 6 18 million barrels per day suggesting the country may be boosting its reserves
If one looks at the overall economic indicators they are all showing a picture of China which is stagnating rather than having strong growth said Jakob
Additional Reporting by Manolo Serapio Jr in Singapore and Adam Rose in Beijing Editing by Christopher Johnson |
JPM | Bubble spotting in Europe | By Dhara Ranasinghe Saikat Chatterjee and Vikram Subhedar LONDON Reuters European Central Bank chief Mario Draghi said last week he saw no bubbles in European asset prices only a day after Deutsche Bank DE DBKGn chief executive John Cryan insisted there were signs of bubbles building in the region s capital markets Who s right A glance across Europe s markets suggests some froth forming in certain corners at least After years of volatility surrounding the global banking crash and subsequent euro debt crisis the European Central Bank s remedy was to flood the bloc with cheap cash and directly support lending and bond markets via massive asset purchases The euro zone economy has finally responded this year and is currently enjoying its best run since the single currency s 1999 launch even if inflation remains subdued and below ECB targets Europe s asset markets have responded Equity credit and real estate prices have accelerated challenging the ECB to withdraw its ultra loose monetary policy before unsustainable bubbles develop European high yield markets are trading significantly above their long term historical valuation ranges as this chart shows Chart for European High Yield Valuations BUBBLY BONDS The ECB s 2 3 trillion euro 2 7 trillion bond buying stimulus has driven borrowing costs in the single currency bloc to record lows While stronger economic growth and an expectation that the scheme will be scaled back in coming months have pushed bond yields higher over the past year a large chunk of the market remains in negative territory According to JPMorgan NYSE JPM Asset Management 36 percent of government bond yields in the euro zone are below zero compared with a peak in June 2016 of 51 percent This chart shows which euro zone bonds are trading below the region s inflation For bond strategists another example of how the ECB s quantitative easing program has inflated government bond prices in the bloc is to compare Italian bonds against U S Treasuries Ten year bond yields in Italy a lower rated sovereign that is often viewed as one of the weakest links in the euro area have traded below U S Treasury yields US10YT RR for almost the entire period since the ECB signaled in late 2014 that it would start buying bonds to boost inflation and growth See chart for US and Italian Bond Yields It s hard to say there isn t some kind of over inflated asset prices said Iain Stealey senior fixed income manager at JPMorgan Asset Management You ve got negatively yielding government bonds in an economy that is growing at a nominal growth rate approaching 4 percent So there is a disconnect FROTHY FOREX The euro s 14 percent surge against the dollar this year its biggest annual rise since 2004 has turned around market expectations and euro dollar is the most crowded trade in the currency markets Figures from the U S Commodity Futures Trading Commission CFTC show that hedge funds and other speculators now hold the biggest net long euro position since May 2011 Morgan Stanley s own surveys show 93 percent of currency traders are bullish on the euro against the dollar but some market watchers saying that kind of positioning is unlikely to be sustained for long We think the euro has gone too far in too short a period and that should remain a worry for policymakers said Richard Falkenhall a senior currency strategist at SEB A concern for some is that the euro s steep appreciation has drawn in non euro zone investors to the zone s assets and flattered both the inflows and the returns in debt and equity Any sudden currency reversal could have ripple effects across euro markets as result even if economists would ultimately see that as a boon for growth For a chart on hedge fund positioning in the euro see chart EBULLIENT EQUITIES Perhaps the area where investors are most divided on whether bubbles exist in the euro zone is in equities where the MSCI Europe equity index is still more than 20 percent below its pre 2008 highs and valuations are broadly in line with long term averages That is sharply in contrast to U S equities which are overvalued across a range of key metrics At the same time expectations in Europe have grown considerably with earnings growth forecast to expand in double digits in the coming months according to Ken Hsia a portfolio manager at Investec European Equity Fund who manages over 2 billion But Hsia notes that bond proxy bets such as consumer durables are among the most expensive parts of the stock markets with a lot of positive earnings expectations already priced in Valuations of consumer staples are above ranges according to the chart |
JPM | U S job openings at record high qualified workers scarce | WASHINGTON Reuters U S job openings rose to a record high in July suggesting a slowdown in job growth in August was an aberration and that the labor market was strong before the recent disruptive hurricanes
The monthly Job Openings and Labor Turnover Survey or JOLTS released by the Labor Department on Tuesday showed the labor market continued to tighten amid a scarcity of workers
The strong labor market fundamentals could encourage the Federal Reserve to continue tightening monetary policy this year despite inflation persistently running below the U S central bank s 2 percent target
Employers need skilled labor and experienced workers are in short supply which continues to suggest the economy has returned to a relatively normal labor market that does not need exceptional support from the Fed said John Ryding chief economist at RDQ Economics in New York
Job openings a measure of labor demand increased by 54 000 to a seasonally adjusted 6 2 million That was the highest level since the data series started in December 2000 Job openings have now been above 6 million for two straight months
Hiring increased 69 000 to 5 5 million in July lifting the hiring rate to a near 1 1 2 year high of 3 8 percent from 3 7 percent in June
Labor market tightness was also underscored by another report from the National Federation of Independent Business
The NFIB survey showed a record share of small businesses in August ranked difficulties finding qualified workers as their top business problem The rise in job vacancies in July bolsters views that August s moderation in job gains was largely because of a seasonal quirk
SOLID SHAPE
Nonfarm payrolls increased by 156 000 jobs last month with the private services sector hiring the smallest number of workers in five months Job growth in September could however be held back by hurricanes Harvey and Irma which struck Texas and Florida respectively
The two states account for about 14 percent of U S employment Temporary unemployment as a result of flooding from Harvey has already caused a surge in first time applications for jobless benefits
The JOLTS data signal that the labor market was in solid shape in July and support our view that we should not be very concerned about the modest disappointment in the August payroll report said Daniel Silver an economist at JPMorgan NYSE JPM in New York
JOLTS is one of the job market metrics on Fed Chair Janet Yellen s dashboard Economists expect the U S central bank will announce a plan to start reducing its 4 2 trillion portfolio of Treasury bonds and mortgage backed securities at its Sept 19 20 policy meeting
Benign inflation amid sluggish wage growth however suggests the Fed will delay raising interest rates again until December It has increased borrowing costs twice this year
Job openings in transportation warehousing and utilities increased 70 000 in July and educational services had an additional 26 000 vacancies There were 20 000 more job openings in construction
Manufacturing however saw a 29 000 drop in vacancies in July Health care and social assistance job openings decreased 72 000 and federal government vacancies declined 21 000
About 3 2 million Americans voluntarily quit their jobs in July up from 3 1 million in June The quits rate which the Fed looks at as a measure of job market confidence rose to 2 2 percent from 2 1 percent in June
One of the problems facing firms is that workers are still pretty much locked into their current positions said Joel Naroff chief economist at Naroff Economic Advisors in Holland Pennsylvania With companies unwilling to bid for workers from other firms there is little reason to leave and that is limiting the availability of qualified workers
Layoffs fell 23 000 to 1 78 million in July |
JPM | JPMorgan s Dimon says bitcoin is a fraud | By David Henry and Anna Irrera NEW YORK Reuters Bitcoin is a fraud and will blow up Jamie Dimon chief executive of JPMorgan Chase Co N JPM said on Tuesday Speaking at a bank investor conference in New York Dimon said The currency isn t going to work You can t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart Dimon said that if any JPMorgan traders were trading the crypto currency I would fire them in a second for two reasons It is against our rules and they are stupid and both are dangerous Dimon s comments come as the bitcoin a virtual currency not backed by any government has more than quadrupled in value since December to more than 4 100 Bitcoin is a digital currency that enables individuals to transfer value to each other and pay for goods and services bypassing banks and the mainstream financial system While banks have largely steered clear of bitcoin since it emerged following the financial crisis the virtual currency has a range of people who support it including technology enthusiasts liberterians skeptical of government monetary policy and speculators attracted by its price swings Like it or not people want exposure to bitcoin Edward Tilly chairman and CEO of exchange group CBOE Holdings Inc O CBOE said at the same conference CBOE has applied with U S regulators to launch a bitcoin futures contract and a bitcoin exchange traded fund on its venues Any good trade is started with a difference of opinion Tilly added So Jamie can be on the short side and the issuers and those trading in physical can be on the long side and it sounds like we have a great trade Dimon may also be on the other side of another bitcoin trade closer to home At another conference about two hours later Dimon said that one of his daughters had bought some bitcoin It went up and she thinks she s a genius now Dimon said at the CNBC Institutional Investor Delivering Alpha Conference WORSE THAN TULIP BULBS Banks and other financial institutions have been concerned over bitcoin s early association with online crime and money laundering The supply of bitcoin is meant to be limited to 21 million but there are clones of the virtual currency in circulation which have made the market for it more volatile It is worse than tulips bulbs Dimon said referring to a famous market bubble from the 1600s JPMorgan and many of its competitors however have invested millions of dollars in blockchain the technology that tracks bitcoin transactions Blockchain is a shared ledger of transactions maintained by a network of computers on the internet Dimon said such uses will roll out over coming years as it is adapted to different business lines Financial institutions are hoping blockchain can be adapted to simplify and lower the costs of processes such as securities settlement loan trading and international money transfers Dimon predicted big losses for bitcoin buyers Don t ask me to short it It could be at 20 000 before this happens but it will eventually blow up he said Honestly I am just shocked that anyone can t see it for what it is Bitcoin s price fell as much as 4 percent following Dimon s comments and was last trading at 4 164 Rumors that the Chinese government is planning to ban trading of virtual currencies on domestic exchanges has weighed on bitcoin recently
It feels like we are in the midst of a negative news cycle but even considering all this we are still trading above 4 000 said John Spallanzani chief macro strategist at GFI Group |
JPM | Gundlach Equity investors to see change in dynamic with QE reversal | By Jennifer Ablan NEW YORK Reuters Investors in equities and risk assets should brace themselves for the end of quantitative easing given the high correlation it has to high stock and junk bond prices Jeffrey Gundlach chief executive at DoubleLine Capital warned Tuesday Equity and risk asset investors are unfortunately about to see the first change in dynamic in years with the end of QE Gundlach said on a webcast In September the Federal Reserve is expected to begin to reverse quantitative easing QE Interest payments and principal from maturing securities will no longer be reinvested in the bond market This is known colloquially as balance sheet reduction because as the bonds and mortgage backed securities mature the asset side of the Fed s balance sheet will shrink You go into a cumulative quantitative tightening So I m wondering if this suggests a little more trouble in 2018 Gundlach said about the reversal of QE I am thinking that maybe we have to start going on Trouble Watch for the middle part perhaps of 2018 with quantitative easing scheduled to go away Gundlach known on Wall Street as the Bond King noted that the percentage of the S P 500 components that are above their 200 day moving average are really weak Generally when you start to see weakness on the percentage of the 200 day it s foreshadowing potential trouble on the index broadly Not really that scary yet but these are one of the things that we have to watch said Gundlach who oversees more than 109 billion as of June 30 at DoubleLine On the dollar Gundlach said he thinks a short term bottom has been made in the greenback and a rally is overdue but the currency does not trade well I am really not that fond of emerging markets in the short term because I don t think the dollar is going to keep falling but I do like EM a lot on a long term basis Gundlach said Gundlach remarked on Bitcoin in the wake of JPMorgan Chase Co NYSE JPM CEO Jamie Dimon s comments Tuesday at an investor conference calling it a fraud that will blow up Gundlach said on August 25 he received an email from his 86 year old mother with a link to a story that recommended buying Bitcoin I philosophically don t believe that it s unhackable I ve had a lot of really smart 20 somethings argue with me on this that it really is completely safe
Obviously I am an investor and not a speculator I have no interest speculating on a Bitcoin type of deal Gundlach said I am going to let this mania go on without me |
JPM | Bitcoin slides on fraud warning from JPMorgan s Dimon | By Jemima Kelly LONDON Reuters Bitcoin slid by more than 10 percent on Wednesday as investors sold the cryptocurrency after a warning by JPMorgan N JPM Chief Executive Jamie Dimon that it is a fraud and will eventually blow up Bitcoin the original and still the biggest cryptocurrency has been on a tear in recent months hitting a record high just below 5 000 at the start of September after a more than fivefold increase in price since the start of the year But bitcoin and other cryptocurrencies have been falling since early last week when China banned the issuance of new digital coins for fundraising purposes a phenomenon known as initial coin offerings or ICOs ICOs have fueled a rapid ascent in the value of all cryptocurrencies from about 17 billion at the start of the year with bitcoin making up around 90 percent of that to a record high close to 180 billion at the beginning of September of which bitcoin represented less than half Following the ICO ban the market was further spooked by reports early this week that Chinese authorities were planning to forbid any trading of cryptocurrencies and by a warning on ICOs from Britain s financial watchdog raising fears of a wider crackdown Dimon s warning triggered a further 11 percent collapse in the price of bitcoin which had already lost around 15 percent of its value in 10 days He joins a long line of market commentators that have been critical of bitcoin and it potentially being in a bubble so his comments could have been the tipping point said James Butterfill head of research and investment strategy at ETF Securities in London The cryptocurrency tumbled to as low as 3 720 01 on the Bitstamp exchange BTC BTSP before recovering to trade around 3 810 by 1524 GMT still down 8 7 percent on the day Most other digital currencies were down also with bitcoin s main rival ether often called Ethereum the name given to the project behind the currency down 10 percent on the day according to Coinmarketcap an industry website Dimon told an investor conference in New York that if any of his traders were found trading bitcoin he would fire them in a second and that bitcoin was worse than tulips bulbs referring to a famous market bubble from the 1600s This is not the first time that Jamie Dimon has spoken against the currency the last time he had a similar go on the currency was in November 2015 said ThinkMarkets analyst Naeem Aslam Since then the currency has had a remarkable run Most importantly given that the CEO does not think that shorting this trade would yield a more favorable outcome shows that the cryptocurrency has a lot more room to run
This version of the story was refiled to fix garbled third paragraph |
JPM | JPMorgan Chase extends urban renewal investments to Chicago | Reuters JPMorgan Chase Co NYSE JPM will invest 40 million over three years in Chicago to revitalize neighborhoods finance small business growth and promote job skills training the bank said on Thursday The investment program in Chicago where the bank has significant business interests is modeled on a 100 million urban renewal program that JPMorgan began in Detroit in 2014 and this year boosted by another 50 million A lack of opportunity is a root cause of Chicago s gun violence concentrated poverty and persistent racial and economic inequities so the firm s investments will focus on key drivers of inclusive economic growth the company said in a news release Chief Executive Officer Jamie Dimon 61 has turned more of his attention lately to advocating for public policies to promote the economy including infrastructure improvement and job skills training Since becoming chairman of the Business Roundtable a CEO group in December Dimon has been spending more time in Washington discussing policies that go beyond banking JPMorgan is the biggest bank in the United States with 2 56 trillion in assets It earned 24 7 billion in 2016 In Chicago the bank has 5 8 million retail customers and 360 branches The 2014 Detroit investment grew out of a desire by Dimon to better direct JPMorgan s community contributions to projects with lasting impact Monies were directed to specific locations there in consultation with local officials
The Chicago investments will be directed to the city s South and West sides They include money for established job training organizations and community development financial institutions |
C | Energy Transfer says not slowing construction of Dakota Access pipeline | Energy Transfer Partners NYSE ETP says it is not slowing down construction of the Dakota Access oil pipeline despite protests and is moving equipment to prepare for tunneling under Lake Oahe even as federal regulators have not yet given a go ahead to proceed An Army Corps of Engineers spokesperson reportedly had said yesterday that ETP agreed to slow down construction a statement the company refutes The continued construction comes amid pressure from activists on banks financing the pipeline to pull their support Citigroup NYSE C says it has discussed its concerns with ETP and urged it to reach a resolution with the Standing Rock Sioux Tribe which contends the pipeline would desecrate sacred grounds and that a spill could contaminate drinking water Separately North Dakota regulators are proposing a fine of at least 15K against ETP because it failed to gain their approval to proceed with construction after artifacts were found last month |
C | Mexican peso s massive slump deepens after Trump win | By Michael O Boyle MEXICO CITY Reuters Mexico s peso sank again on Thursday taking its biggest two day tumble in more than 20 years as investors worried about how U S President elect Donald Trump s policies could hit exports from Latin America s No 2 economy The peso lost more than 3 percent to trade around 20 51 per dollar That follows a major slump on Wednesday during a sell off after Trump s unexpected victory nL1N1DA0TZ The dollar has gained around 12 percent against the peso in the last two days one of its biggest ever slumps since a 1994 1995 devaluation During his campaign Trump vowed to rewrite or scrap the North American Free Trade Agreement on grounds that it favored Mexico at the expense of U S workers He has also said he would tax the money sent home from the United States by Mexican migrants to pay for building a wall along the U S Mexico border Citigroup NYSE C strategist Dirk Willer said he expected the peso long a bellwether for investor sentiment about the U S election to keep weakening and range between 21 and 22 per dollar until it is clear what trade policies Trump will enact It will be very hard for the peso to rally until you get some clarity on whether Trump really means business Willer said In the run up to the election a Reuters poll had forecast a Trump victory would knock the peso to around 21 per dollar Mexico chose not to intervene to stem peso losses the morning after Trump s victory a move many analysts had expected although the central bank may raise interest rates next week for the fourth time this year Nonetheless on Thursday Mexico s finance ministry said it would cut the amount of long term peso bonds it would offer during the rest of the fourth quarter due to the increase in market volatility nE1N1D800N The finance ministry said it would cut issuance of fixed rate and inflation linked 10 year and 30 year peso bonds during the rest of the year while it would increase the amount of short term peso debt it offers in its weekly auctions The dollar has strengthened about 19 percent against the peso this year even more than a nearly 17 percent gain for all of 2015 During the last decade the peso as the most liquid emerging market currency has been a proxy bet for all emerging markets and risky investments like stocks But the peso diverged for the second day in a row as stocks rose in the United States SPX Mexico s top trading partner
If Trump increases tariffs on Mexican imports into the United States as he promised during the campaign it could impede growth for the Latin American country s economy |
JPM | Weekly Charts Survey Yield To Yields | On Friday 10 Year yields slid into their skipped stone support from the breakout range they have meandered in since last summer They then broke through mid morning accelerating the downside reversal in the equity markets and a strengthening bid beneath the yen Clearly depicted in the chart below the strong inverse relationship between these two risk proxies has tightened considerably as our own domestic equity fronts have collided with several different pressure systems Namely the trap door we have expected would open in Japan and participants beginning to come to terms with the end of QE As the markets flounder further and volatility creeps higher we suspect that the discussion surrounding QE and its impact to the market will only grow louder and more confusing
What we do know is that while correlations may be strengthening in some corners of the market the indiscriminate tightness we witnessed across assets in 2011 as the Fed last attempted to step away or 2008 as the Fed rushed to the accident scene are not present It really has become a market in 2014
A snapshot of this weeks performance through Thursday s close tells the story SPX 1 75 US Dollar Index 1 35 IBEX 3 19 Euro 1 33 Japan 4 49 Yen 1 72 EEM 1 28 Australian Dollar 1 34
CRB 1 78 Gold 1 21
FXI 2 98 SSEC 4 43
As the banks already down 4 0 for the week get hit once again this morning on the back of considerably weaker then expected quarterly profits from JP Morgan NYSE JPM the downside catalyst will only reinforce the trend and negative divergence that long term yields had pointed towards in the financial sector over the An inverse to last years sentiment and structure participants need to yield their considerably misgiven perspectives to yields Those that have followed our work over the past four months see h will know that this has been a major theme and imbalance that we have positioned off of Closing out an important and powerful week we updated several different ongoing series |
JPM | The Long Side Beckons But Trouble Lurking In Q2 | For those of you accustomed to seeing my column on Saturday mornings my apologies a weekend of college revisits began with a 4AM wakeup on Saturday and didn t finish until late Sunday afternoon Apart from disaster movies and the 1986 World Series I don t think I have ever seen so many scared looking middle aged people gathered in one place before
As the stock market finished a decidedly downbeat week the Friday topic of debate naturally centered around What It All Means it being the selling that has taken the averages into the red on the year One camp called it a healthy pullback and thus a buying opportunity another rather more smug group consisted of I told you so bears and perhaps the largest group was those nervous undecideds hovering between the first two Then there was the comic fringe group wanting to blame it all on tax payments blaming the government being one of Wall Street s most cherished traditions though such things come up every year at this time The argument that taxes are responsible for bringing down stocks on the other hand only comes up on those rare occasions when stocks are below water in April
If you are Jerome Siegel and investing with a fifty year horizon last week s turbulence was indeed a buying opportunity but then again so is every other week If you are Jeremy Grantham and working with a seven year horizon the drop isn t nearly enough to be a buying opportunity Nor was it for a day trader and certainly not for the average retail investor either However you short term traders should be sharpening your pencils
The January turbulence in equities was a warning sign and so has been the recent rotation out of high beta stocks into low beta issues Those are tremors though not the actual earthquake which will come later the fault lines are spreading
But the big one won t come in the spring as I have often said It s just not the time of year for them though Vladimir Putin may have other ideas One can later look back at certain springs and say that is when the bull started to tremble but there is always a first quarter earnings rally and bull markets don t come apart all at once there are always counter rallies They have only plunged straight down on one infamous occasion in October of 1987 a one day decline that has since been legislated out of existence by the exchanges The selling should exhaust itself sometime this week exactly when depending on whether we get there all at once or in stages
At some point this week unless developments in the Ukraine intrude it should be a good time to start edging back in on the long side It will be a trade though because bigger trouble is lurking in the latter part of the second quarter Few companies have reported earnings so far but it s clear from JP Morgan s NYSE JPM conference call that business conditions are still not robust Expectations are low with consensus estimates around plus or minus one percent But those estimates are designed to be beaten and the first quarter is too early for companies to throw in the towel A little more selling this week and both technicals the calendar and estimates will be in your favor You should be able to take your cue from Monday s pre open release of March retail sales
Just remember it s only a trade One other thing to remember all U S markets are closed on Friday April 18th Good Friday and many European markets will be closed on Monday April 21st Easter Monday
The Economic Beat
The key report of a very light week was the latest release of the FOMC Fed policy committee minutes Many seemed to take them as a reaffirmation of dovish bias or perhaps just a guarantee that the Fed would ride to the rescue whenever needed The Fed looked uncertain from my point of view sort of trying to have its cake and eat it too we want to taper but you know we could change our minds We will raise rates someday but maybe that will be far off in the future Or not It also looked like some trial balloons were being floated such as the notion of no longer reinvesting principal payments from maturing securities In sum a new chair and a changed policy committee are finding their way and it will probably be some time before things settle in
The February labor turnover report JOLTS did not reveal any extra momentum in the job market On a seasonally adjusted basis hires were up slightly from February 2013 while the hire rate was slightly down 3 3 vs 3 4 On a non adjusted basis job openings were up year on year 2 9 vs 2 7 though manufacturing was down sharply 1 9 against 2 4 and hire rates were the same at 2 8 I counted 13 instances of the phrase little changed in the release which just might be a clue
Wholesale sales revealed that the inventory to sales ratio for February was provisionally estimated at 1 335 the highest rate since May 2009 1 353 if it stands up The twelve month rate of change for sales edged up to 4 26 still in the same range of about 4 that it s been in since September The high levels of inventory are something of a worry but the end of the quarter usually cleans enough of it out that it would be premature to draw any conclusions yet
Weekly chain store sales had a decent pickup over the week that crossed into April though the year on year comparisons will suffer from the shift in the Easter holiday Rising temperatures should help the latest week and while much of the country will return to cooler weather as we get closer to Easter the holiday itself should help things keep moving
The report that was probably the most widely quoted while simultaneously being completely unanalyzed was weekly jobless claims Where is Mark Haines when we need him may he rest in peace I can well remember the former anchor of CNBC s Squawk Box the morning show constantly reminding market Panglosses in 2007 that employment is a lagging indicator Employment will keep growing after a recession has already started and keep shrinking for many months after a recovery has begun
It should be noted that while many are boasting about the lowest number in 7 years the number was a tiny bit flawed The previous week had been blown up by another California vagary so it may be better to average out the last three weeks to get a read on the real trend The four week average of unadjusted claims was lower as recently as last summer and there is also the not insignificant matter of revisions Once upon a time the first week of September 2013 was below 300 000 on an adjusted basis 294 000 and is now given as 307 000 though the actual number of claims was unrevised only the adjustment factor changed
The ends of the first and third quarter are usually the lightest times of year for claims so it may well be that last week s number gets revised later on as well But the most important aspect of a number that people wanted to put so much weight on is that claims always peak just before a cyclical downturn it s virtually a tautology The last time that claims descended to this level as a percentage of workforce was the spring of 2007 They continued to gently decline into October and then at almost the same time as the S P 500 was making a new high began to reverse They didn t stop going up the summer of 2009
The spring of 2000 followed the same pattern peaking in October So what the claims data may be telling you is that a couple more good quarters lay ahead of us before the business cycle will start to contract again Cycles just don t last forever except perhaps in the outlooks of equity mutual fund managers
The week ahead could very well pivot on the Monday morning release of March retail sales As we go to press consensus is for something close to 1 seasonally adjusted with autos and about half of that without them The last week of March did indeed improve but chain store sales reports the rest of the month were not pointing to strength in the ex auto ex gas category If the report does match or beat consensus the selling in the market may reverse but I confess to a bit of skepticism that it will The Chinese trade data disappointment last week declines in exports and imports fanned our own equity market sell off
However guessing government reports is a very chancy business one can be spot on and not find out until a month later or more when the revision comes out and seasonal adjustments are always a wild card Once again better to wait and see
The rest of the week is full of market sensitive data On the manufacturing side the Federal Reserve and its regional branches will report the New York manufacturing survey on Tuesday March industrial production on Wednesday and the Philadelphia manufacturing survey on Thursday
Housing will start another monthly round of reports with the homebuilder sentiment index on Tuesday and housing starts on Wednesday The Fed s Beige Book comes out that afternoon The consumer price index comes out Tuesday and the latest read on producer inflation Friday showed a big monthly spike 0 5 overall 0 6 excluding food and energy Leading indicators come out Friday but the financial markets are closed in honor of Good Friday banks and government offices will be open |
JPM | Putin Prices And Purchases The Order Of The Week | The sunny weather and relaxed weekend belies the storm clouds gathering over the world s markets this morning courtesy of movements in Ukraine once again Ukrainian and Russian forces have clashed over the course of the weekend in the Eastern part of the country and noises from the Kremlin have been incendiary at best with the Russian government defining Ukrainian resistance efforts as acts of terror New developments this morning are thin on the ground but a deadline for protestors to leave buildings has passed without incident Tensions here will keep risky assets from getting too far ahead of themselves ahead of an important week of data but a continuation will see further chatter about intervention and increased sanctions on Russian assets The euro has come back from its Friday highs and after having the best week since September last week Mario Draghi once again verbally took the currency lower Any more strengthening of the euro exchange rate would require more loosening of the European Central Bank s monetary policy in order to maintain the overall current level of looseness Draghi said at the IMF on Saturday The stronger currency has been a major factor in bringing disinflation and in some cases deflation to Eurozone economies I have always said that the exchange rate is not a policy target but it is important for price stability and growth And now what has happened over the last few months is that it is has become more and more important for price stability Draghi said when asked by reporters The comments only took 0 25 off the euro and comes after another ECB member Beno t C ur fleshed out what the ECB could possibly buy as part of any quantitative easing plan Inflation and jobs will be the order of the week we believe US UK and the final Eurozone CPI number for March are all due before Easter and in the latter s case will be closely watched to see if the stubbornly high core reading will yield to further disinflationary pressures The numbers from the US and UK are due tomorrow while the Eurozone s is due on Wednesday Wednesday may finally be the day that UK unemployment hits the 7 0 level a key psychological level for government and policy makers alike given the initial use of the level as a threshold for rate rises during the first version of the Bank of England s forward guidance plan Elsewhere throughout the week we have a significant number of S P listed companies reporting their latest earnings numbers J P Morgan s NYSE JPM numbers on Friday took the index to the lowest level in nearly 2 months and the possibility for further equity market losses and a desire for haven currencies could define this week s trade China s consumer price index rose 2 4 from a year earlier in March up from 2 0 in February This was in line with expectations but we need to see stronger figures here and throughout the Chinese economy for fears over the general strength to recede GDP numbers are due on Wednesday morning with the market looking for Q1 growth of 7 3 since Q1 of 2009 The release of the minutes from the Bank of Japan s March meeting last week confirmed the view that policy is unlikely to be changed unless we see a significant fall in economic activity Board members seemed to suggest that the recent increase in sales taxes would not affect general consumption and therefore policy will remain as stimulators as it needs to be Anecdotal evidence from friends in Japan have shown that prices are rising at a rate of sometimes 10 hardly an incentive for increased consumer spending Today s focus will be US retail sales at 13 30 consensus is looking for an increase of 0 9 in the month of March following a 0 3 expansion in February |
JPM | The U S Dollar Index Fundamentals Outlook | As we suggested in the previous review on Friday the Dollar index rose for the first time during a week The reason of this was higher than expected Michigan consumer confidence index Today at 13 30 CET we are expecting for information on retail sales for March from the USA and 15 00 CET U S wholesale inventories Preliminary forecasts in our opinion are positive for the U S Dollar Stock indices S P 500 and Nasdaq reduced per week by 2 6 and 3 1 respectively and it turned out to be the highest since June 2012 Negative dynamics of the market on Friday were supported by weak quarterly reporting of J P Morgan Chase Co NYSE JPM and rising March producer price index by 0 5 This is its biggest increase in the past nine months Investors fear a possible reduction in the profitability of corporations due to inflation
This morning the Euro continued to decline Over the weekend ECB President Mario Draghi said that the ECB does not exclude further monetary policy easing and it firmly reiterates that it continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time In the last 12 months strengthening of the Euro against the U S Dollar was 5 5 and against the Japanese Yen 10 Today at 17 45 CET the head of the French Central Bank and the ECB Governing Council member Christian Noer will speak After Mario Draghi s speech the majority of market participants has decided that the ECB does not want to strengthen the Euro above 1 39 Dollar although no specific numbers were mentioned It is possible that Christian Noer s statements will be more specific According to the U S Commission on commodity futures trading the amount of net purchase positions net longs in the Euro decreased by 23 3 thousand per week to its lowest level since late February The Head of the Swiss National Bank SNB Thomas Jordan said that Switzerland can benefit from easing monetary policy in the Eurozone in case of Swiss Franc weakening in tandem with the Euro Recall that in September 2011 the SNB does not allow the strengthening of the Swiss currency less than 1 2 Francs per Euro This level may become a strong support This year the SNB expects zero inflation In 2015 it is expected to reach 0 4 Swiss GDP growth this year could be around 2
The cost of the Cattle Fcattle reached a new historic high Japan has reduced import duties on Australian meat cattle thus opening its domestic market for Australian producers Negotiations with the United States about which we wrote in the previous reviews is not yet finished Australia is the world s third largest producer of beef after the United States and India A message regarding increase in cattle imports to China by 40 last year has contributed to beef prices rising About 2014 opinion was divided USDA predicts a drop in beef exports to China this year by 10 due to high prices and increasing domestic production to 5 76 million tons Organization for Economic Cooperation and Development expects beef exports to China will grow annually by 7 during 8 years until it reaches 850 thousand tons It should be noted that the Australian Bureau of Agricultural and Resource Economics and Sciences ABARES expects that exports of Live Cattle from Australia this year will be the highest for six years 600 thousand We believe that futures prices for cattle will depend heavily on the news about its real consumption in China and progress of negotiations between Japan and the USA The cost of the Copper rose after the Glencore Xstrata sold its stake in copper deposit in Peru to Chinese consortium for 6 billion |
JPM | Bonds Size Matters | There have been a few articles recently on Pimco s underperformance and the increasing concentration on the buy side of the bond market There is danger here for large active managers and their clients
Risk Assessment
Two years ago I wrote a piece called Don t Become the Market I wrote it partly to explain JP Morgan s NYSE JPM London Whale Anytime you become big relative to a market that you use your own actions affect the prices of the market This means that a market dominated by a firm or set of firms pursuing a similar strategy will no longer be able to rely on prices as a reasonable guide in assessing risk
Smaller players who can trade without affecting prices can still make their estimates of risk at current prices and they can trade against larger players Though there are initially economies of scale once you get big enough as an active investment manager the diseconomies of scale kick in
Size Matters
It s relatively easy to outperform when you are a small manager But when you get big as an active manager you realize that you can t find so many good investable ideas Now if you were a passive manager like Vanguard Bond ARCA BIV you wouldn t have to worry just own an even slice of everything and complain that you don t get a decent allocation on bond IPOs
Because of this I tend to use smaller managers for money that is not passively managed The smaller the manager the more he can take advantage of off the beaten track ideas If he is a trader unlike me being small is an advantage if he has skill
There is an exception to this and it is for institutions that buy and hold fixed income obligations In that case holding 50 of the issue is not a problem if you ve done your credit work right You have no intention of selling and you will bear the few losses that you take If a large manager acts like that it can work so long as its financing cannot run and the defaults are not overwhelming
My advice to readers is to use lesser known and smaller investors when actively investing If they have a a good record use them
You ll benefit with them as they grow |
MS | After record IPO Alibaba eyes first bond sale | By Danielle Robinson NEW YORK IFR Chinese e commerce giant Alibaba will sound out investors next week in Asia Europe and the US as it mulls its first bond ever just two months after the company s record breaking IPO
Alibaba which this week logged US 9 billion of sales on a single day will kick off a roadshow in Boston and Hong Kong on Monday for what will surely be one of the most sought after bond offerings of the year
It hired Morgan Stanley Citigroup Deutsche Bank and JP Morgan to arrange the meetings which continue in New York and Singapore on Tuesday and London on Wednesday
Everyone will want this one market participant told IFR It s a first time borrower it s high quality and it s a marquee name This is a great global story
Founded by Jack Ma in the late 1990s Alibaba Group has become a powerhouse player in the global economy highlighted by its stunning results on China s Singles Day on Tuesday
It reported sales of 57 1 billion yuan US 9 3 billion on the day conceived as a response to Valentine s Day in the West and now akin to Black Friday and Cyber Monday in the United States
What Alibaba as a company is doing is important and exciting for global commerce said Matthew Duch senior portfolio manager at Calvert Investments
They are tapping the holy grail of retail the Chinese consumer
Moody s has assigned an A1 credit rating to the proposed bond which will only increase the appeal of the deal for investors already enamored with the company s success story
The overhang around Chinese companies is what can and can t be trusted in the financials said Duch Alibaba is going a long way to build confidence and credibility in Chinese companies
INVESTOR FAVORITE
Less than two months ago Alibaba wowed the global markets with the largest IPO of all time a whopping US 25bn listing in New York that sold at US 68 per share
Its stock is up nearly 75 since then closing at US 118 20 on Wednesday giving Alibaba Group a market capitalization of US 289 billion even bigger than US retail giant Walmart
Alibaba has the potential to be equally popular in the bond market as the equity market but for very different reasons said Scott Kimball senior portfolio manager at Taplin Canida Habacht
The bond market is often very receptive to brand new highly rated issuers
Bankers told IFR that Alibaba is expected to sell about US 8 billion of bonds which would make it one of the five largest bond deals of the year
It is unusual for large publicly listed companies to undertake big debt sales so soon after an IPO which highlights Alibaba s appeal as a gateway into the vast Chinese market
The fact that Alibaba is going to issue a large transaction on the back of its highly successful IPO in the equity market will continue the positive momentum and interest in the Chinese retail market said Duch at Calvert
Proceeds are expected to be used to repay an existing US 8 billion syndicated term loan facility that has been fully drawn down Fitch Ratings said
There tend to be much tighter restrictions attached to loans than to bonds meaning Alibaba should have even greater freedom in the financing of any future expansion plans
Ma Alibaba Group s chairman and now one of the richest men in the world has indicated that he may seek an IPO for sister company Alipay an online payment platform in 2015
The new bond will also mark a significant success for the four banks underwriting it who were selected after what sources said was an exceptionally competitive process
Reporting by Danielle Robinson Additional reporting by Stephen Lacey Anthony Hughes and Anthony Rodriguez Writing by Marc Carnegie Editing by Natalie Harrison |
MS | RenaissanceRe to buy Platinum Underwriters for 1 9 billion | By Avik Das Reuters RenaissanceRe Holdings Ltd N RNR will buy fellow Bermuda based reinsurer Platinum Underwriters Holdings Ltd N PTP for about 1 9 billion to boost its business amid intensifying competition and falling premiums RenaissanceRe will offer an equivalent of 76 per share in stock and cash representing a 24 percent premium to Platinum s closing price of 61 27 on Friday Platinum s shares rose as much as 21 percent to 74 35 in morning trading Reinsurers such as RenaissanceRe and Platinum help insurance companies cover the cost of major damage claims such as for hurricanes or earthquakes in exchange for part of the premiums their customers pay But fewer natural catastrophes in recent quarters and a rise in competition from pension and hedge funds entering the industry in search of higher returns have been reducing reinsurers pricing power and pushing them to look at buying better products or expanding geographically The declining pricing and a tougher market environment forced RenaissanceRe s hand Macquarie analyst Amit Kumar said The offer price which is at 1 1 times Platinum s book value undervalues the company Kumar said adding that he expects other potential buyers to emerge Under the deal Platinum s shareholders will get a 10 per share special dividend and will be able to choose the rest in the form of 66 in cash or 0 6504 in RenaissanceRe shares or a combination of 35 96 in cash and 0 2960 RenaissanceRe stock RenaissanceRe said it expected annual cost savings of 30 million from the deal which is due to close in the first half of 2015 It will pay a break up fee of 60 million if the deal fails to close the company said on a conference call RenaissanceRe Chief Executive Kevin O Donnell will head the combined company Platinum CEO Michael Price will have no future role Morgan Stanley is the financial adviser to RenaissanceRe while Goldman Sachs is advising Platinum Willkie Farr Gallagher is legal counsel for RenaissanceRe while Sullivan Cromwell is advising Platinum
Platinum shares were up 20 5 percent at 73 87 while Renaissance shares were down 2 1 percent at 99 32 at midday Reporting by Avik Das and Anil D Silva in Bangalore Editing by Ted Kerr Siddharth Cavale and Maju Samuel |
MS | Fed rattled by elusive inflation but loath to sound alarm yet | By Jonathan Spicer and Ann Saphir NEW YORK SAN FRANCISCO Reuters With the U S economy humming along at its fastest clip in more than a decade the Federal Reserve should be confident about its ability to weather a global slowdown and start lifting interest rates around the middle of next year But then there is inflation Interviews with Fed officials and those familiar with its thinking show the mood inside is more somber than the central bank s reassuring statements and evidence of robust economic health would suggest The reason is the central bank s failure to nudge price growth up to its 2 percent target and more importantly signs that investors and consumers are losing faith it can get there any time soon Despite undershooting the goal for three years the Fed has long succeeded in convincing markets that the target was within reach However inflation expectations have begun slipping in recent weeks threatening to amplify downward momentum from plunging energy prices and stuttering global growth Barring a turnaround Fed officials would hesitate to raise interest rates as soon as mid 2015 even as gradually as their forecasts now suggest On Friday prices of short term interest rate futures showed traders pushed back their expectations for a lift off in rates from near zero until October 2015 later than most Fed officials have signaled so far The primary concern at the moment is whether you can get back to 2 percent in a way that keeps expectations anchored and maintains the credibility of the Fed as an institution that can achieve its goal said Jeffrey Fuhrer the Boston Fed s senior policy advisor At first sight a combination of economic growth of nearly 4 percent falling unemployment and price increases of around 1 6 percent looks good Central bankers worry though that inflation instead of picking up further could head the other way RESISTING THE URGE For the Fed 2 percent inflation provides a necessary buffer against deflation and sufficient leeway to leave crisis era zero lower bound on interest rates behind and start using them as the main policy lever again We re below the Fed s 2 percent target now but what if we get to 1 percent And then 0 5 You need to cut that off said former Fed Vice Chairman Alan Blinder who teaches at Princeton University One Fed official who declined to be named told Reuters policymakers must resist the urge to lift rates at the first opportunity because they might be forced to backtrack if inflation failed to pick up Narayana Kocherlakota who has been a dissenting voice and voted against ending the Fed s bond buying program in October says time is ripe for the Fed to come clean on inflation and act A key for us would be to be communicating effectively and then taking actions to live up to that communication that we are trying to get inflation back to 2 percent as rapidly as possible the Minneapolis Fed president said last in November Other officials who declined to be named were not ready to sound alarm yet but said that if inflation continued to disappoint the Fed would have to admit it did not know how long it could last or how it might shape longer term expectations They also flagged a growing concern that oil prices which hit a four year low below 70 a barrel on Friday will depress the core price measures the Fed uses to steer its policy For now however most policymakers opt to stick with the tried and tested theory that monetary stimulus and accelerating growth will eventually lift inflation and fear that airing their doubts could make the Fed s target even harder to accomplish Reflecting such fears the Fed s Oct 29 policy statement left out references to recent market turmoil and economic weakness in Europe Japan and China while downplaying a drop in market based inflation gauges The meeting s minutes released later showed policymakers raised those concerns but decided not to air them to avoid undermining investors confidence in the U S recovery I think deep down they are worried about un anchoring inflation expectations said Vincent Reinhart chief U S economist for Morgan Stanley Reinhart who led the Fed s monetary affairs division in the early 2000s described recent Fed statements as tone deaf on downward price pressures Primary dealers surveyed by the Fed still expect inflation to reach 2 percent by 2016 roughly matching central bankers forecasts Other measures however have slipped Prices of inflation protected bonds show inflation expectations near three year lows and a survey by the University of Michigan showed consumer expectations hit the lowest level since 1992 Furthermore economists surveyed by the Philadelphia Fed now see inflation averaging below 2 percent at least until 2017 whereas only three months ago they expected the Fed to hit its target by the first quarter of 2015
William Dudley the influential New York Fed president hinted at the possible response to a further cooling in prices saying last month the central bank could run the economy hot keeping rates low longer than what growth and jobs data would have suggested Reporting by Jonathan Spicer and Ann Saphir Editing by Tomasz Janowski |
MS | Moody s Downgrades Japan s Sovereign Debt Rating | By Moody s Investors Service on Monday downgraded Japan s sovereign debt rating by one notch to A1 citing rising uncertainty over the country s ability to hit its debt reduction goal
The announcement briefly sent the yen to a seven year low against the dollar and pushed 10 year Japanese government bond JGB futures down by 10 ticks
The U S rating agency said the outlook was stable
The downgrade came less than two weeks before Japanese Prime Minister Shinzo Abe seeks re election at a snap poll where his stimulus policies and a decision to delay a second sales tax hike will be among the key campaign issues
The jury is out over whether Abe s strategy will revive the economy and restore the country s tattered finances
This is particularly bad for Abe because the opposition can attack him for this before the election said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley Securities
There are concerns the Bank of Japan s quantitative easing and Japan s high household assets have made the government complacent on fiscal policy
Moody s said that while Abe s decision to delay next year s scheduled tax hike could support the economy in the short term it had made it more challenging for Japan to achieve its target of balancing its budget by 2020
Japan s deficits and debt remain very high and fiscal consolidation will become increasingly difficult to achieve as time passes given rising government spending particularly for social programs associated with a rapidly ageing population the rating agency said
Hours before Moody s announcement Abe had stressed in a televised public debate that Japan remained committed to fiscal reform and that the Bank of Japan s ultra loose policy was not aimed at monetizing public debt
But Moody s warned that the BOJ s efforts to achieve its 2 percent inflation target through aggressive money printing may eventually push up bond yields and raise government borrowing costs
Rising interest rates would increase expenditure and offset gains from revenue buoyancy it said adding that there was also uncertainty about how quickly Abe s structural reform efforts would bear fruit |
JPM | U S services data suggests upward revision to second quarter GDP | WASHINGTON Reuters The U S economy probably grew faster than reported in the second quarter with data on Thursday suggesting stronger consumer spending than previously estimated The quarterly services survey or QSS from the Commerce Department implied consumer spending increased more briskly than the 3 3 percent annualized rate reported last week in its second estimate of gross domestic product The QSS report added to data on construction spending and factory orders in suggesting that second quarter GDP growth could be revised higher from its 3 0 percent rate when the government publishes its third estimate later this month Considering the construction factory orders and QSS data JPMorgan NYSE JPM is forecasting that GDP growth for the quarter would be raised to a 3 4 percent rate
We believe that the QSS points to an upward revision to the estimate of real consumption growth said economist Daniel Silver of JPMorgan in New York |
JPM | Germany s Merck hires JP Morgan to advise on consumer health review | FRANKFURT Reuters Merck KGaA DE MRCG has hired investment bank JP Morgan N JPM as a financial adviser to evaluate strategic options for its consumer health business a spokesman for the German company said on Friday People familiar with the matter told Reuters that boutique bank Guggenheim Partners has also been mandated to help with the review which was announced this week The Merck spokesman declined to comment on Guggenheim Partners involvement while Guggenheim did not immediately respond to a request for comment Family controlled Merck said on Tuesday it was considering selling its consumer healthcare business which has sales of about 1 billion a year to help fund more research into prescription drugs |
C | Slowdown in orders hiring curbs U S services sector growth | By Lucia Mutikani WASHINGTON Reuters U S services industry activity cooled in October amid a slowdown in new orders and hiring suggesting a moderation in economic growth early in the fourth quarter Other data on Thursday showed planned job cuts by U S based employers dropped 31 percent to a five month low last month That underscored the labor market s healthy fundamentals though more Americans filed for unemployment benefits last week The mixed reports came a day after the Federal Reserve offered a fairly upbeat assessment of the economy and signaled it could raise interest rates next month While the services report was weak it is not nearly weak enough to disrupt Fed plans to hike in December It is consistent with a softer pace of economic growth said Andrew Hollenhorst an economist at Citigroup NYSE C in New York The Institute for Supply Management ISM said its non manufacturing index fell 2 3 percentage points to a reading of 54 8 percent in October A reading above 50 indicates expansion in the services sector which accounts for more than two thirds of the economy It said respondents comments remained mostly positive about business conditions and the overall economy but added that several had highlighted uncertainty about the impact of the Nov 8 U S presidential election Services industries reported a slowdown in new orders and employment as well as demand for exports The new orders sub index dropped 2 3 percentage points to 57 7 while a measure of services sector employment decreased 4 1 percentage points to 53 1 A sub index for export orders fell 1 0 percentage point last month Thirteen services industries including information professional retail and finance reported growth in October The five industries reporting contraction included education public administration and arts entertainment and recreation The economy grew at a 2 9 percent pace in the third quarter after expanding at a 1 4 percent rate in the April June period Separately the Labor Department said on Thursday that initial claims for state unemployment benefits increased 7 000 to a seasonally adjusted 265 000 for the week ended Oct 29 the highest level since early August It was still the 87th straight week that claims remained below 300 000 a threshold associated with a healthy labor market That is the longest stretch since 1970 when the labor market was much smaller U S jobless claims remain supportive of labor market improvement said Michael Gapen chief economist at Barclays LON BARC in New York The Fed on Wednesday held interest rates steady but said its monetary policy setting committee judges that the case for an increase in the federal funds rate has continued to strengthen The U S central bank is widely expected to increase its overnight benchmark interest rate in December but the decision could depend on the outcome of next week s election The tightening of the race between Democratic candidate Hillary Clinton and her Republican rival Donald Trump has rattled financial markets The Fed raised borrowing costs last December for the first time in nearly a decade U S financial markets were little moved by the data with traders focused on the race for the White House The dollar stabilized from multi week lows against a basket of major currencies after a poll showed Clinton holding on to a narrow lead over Trump U S stocks were a bit weaker while prices for longer dated U S government bonds fell LAYOFFS DECLINE Last week s claims report has no bearing on October s employment report which is scheduled for release on Friday as it falls outside the survey period According to a Reuters survey of economists nonfarm payrolls likely increased by 175 000 last month after rising by 151 000 in September The unemployment rate is seen slipping one tenth of a percentage point to 4 9 percent Expectations of an upbeat October employment report were supported by a report on Thursday from global outplacement consultancy Challenger Gray Christmas showing employers announced 30 740 job cuts last month down from 44 324 in September Job cuts in October were concentrated in the computer industry where employers announced 4 792 layoffs Most of the computer job cuts came from HP Inc which laid off another 4 000 workers last month That was in addition to the 30 000 job cuts the company announced in 2015 In another report the Labor Department said nonfarm productivity which measures hourly output per worker rose at a 3 1 percent annual rate the fastest pace in two years The increase ended three straight quarters of decline Despite the rise the trend in productivity remains weak A fifth report from the Commerce Department showed new orders for manufactured goods increased for a third consecutive month in September Unfilled orders at factories however fell for a fourth straight month
Manufacturing which accounts for about 12 percent of the economy has been hurt by a strong dollar and weak global demand Production has also been undermined by the collapse in oil drilling activity in the wake of the plunge in oil prices |
C | FHFA could against boost multifamily lending cap Citi | With a 26 gain in multifamily originations in Q3 Fannie Mae and Freddie Mac volumes currently at 27B are in danger of hitting the 36 5B cap for the year The FHFA has already lifted the cap twice in 2016 and could decide to boost it again suggests the team at Citigroup NYSE C Of possible interest to Walker Dunlop WD 1 4 Ladder Capital LADR 1 7 iStar Financial STAR 0 9 HFF HF 1 4 |
C | OneMain plunges on earnings miss big cut in guidance | Alongside its Q3 report the company last night slashed its guidance for net receivables growth this year to 5 from 10 15 previously for 2017 net receivables growth is now seen at 5 10 vs 10 15 previously As for EPS 2016 is now being guided to 3 60 3 70 from 4 20 4 70 2017 is cut to 3 75 4 from 5 60 6 10 Speaking on the earnings call CEO Jay Levine notes an increase in the amount of credit available to sub 660 FICO borrowers and the company is going to begin proceeding more cautiously Also assisting in the guidance cut is a decline in productivity amid the Springleaf integration Levine and team expect this to pass The sell side is bailing with Citigroup NYSE C Deutsche Bank DE DBKGn and BAML among those downgrading OMF 35 premarketOneMain Financial Earnings CenterEarnings call presentation slides |
JPM | Silver Price Fixing Conspiracy Theorists Lose Battle Continue War | Despite the legal arguments presented by dozens of appellants and their attorneys the U S Second Circuit Court of Appeals ruled that silver price manipulation theorists had legally failed to show that J P Morgan Chase Co NYSE JPM had manipulated the silver market
In a summation issued Thursday Circuit Judges Robert A Katsmann Richard C Wesley and Denny Chin upheld the decision of Federal Court Judge Robert P Patterson Jr who ruled in January 2013 that while the appellants complaint contained many conclusory allegations it simply failed to provide the specific factual allegations needed to substantiate their claim
The class action lawsuit was originally filed by 44 plaintiffs who said they lost money because JPMorgan Chase Company reportedly conspired and agreed to manipulate the prices of Comex silver futures and options contracts
The plaintiffs had claimed that the alleged silver price manipulation occurred on June 26 2007 and between March 17 2008 and October 27 2010 The suit claims that by August 15 2009 JPMorgan held 24 34 of the open interest in Comex silver futures short contracts
Reuters reported that 43 complaints were filed by investors in 2010 and 2011 which accused banks of making millions in illegal profits through silver price fixing After the lawsuit was consolidated JPMorgan was named as the main defendant
The Gold Anti Trust Action Committee has asserted for years that the Federal Reserve and banks are colluding to keep gold and silver prices artificially low
The Commodity Futures Trading Commission began investigating allegations of silver price fixing in 2008 but subsequently found in September 2013 that there was no basis for action by the agency
Nevertheless in their summation filed Thursday the 2nd Circuit panel found that the plaintiffs assertions related to JPMorgan s market power and uneconomic conduct were insufficient to plausibly allege interest or causation
Plaintiffs suggest that JPMorgan s large short position in silver futures incentivized JPMorgan to depress prices But this incentive could just as easily be imputed to any company with a large market presence in any commodity market said the justices
Plaintiffs failed to plausibly allege even a tacit agreement to manipulate prices the justices found Rather plaintiffs argued that its allegations of large volume uneconomic trades in a compressed period and price signaling plausibly alleged concerted action by JPMorgan and unidentified floor brokers
Again this conclusory allegation did not identify any concerted actions among the defendants Moreover these allegations were insufficient to plead a claim that defendants unreasonably acted to restrain trade the justices ruled |
JPM | Why JPM Will Beat Estimates | J P Morgan Chase Co NYSE JPM is set to report FQ1 2014 earnings before the market opens on Friday April 11th JPMorgan Chase is the largest bank in the United States This quarter Wall Street is expecting JPM s earnings to fall 11 compared to FQ1 last year while revenue is also expected to decrease by 2 3 Banks make the big bucks when the economy grows and businesses and individuals take on loans to fund expansion but this quarter investors have displayed a squeamish risk appetite The caution may be the result of the Fed s decision to taper and increasing concerns over the growth rate of the Chinese economy as well as smaller emerging markets Additionally JPM continues to pay multibillion dollar legal settlements including a 1 7B settlement from January for ignoring warning signs over Madoff s Ponzi scheme Here s what investors are expecting from JPM on Friday
The information below is derived from data submitted to the Estimize com platform by a set of Buy Side and Independent analyst contributors
The current Wall Street consensus expectation is for JPMorgan Chase to report 1 41 EPS and 24 553B revenue while the current Estimize com consensus from 36 Buy Side and Independent contributing analysts is 1 43 EPS and 24 579B in revenue This quarter the buy side as represented by the Estimize com community is expecting JPMorgan Chase to beat the Wall Street consensus on EPS and revenue
Over the past 6 quarters the consensus from Estimize com has been more accurate than Wall Street in forecasting JPM s EPS and revenue 5 and 3 times respectively By tapping into a wider range of contributors including hedge fund analysts asset managers independent research shops students and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69 5 of the time but more importantly it does a better job of representing the market s actual expectations It has been confirmed by Deutsche Bank Quant Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market In this case we are seeing a smaller differential betweenthe two groups expectations
The distribution of estimates published by analysts on the Estimize com platform range from 1 30 to 1 55 EPS and from 23 396B to 25 200B in revenues This quarter we re seeing a wide distribution of estimates on JPMorgan Chase
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already A wider distribution of estimates signaling less agreement in the market which could meangreater volatility post earnings
Over the past 4 months the Wall Street EPS consensus fell from 1 49 to 1 41 while the Estimize consensus dropped from 1 46 to 1 43 Meanwhile the Wall Street revenue consensus declined from 24 862B to 24 553B while the Estimize forecast sank from 24 956B to 24 579B Timeliness is correlated with accuracy and downward analyst revenue revisions at the end of the quarter are often a bearish indicator
The analyst with the highest estimate confidence rating this quarter is BradHewitt91 who projects 1 44 EPS and 24 450B in revenue BradHewitt91 is ranked 13th overall among over 4 000 contributing analysts Over the past year BradHewitt91 has been more accurate than Wall Street in forecasting EPS and revenue 52 and 49 of the time respectively throughout 662 estimates Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy In this case BradHewitt91 is expecting JPMorgan Chase to beat the Estimize consensus on EPS but come up slightly short of the community s expectations on revenue
This quarter economic growth has been sluggish and estimates for JPMorgan Chase have accordingly been taken down considerably With that being said contributing analysts on the Estimize com platform expect JPMorgan Chase to outperform the mark set by Street s on both EPS and revenue by a small margin
Get access to estimates for JPMorgan Chase published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize com Register for free to create your own estimates and see how you stack up to Wall Street |
C | Bloomberg Citi reaps 300M derivative profit | So much for the Volcker Rule Citigroup NYSE C s U S dollar interest rate swaps desk pulled down about 300M this year serving clients making bets on the direction of short term rates according to a Bloomberg story This report follows another from last week in which one trader earned more than 100M buying junk debt at the lows early this year Part of Dodd Frank financial reforms the Volcker Rule was supposed to eliminate or at least limit banks from making these sorts of bets and turn trading desks into little more than facilitators of client trades In the case of Goldman word is the trader was a buyer as clients were eager to sell amid the early market jitters this year He later found other buyers at higher prices Citi declined to comment on its desk s gains though surely some of those profits simply came from volume amid a good deal of rate volatility this year |
C | Dollar surges against Swedish crown on Riksbank gains against yen | By Sam Forgione NEW YORK Reuters The U S dollar hit its highest in more than seven and a half years against the Swedish crown after dovish comments from Sweden s central bank and hit a three month high against the yen on expectations of a December Federal Reserve rate hike Sweden s Riksbank said the chances of another interest rate cut had increased and it was ready to expand its quantitative easing program further The Riksbank has already slashed rates to negative 0 5 percent and is on track to buy 40 percent of the stock of outstanding government bonds by year end The dollar was last up 1 81 percent against the Swedish crown at 9 0689 crowns after gaining 2 percent earlier and touching 9 0890 crowns its highest level since early March 2009 You sort of expect the central bank to say something like policy is easy just the way we like it said Steven Englander managing director and global head of G10 FX strategy at Citigroup NYSE C in New York To take a step further and endorse further weakness conveys to the market that you re supremely dovish The dollar hit a three month high against the yen of 105 34 yen and was last up 0 75 percent against the Japanese currency at 105 24 yen Analysts said a rise in U S Treasury yields on expectations that the Federal Reserve will increase interest rates in December were behind the move U S yields climbed to roughly five month peaks during the session The euro was down 0 06 percent against the dollar at 1 0900 surrendering a 0 3 percent gain that took the currency to a session high of 1 0942 in morning U S trading The euro has fallen about 3 percent this month against the greenback putting it on track for its worst month in nearly a year The dollar also gained against sterling which was last down 0 64 percent against the greenback at 1 2167 People are looking for the Fed to raise rates obviously in December and maybe more rate hikes in 2017 said David Gilmore partner at FX Analytics in Essex Connecticut The market seems comfortable owning dollars and selling euro rallies Traders last saw a more than 78 percent chance that the Fed would hike rates in December up slightly from Wednesday s probability according to data from CME Group s FedWatch program
The dollar index DXY which measures the greenback against a basket of six major currencies was last up 0 25 percent at 98 875 |
C | Exclusive Deutsche Bank among bidders for HSH Nordbank s debt portfolio | By Jonathan Saul and Andreas Kr ner LONDON FRANKFURT Reuters Deutsche Bank DE DBKGn is among more than 20 bidders in talks to potentially buy a 3 2 billion euro 3 5 billion loan portfolio from state owned rival HSH Nordbank HSH UL as Germany s biggest lender tries to do deals despite its troubles sources told Reuters HSH and Deutsche declined to comment Four finance industry sources with knowledge of the situation said on Friday Deutsche Bank was looking at the portfolio Two of the sources said it included at least 500 million euros of non performing loans related to HSH s shipping finance business It could be an asset play for Deutsche where they pick up the debt and sell it on subsequently one of the sources who declined to be identified said This whole process is still at an early stage Deutsche Bank chief John Cryan pledged to redouble restructuring efforts on Thursday warning the bank faces tough times as it finalizes talks with U S justice authorities over a 14 billion fine which has rocked confidence in the lender While it would be difficult for Deutsche to keep such loans on its books in the long term as that would require the struggling bank to set aside scarce capital such a purchase could be attractive if the loans were quickly sold on at a profit Deutsche may ultimately restrict any purchase to a small part of the billions on offer or pull out But throwing its hat in the ring shows it wants to remain active in the market The sources said banks Credit Suisse S CSGN and Citigroup N C together with asset managers Apollo Global Management N APO KKR N KKR and Oaktree Capital Group N OAK were also among the more than 20 bidders for the HSH portfolio which are expected to submit their first offers shortly Credit Suisse Citi Oaktree and KKR declined to comment while Apollo did not immediately respond The HSH portfolio also includes around 2 billion euros of loans related to real estate assets in Britain Germany and other European countries as well as aviation and energy debt two finance industry sources said HSH turned to its state owners after risky assets turned sour in 2008 In March the European Commission approved a bailout which includes a plan to hive off a total of 8 2 billion euros in bad loans 5 billion of which have been transferred to the state owners while the lender must sell up to 3 2 billion itself HSH had offered 4 billion euros of loans in total and is looking to sell 3 2 billion euros out of that SHIPPING TROUBLES Many segments of the global shipping sector are struggling with their worst ever market conditions caused by a glut of ships and slowing global trade which have battered earnings and led to the collapse of South Korean container line Hanjin in August German lenders among the biggest backers of shipowners over the past 20 years are estimated to be behind up to a quarter of the world s 400 billion of outstanding shipping loans HSH which is among Germany s biggest lenders to shipping has struggled due to the sector turmoil The bank said in August its total shipping finance business was 17 4 billion euros Rival German bank NordLB said in August it was selling a 1 5 billion portfolio of shipping loans to a unit of KKR and a sovereign wealth fund Two of the sources said Deutsche could look to potentially pick up further shipping loans from HSH beyond the portfolio The two sources added Deutsche had recently been buying and selling secondary shipping debt for a profit These types of transactions typically involve smaller parcels of loans of around 100 million each There was not much going on in the secondary market for ships in the first half of the year But now there is very much movement a shipping industry source said Some private equity investors invested too early in shipping loans and burned their fingers But there are other investors that are now shuffling their feet They believe that the shipping market has reached the bottom
In July sources told Reuters that Deutsche was looking to sell at least 1 billion of shipping loans in its own portfolio |
C | U S Treasury s Lew urges UK and EU to ensure smooth Brexit | LONDON Reuters U S Treasury Secretary Jack Lew said Britain and the European Union need to ensure their economies remain highly integrated when Britain leaves the bloc after he met financial industry representatives in London on Monday The Secretary reiterated that a transparent smooth and cooperative process that results in a highly integrated economic relationship is in the best interests of Europe the United States and the global economy a spokeswoman for Lew said Secretary Lew added that the United States remains committed to maintaining its Special Relationship with the UK and its strong partnership with the EU
Lew met senior executives from Barclays L BARC Standard Chartered L STAN the London Stock Exchange L LSE Citigroup N C J P Morgan N JPM and a trade body in London He is scheduled to speak publicly in Oxford later on Monday |
C | Facebook users check in to support North Dakota pipeline protests | By Timothy Mclaughlin and Amy Tennery Reuters Thousands of supporters of a Native American tribe and environmental activists fighting construction of an oil pipeline in North Dakota turned to social media on Monday in a bid to confuse police who they believe are using it to track the protesters More than 4 600 people used Facebook s location tagging feature to check in on Monday afternoon at the Standing Rock Indian Reservation near the site of the 3 8 billion Dakota Access pipeline vastly boosting the numbers actually there The local sheriff s department denied it is using social media to keep tabs on demonstrators and said the online actions by the protesters supporters were unnecessary The Morton County Sheriff s Department is not and does not follow Facebook NASDAQ FB check ins for the protest camp or any location This claim rumor is absolutely false Donnell Preskey a spokeswoman for the department said in an email The Standing Rock Sioux Tribe and other opponents say the pipeline threatens sacred sites and local water supplies Supporters say it would be safer and more cost effective than transporting oil by road or rail The 1 172 mile 1 885 km pipeline is being built by a group of companies led by Energy Transfer Partners LP The vast majority of new check ins at the site in rural southwestern North Dakota appear to have been made remotely Ironically using social media from the protest camp is hard due to poor cellphone reception To get a signal people walk up a small mound that has been dubbed Facebook Hill Variations on the search term check in at Standing Rock were among the most popular searches on Facebook on Monday afternoon with more than 10 000 people talking about them Mekasi Camp Horinek a protest leader from Bold Oklahoma an environmental advocacy group said he did not know who started the online movement but he welcomed it It is a lot of people showing their support for Standing Rock Horinek said on Monday by telephone from North Dakota They can t be with us here physically but they are with us in spirit and prayer Horinek was among the 142 protesters arrested by police last week at an encampment set up on private land
There were also demonstrations at banks linked to the pipeline s financing on Monday Twelve people were arrested in San Francisco for demonstrating in the Citigroup NYSE C Center according to protest organizers and demonstrators occupied the lobby of the Wells Fargo NYSE WFC Center in Salt Lake City |
C | This Big U S Bank Eyes Citical Resistance | Citigroup NYSE C doesn t have much to brag about from a long term perspective as it remains 80 off its high back in 2006 Yet Citi can brag about the gains it achieved from its 2009 lows it s up several hundred percent
Below looks at Citi over the past 24 years which is why I think a critically important resistance test is in play
A few months ago Citi faced a dual resistance test at 1 where enough buyers came forward and a breakout took place Citi rallied nearly 20 in short order following the breakout at 1
The rally over the past few months has Citi facing another resistance test at 2 which comes into play at 77 If it can find enough buyers and strength to take out this key resistance it could attract a good deal of buyers as the price has waterfalled between 150 and 77 Is a reversal of this waterfall pattern about to take place What Citi does at current levels will be highly important for it months from now
If Citi can find enough buyers and strength to take out this key resistance zone it could attract a good deal of buyers Is Citi s waterfall pattern about to revers What Citi does at iits current levels will be highly important for months to come |
C | Markets Move to New Highs | Global Commentary
Asian markets were mostly higher on Wednesday extending a rally that has seen benchmark indices across the region gaining for the past month Japan s Nikkei reached its highest level in 21 years as investors there remain upbeat ahead of the Oct 22 snap elections The Nikkei is now up 7 over the past month Australia s market did well with gains led by the big four banks and shares of oil companies responding to the overnight surge in the price of crude
European markets got some relief on Wednesday after the Catalan president said he was putting independence plans for the region on hold and would instead enter into talks with Madrid While the fate of Catalonia is still uncertain the current shelving of independence plans help restore investor confidence across the region to some extent London s market was slightly lower as investors there are cautiously awaiting the latest round of Brexit negotiations to end
U S markets crept higher throughout the session and ahead of the release of the September Federal Reserve meeting minutes When released the minutes had little impact on equities giving them possibly a slight boost as the tone of the meeting minutes was somewhat less hawkish than investors were expecting That boost solidified the gains for the day as all three of the major U S benchmark indices closed once again at record levels
FOREX
EUR USD
The pair gained for the fourth session in a row Wednesday following news that Catalonia would be delaying any announcement of independence while opening up discussions with Madrid The pair is now closing in on the 1 1900 level as trader confidence in the shared currency returns although any renewed political uncertainties from Spain or Germany for that matter could send the pair rapidly lower
USD CAD
The strength in the crude market has combined with broad based USD weakness to send this pair lower over the past two sessions with the pair breaking below the 1 2500 level today We should see muted trade in the pair early Thursday as traders will be looking ahead to the U S crude inventory report Once that report is released expect some volatility unless it comes in pretty much in line with expectations
Cryptocurrencies
The cryptocurrencies are continuing to inch their way higher on Wednesday but there haven t been many strong moves Late in the day Bitcoin and Litecoin are slightly lower but holding well above support levels while Ripple and Ethereum are making gains although Ethereum is struggling to remain above the 300 level
Commodities
Metals
Precious metals ended Wednesday s session lower just ahead of the release of the Federal Reserve meeting minutes There was a brief rally in the electronic session following the release of the minutes but the market soon dropped back to closing levels as traders found little new information in the September meeting minutes The drop saw silver snap a four session winning streak while gold broke its own three session rally
Oil
Crude added onto solid gains made in the previous session after OPEC forecast rising demand for crude in the coming year while the U S Energy Information Administration raised its price target for crude for the remainder of this year as well as for 2018 It also lifted its production forecast for 2018 but markets shrugged off that piece of news
Indices
Nasdaq
The technology heavy index outperformed on Wednesday as technology was one of the best performing sectors of the day following the release of the latest Fed meeting minutes The less hawkish than expected tone was beneficial for technology shares The healthcare sector which is also well represented on the Nasdaq also saw modest gains for the day helping lift the index further The Nasdaq has now gained 22 in 2017 making it the best performing of the major U S indices
IBEX 35
While most markets in Europe were little changed on Wednesday the IBEX rallied higher by 1 3 in response to news that Catalan officials were shelving independence plans for the time being President Carles Puigdemont said he is interested in talks with Madrid which helped calm investors as it takes the political atmosphere in Spain nearly back to normal While there could be more volatility as talks progress we should see the market returning to normal with bank shares the largest beneficiaries
Stocks
Citigroup NYSE C
Citigroup was one of nine banks that the International Monetary Fund said will struggle to remain profitable in the coming year and was the only one based in the U S to make the undesirable list The IMF cited the current weak capital buffers of the company to withstand future regulatory requirements as well as a lack of capital to create those buffers in the next several years Citi was already hit hard by regulatory requirements following the 2007 2008 financial crisis but the IMF feels it will fare no better now if a crisis were to bring about a new regulatory environment Shares of Citi were flat on Wednesday following the report |
JPM | Is It Time To Buy Gold Now | Now Is the Time to Buy Gold
Gold has been in a downturn for more than two years now resulting in the lowest investor sentiment in many years Hardcore goldbugs find no explanation in the big picture financial numbers of government deficits and money creation which should be supportive to gold I have an explanation for why gold has been down and why that is about to reverse itself I m convinced that now is the best time to invest in gold again
Gold Is the Alternative to Non Convertible Paper Money
If you ve been a Casey reader for any length of time you know why gold is a good long term investment central banks are expanding paper money to accommodate the deficits of profligate governments but they can t print gold Since the beginning of the credit crisis the world s central banks have invented 10 trillion worth of new currencies They are buying up government debt to drive interest rates down to keep countries afloat The best they can do is buy time however because creating even more debt does not solve a credit crisis
Asia Is Accumulating Gold for Good Reason
Since 2010 China has been buying gold and not buying US Treasuries China s plan seems to be to acquire a total of 6 000 tonnes of gold to put its holdings on a par with developed countries and to elevate the international appeal of the renminbi
In 2013 China imported over 1 000 tonnes of gold through Hong Kong alone and it s likely that as much gold came through other sources For example last year the UK shipped 1 400 tonnes of gold to Swiss refiners to recast London bars into forms appropriate for the Asian market
China mines around 430 tonnes of gold per year so the combination could be 2 430 tonnes of gold snatched up by China in 2013 or 85 of world output
India was expected to import 900 tonnes of gold in 2013 but it may have fallen short because the Indian government has been taxing and restricting imports in a foolish attempt to support its weakening currency Smugglers are having a field day with the hundred dollar per ounce premiums
Other central banks around the world are estimated to have bought at least 300 tonnes last year and investors are buying bullion coins and jewelry in record numbers Where is all that gold coming from
COMEX and GLD ETF Inventories Are Down from the Demand
The COMEX futures market warehouses dropped 4 million ounces over 100 tonnes in 2013 The COMEX uses two classes of inventories the narrower is called registered and is available for delivery on the exchange There are other inventories that are not available for trading but are called eligible I don t think it s as easy to get holders of eligible gold to allow for its conversion to registered to meet delivery as the name implies Yes that might occur but only with a big jump in the price
The chart below shows the record low supply of registered COMEX gold
Meanwhile SPDR Gold Shares GLD the largest gold ETF lost over 800 tonnes of gold to redemptions At the same time central banks have provided gold through leasing programs but figures are not made public
Why Has Gold Fallen 700 Since 2011
In our distorted world of debt ridden governments and demand from Asia gold should continue rising What s going on
The gold price quoted all day long comes from the futures exchanges These exchanges provide leverage so modest amounts can be used to make big profits Big players can move markets and the biggest player by far is JPMorgan JPM
For the first 11 months of 2013 JPM and its customers delivered 60 of all gold to the COMEX futures market exchange that surely is a dominant position that could affect the market By supplying so much gold they are able to keep the price lower than it would otherwise be
A key question is why a big bank would take positions that could drive gold lower Answer Banks gain by borrowing at zero rates But the Federal Reserve can only continue its large quantitative easing programs that bring rates to zero if gold is not soaring which would indicate weakness in the dollar and the need to tighten monetary policy Voil we have a motive Also suppressing the price of gold supports the dollar as a reserve currency
The chart below shows the month by month number of contracts that were either provided to the exchange or taken from the exchange by JPM For a single firm the numbers are large but the effect across all gold markets is greater because so many gold transactions follow the price set in the paper futures market
What jumps out from the chart above is the fact that while JPM had been selling gold into the futures market for most of the year it made a major shift in December absorbing 96 of all gold delivered
That is a radical shift and I believe an indicator that JPM s policy has shifted In my opinion their deliveries of gold were suppressing the price during 2013 but now their policy has shifted in a way that will support gold going forward
This leaves a vital question unanswered Why Has the motivation to suppress the price of gold gone away Not likely and we may never know the full truth of what is happening but I suspect the main reason for the shift is that they have done their damage The 740 drop from top to bottom a 39 decline has shaken confidence in gold as a financial safe haven among many investors especially those new to precious metals At the same time continuing to lean on gold at this point could become very costly JPM delivered 3 billion about 2 million ounces of gold into the market up to December in 2013 and may not have ready sources of gold to keep that up It is dangerous to put on big short positions unless you have gold or some future gold deliveries as a hedge
By now everyone knows of the shortages in the gold market JPM has to be as aware of that as the rest of us It just isn t safe for them to continue to lean on the market Being aware it looks like they are taking the bet that gold will rebound so they could do well on the other side of the trade
Another confirmation of the shift by big banks comes from data provided by the US Commodity Futures Trading Commission CFTC that shows the net positions of the four biggest US banks in the futures market There has been a dramatic change from being short the market to now being long
Crisis Brewing in the Gold Market
Germany claims to hold 3 390 6 tonnes of gold about half of which is held by foreign central banks Over a year ago they announced a plan to repatriate 674 tonnes of gold from France and the United States The US said it would comply but told the German government that it would have to wait seven years for all the gold to be delivered The news out last week was that after a year Germany had only obtained 37 tonnes of its gold and only five of them were from the US That is a trivial amount only 160 000 ounces
So why can t Germany get its gold Explanations of having to melt down existing gold and recast it just don t make sense The most logical conclusion and the one I ve come to is that the United States simply doesn t have the gold it says it has neither Germany s nor its own
Of course the US government isn t going to admit that there s a problem but I say there is
More evidence JPMorgan s COMEX warehouse contained 3 0 million ounces of gold in 2012 but that had dropped to 0 5 million ounces by mid 2013 Its registered inventories are a razor thin 87 000 ounces These kinds of swings are indicative of shortages and instability
Further JPMorgan sold its gold vault in New York City located next to the Federal Reserve s vault to the Chinese The banking giant also just announced the sale of its commodities trading business although it may not have sold the precious metals part of that business Perhaps they were concerned about new regulations of banks with deposit insurance from the government
In another relevant development Deutsche Bank recently surprised the gold community by quitting its position on the committee that sets the London a m and p m fixings This came a few weeks after a German regulatory body called BaFin started investigating how these prices were set BaFin also gave an indication that the process appeared worse than the LIBOR fixing scandal which resulted in billions in fines
Putting Gold Inventories and Traders Together
The futures market looks fragile to me The basic problem is that there are many more transactions that could put a claim on gold than there is gold registered for delivery in the COMEX warehouses
The chart below gives a dramatic picture by simply dividing the open interest of all futures contracts by the registered inventories The black line at the bottom shows the big jump in the ratio as the registered inventories declined There are 107 times more open interest positions than there is registered gold
The futures markets operate on the expectation that only a few big traders will demand delivery JPMorgan has shown that it is in a position to demand almost all 96 of the gold for delivery They are big enough that they could cause a collapse of the market if they were to force delivery of more than is available They know better than to do so though and I would guess that they will just manage to try to gain back what gold they have been delivering over the last several years That should support the price of gold
Gold Will Rise and It s on Sale Now
Now is the time to stake your claim in gold In the long term we know that paper money will become worthless in the short term the biggest seller has just shifted its actions to becoming a buyer That makes this a good time to accumulate gold and gold mining stocks before a major shift upward in price |
JPM | Better Markets v DOJ In Re 13 Billion JPM Fine A Question Of Trust | 13 billion is a lot of money even by Wall Street standards
But is the 13 billion fine imposed on JP Morgan by the Department of Justice an appropriate penalty for the array of transgressions involved In order to answer that question one needs to rely on the inputs reviewed and the process utilized by the Department of Justice which meted out this justice
The inability to undertake just such a review is the crux of the a nonprofit nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets
Better Markets filed a lawsuit in U S District Court for the District of Columbia challenging the Justice Department s authority to unilaterally enter into the unprecedented and historic 13 billion agreement with JP Morgan Chase which was the largest settlement with a single entity in the nation s history by more than 300 The November 2013 agreement gave JP Morgan Chase with no judicial review or approval blanket civil immunity for years of alleged pervasive egregious and knowing fraudulent and illegal conduct that contributed to the 2008 financial crash and the worst economy since the Great Depression
The Wall Street bailouts were bad enough but now taxpayers are being forced to accept a secretive backroom deal that may well have been another sweetheart deal The Justice Department cannot act as prosecutor jury and judge and extract 13 billion in exchange for blanket civil immunity to the largest richest most politically connected bank on Wall Street The executive branch does not have this unilateral power because it violates the constitutional requirement of checks and balances said Dennis Kelleher President and CEO of Better Markets an independent nonprofit organization that promotes the public interest in the financial markets
Adding insult to injury the Department of Justice did all this in an agreement that appears to have been written more to conceal than reveal For example it is using the large dollar amount to blind everyone to the reality that they have disclosed no meaningful facts about what JP Morgan Chase did who did it who it hurt how much they profited and how much their clients customers and others lost The American people deserve and the law requires an independent judicial review to determine whether the settlement is fair and whether it can withstand scrutiny in the light of day Mr Kelleher said
What is the key question underlying this lawsuit
Very simply do we the American public trust the Department of Justice here While we can rehash a whole slew of bad practices and backdoor bailouts our justice system relies upon the premise that our public officials will truly act in the public trust and uphold the rule of law in doing so
The fact that this question of trust is not immediately dismissed is a strong commentary on the state of things in our nation today
So I ask you who read this post do you trust the DOJ in the administration of this justice meted out upon JP Morgan |
JPM | 3 Top Ranked ETFs From The Hottest Sectors | Better than expected jobs report for February has raised hopes that the economy is beginning to thaw Most analysts now believe that weak economic data for the past couple of months was mainly the result of unusually cold weather conditions If they are correct the economy might pick up momentum as the spring arrives Improving economy is one of the main reasons to believe that the five year old bull market still has legs Further even though the Fed may continue with gradual withdrawal of its QE program the monetary policy is still very accommodative With earnings near all time high US companies have been returning record amounts of cash to investors via dividends and buybacks Fourth quarter earnings have been a mixed bag but at the same time investors are clearly rewarding stocks and sectors that have been witnessing positive earnings momentum One easy way to identify sectors with improving earnings prospects is to look at Zacks Industry ranks which are based on earnings estimates revisions And a good way to invest in these sectors is to look at ETFs that have earned top Zacks ranks based on their potential to outperform their peers Financial Select Sector SPDR Fund XLF Financial sector s performance has been in line with the market this year Mixed earnings and flattening yield curve weighed on the sector But long term rates may start creeping up with improving economy Further housing market may pick up momentum after spring Those developments will be positive for banks The Fed is set to release the stress test results for 30 large banks later this month It is widely expected that many of these banks will get their capital plans approved and will be able to increase dividends and buybacks Looking at industries within the broader financial sector insurance ranked 3 out of 62 M industries investment managers 6 and banks thrifts 7 are witnessing strong positive estimates revisions in the past few weeks resulting in their top industry ranks as of now XLF is the largest and most popular ETFs in the financials space This product has 18 5 billion in assets under management and trades in heavy volume of more than 40 million shares a day The ETF charges 16 bps in fees per year from investors and is the second cheapest choice among financial ETFs The product currently holds about 83 securities in its basket with Wells Fargo JP Morgan Chase and Berkshire Hathaway being the top holdings In terms of industry exposure the product has highest exposure to banks at 38 while insurance capital markets REITs and diversified financial services also account for double digit allocation The ETF has a Zacks ETF Rank of 1 or Strong Buy SPDR S P Aerospace Defense ETF XAR Despite budget related worries this small sector has been doing very well for the past many months thanks mainly due to strong momentum in the commercial aviation market Aerospace Defense is currently 5 out of 62 on the Zacks M industry list Fourth quarter earnings were excellent for the Aerospace sector with an 88 9 earnings beat ratio 88 9 revenue beat ratio and 20 0 earnings growth Launched in September 2011 this product tracks S P Aerospace and Defense Select Industry index which is a modified equal weight index This product has attracted AUM of 52 6 million so far It holds 36 securities with weighted average market cap of 21 7 billion It charges 35 basis points in expenses and has a decent dividend yield of 1 2 currently Being modified equal weighted the fund is pretty well diversified with the top holding accounting for just 4 6 of total assets It has returned almost 60 in the past one year XAR is a Zacks Rank 1 Strong Buy ETF First Trust NASDAQ Clean Energy Green Energy Index QCLN Alternative energy is one of the hottest industries in the energy sector thanks mainly to concerns about carbon emission climate change and other environmental issues QCLN is based on the NASDAQ Clean Edge Green Energy Index Launched in 2007 the fund now has 194 8 million The industry is currently ranked 4 out of 62 on the Zacks M industry list QCLN holds 42 securities in its basket and is top heavy with top 10 holdings accounting for more than 60 of assets Current investor darling Tesla Motors is the top holding with more than 12 of the asset base The fund has delivered scorching returns of almost 95 in the last one year QCLN is a Zacks Rank 1 Strong Buy ETF |
JPM | Investment Firm Smashes Record Notches 99 92 Win Rate | Prepare to be stupefied
Over the course of 1 238 trading days from January 1 2009 to December 31 2013 Virtu Financial had one day in which it lost money One
Let that sink in for a moment 1 237 days of profits and only one day of losses
And we thought J P Morgan s JPM stretch of 365 days of trading without a loss was impressive
I assure you this isn t the stuff of Bernie Madoff It s not a statistical anomaly It s the stuff of high frequency trading HFT And it s totally legit
Today I want to share two ways you can get a piece of the action So let s get to it
Believe the Hype
On Monday New York City based Virtu Financial filed IPO plans with the SEC to raise up to 100 million Although no date has been set yet it plans to list on the Nasdaq under the ticker VIRT
And it s in the IPO prospectus where we find this mind blowing chart showing the company s daily net trading income
You ll note there was only one day during 2012 when the firm lost money Every other day Virtu pocketed anywhere from 500 000 to upwards of 5 million in profit
Such a hefty daily haul explains the 624 million in trading income the company reported last year as well as the founder s 114 million NYC mansion
So how does the company do it
Per the S 1 We stand ready at any time to buy or sell a broad range of securities and we generate revenue by buying and selling large volumes of securities and other financial instruments and earning small bid ask spreads
To be clear the company doesn t speculate Instead its strategies are designed to lock in returns through precise and nearly instantaneous hedging
It simply provides liquidity scalping pennies on billions of market orders which clearly add up over time
Here s the most shocking revelation in the S 1 If our risk management system detects a trading strategy generating revenues outside of our preset limits it will freeze or lockdown that strategy and alert risk management personnel and management
In other words if the company is making too much money in a particular market it shuts down trading just to be safe Don t we all wish we had that problem
If You Can t Beat Em
Virtu s runaway success reveals something we ve known for a long time Markets aren t even close to being efficient If they were Virtu couldn t survive let alone thrive
Despite what you ve been told to the contrary even the most liquid and widely traded securities aren t efficient
Case in point On March 3 the bid ask spread on the SPDR S P 500 ETF SPY became inverted for 500 milliseconds according to Cristian Zarcu of TradeDynamiX
That means the bid price was above the ask price for half a second Not by a little bit either At one point the spread reached as high as 0 09 184 24 versus 184 15
In a world where HFTs like Virtu can trade inefficiencies down to the millisecond this represented a free lunch
And if this is going on in an ETF that sees the heaviest trading rest assured it s going on elsewhere in the market too
So how can we compete against the can t lose profit machines that are HFTs We have two options
We can either concede defeat and invest right alongside them by buying into Virtu s IPO Yes I ll let you know when the stock begins trading
Or we can go where HFTs can t micro caps
As my friend and fellow micro cap specialist Ian Cassel points out they represent the last inefficient market cap class where individual investors like us hold a distinct advantage
How so Well Wall Street analysts routinely ignore micro caps In fact over 40 of companies with market caps of less than 300 million have no analyst coverage That allows us to uncover meaningful information first before it s reflected in share prices
At the same time daily trading volume in micro caps is way too infrequent for HFTs to even bother
Bottom line Although we can t duplicate the exact trading successes of companies like Virtu we can generate more than enough profits in micro caps to make it worthwhile |
MS | Shake Shack IPO Aiming For 1 Billion Valuation Report | By Rumblings about Shake Shack s proposed initial public offering are getting louder up and down Wall Street The burger chain s privately held parent Union Square Hospitality Group LLC reportedly seeking a 1 billion valuation for the 10 year old unit as a publicly traded company
Last month people familiar with the matter told Reuters that Union Square Hospitality chose JPMorgan Chase Co NYSE JPM and Morgan Stanley NYSE MS to lead Shake Shack s proposed IPO And this month people familiar with the matter told Bloomberg News that Union Square Hospitality was preparing for an IPO that could value the unit as high as 1 billion which would be about 50 times its estimated earnings of 20 million next year
This equity market valuation appears to be around the middle of the range of several other casual dining chains that went public during the past year or so as measured by their forward price to earnings ratios at Yahoo Finance Zoe s Kitchen Inc NYSE ZOES 302 67 El Pollo Loco Holdings Inc NASDAQ LOCO 60 40 Potbelly Corp NASDAQ PBPB 48 48 and Papa Murphy s Holdings Inc NASDAQ FRSH 16 83
Shake Shack s U S sales were about 62 3 million last year according to restaurant researcher Technomic Inc estimates cited by Bloomberg News
Union Square Hospitality CEO Danny Meyer launched Shake Shack in his company s headquarters city of New York in 2004 The unit now also has more than 50 locations in Florida Pennsylvania New Jersey and the District of Columbia as well as in Europe and the Middle East Its proposed IPO could be carried out by the end of this year Reuters reported
The private equity firm Leonard Green Partners LP agreed to acquire a 39 5 percent interest in Union Square Hospitality in 2012 for an undisclosed amount Reuters said
Shake Shack JPMorgan and Morgan Stanley all declined to comment on any IPO plans while a Leonard Green representative did not immediately reply to messages seeking comment Bloomberg News said |
MS | Morgan Stanley to pay 95 million in U S mortgage debt settlement | By Nate Raymond NEW YORK Reuters Morgan Stanley N MS has agreed to pay 95 million to resolve a lawsuit accusing the Wall Street bank of misleading investors in mortgage backed securities in the run up to the 2008 financial crisis
The settlement disclosed in court papers filed Monday in New York federal court follows years of litigation by investors over allegedly false and misleading statements over the soured securities
The deal stemmed from a lawsuit pursued by the Public Employees Retirement System of Mississippi MissPERS and the West Virginia Investment Management Board
The plaintiffs accused Morgan Stanley of violating U S securities law in packaging and selling mortgage backed securities in 13 offerings in 2006 and 16 offerings in 2007
In the years since the litigation began in 2008 the plaintiffs were dealt a series of setbacks by U S District Judge Laura Taylor Swain who dismissed various claims due to standing and timeliness
After a ruling in May that dismissed claims brought by some of the plaintiffs Morgan Stanley said MissPERS had become the lone named plaintiff to have purchased securities in the only remaining offering at issue in the case
A motion to grant class certification status allowing the investors to sue as a group was pending when the parties first informed the court in July of a deal Financial terms were not disclosed until Monday
Representatives for Morgan Stanley did not respond to a request for comment David Stickney a lawyer for the plaintiffs at Bernstein Litowitz Berger Grossmann declined comment
In court papers lawyers for the plaintiffs said they expected investors would on average receive a distribution of 2 63 per 1 000 in original face value offered
Lawyers for the plaintiffs said they would also seek approval of a fee award of 17 percent of the settlement or 16 2 million plus up to 2 million in expense reimbursements
The settlement must be approved by U S District Judge Katherine Forrest who took over the case in May
The case is In re Morgan Stanley Mortgage Pass Through Certificates Litigation U S District Court Southern District of New York No 09 02137
Reporting by Nate Raymond in New York Editing by Ken Wills |
MS | China s Tianhe denies overstating profits cites investor support | By Pete Sweeney and Stephen Aldred SHANGHAI HONG KONG Reuters Tianhe Chemicals has denied allegations that it made false statements in its initial public offering prospectus and said key investor Morgan Stanley Private Equity Asia MSPEA has given it full support
A report by Anonymous Analytics which describes itself as a faction of the hacker group Anonymous accused the Chinese chemicals company of conducting one of the largest stock market frauds ever conceived based on analyses of different company reports tax statements market analysis and visits to customers mentioned in Tianhe filings
It also accused Tianhe of giving its auditor Deloitte forged documentation prior to its IPO in Hong Kong in June an allegation Tianhe denied in a statement on Wednesday
Deloitte declined to comment when contacted by Reuters referring Reuters to Tianhe s statement
Tianhe s share price fell 5 percent in just a few hours on Sept 2 after the Anonymous report was published Tianhe management requested a trading halt while Goldman Sachs and UBS suspended their ratings on the stock
The cost of borrowing shortable shares in Tianhe which had a market cap of just under 8 billion before the trading halt has risen since the freeze indicating the report has gained some market traction
Tianhe said it unequivocally denies and vigorously refutes the groundless allegations in the report but added that trading in its shares will remain suspended while it addresses queries from the Hong Kong stock exchange
Resumption of trading of the shares may only take place when all relevant information has been provided to the stock exchange and properly disclosed
It also said that its e mail system had been hacked
As a result there is an imminent risk of leakage of such communications which may result in further market rumours
Tianhe said the Anonymous report contained falsified information and a forged signature of the company s chairman
Anonymous Analytics rejected Tianhe s report in an e mailed response to questions from Reuters
Despite having over a week to prepare the main response the company is left with are false accusations of forgery This further increases our confidence that the end is near for Tianhe
Anonymous said it had no knowledge of any hacking of Tianhe s e mail
STAND RESOLUTELY
Tianhe s statement quoted Homer Sun chief investment officer and head of China for MSPEA and a non executive director at Tianhe saying that MSPEA supports Tianhe
We stand resolutely behind Tianhe s world class management team the statement quoted Sun as saying MSPEA confirmed the authenticity of Sun s comments but declined to comment further
MSPEA has put more into Tianhe than any other single equity investment in Asia investing around 300 million in the Liaoning based chemicals manufacturer in 2012 while Morgan Stanley s investment banking division sponsored its IPO
Tianhe s rebuttal also suggested that major investors would buttress Tianhe s share price in case of shorting pressure
The controlling shareholders of the company would also consider conducting on market purchases of the shares in the event of disorderly market trading of the shares
That support in the context of a wider stock market rally in Hong Kong could squeeze many short sellers regardless of the accuracy of the allegations
MSPEA declined comment on whether it would support the stock but it has previously acted to back an investment when the company came under short seller attack
In 2011 at the height of a short selling frenzy targeting U S listed China companies MSPEA invested 50 million in fertilizer company Yongye International which had been accused of fraud by short sellers
Yongye s stock subsequently soared around 40 percent in one day It then fell back but the accusations faded In July this year MSPEA was part of a consortium that bought out the company
Tianhe s rebuttal was a detailed line by line refutation of Anonymous Analytics 67 page report dealing in complex issues involving taxation different accounting standards and the market for Tianhe s flagship anti mar product
Reuters was unable to independently verify or disprove any of the allegations Due diligence experts who spoke to Reuters were divided on how to interpret the significance of Anonymous s allegations
A source with knowledge of the matter previously told Reuters that MSPEA spent over 2 million conducting due diligence on Tianhe before investing
Additional reporting by Vikram Subhedar in LONDON Editing by Raju Gopalakrishnan |
MS | Rosneft may back out of Morgan Stanley oil unit deal sources | By Dmitry Zhdannikov LONDON Reuters Rosneft MM ROSN Russia s biggest crude oil producer may back out of a deal to buy Morgan Stanley N MS s oil trading unit because Western sanctions make it virtually impossible to finance day to day operations three sources close to the state controlled company said The people said the chances of the deal going through range from possible to highly unlikely A spokesman for Rosneft said that the work over the deal is still ongoing The business in question trades actual barrels of oil instead of just contracts linked to the price of crude Morgan Stanley is under U S pressure to sell the unit because regulators regard physical oil trading as too risky for a major bank to own because unpredictable events like oil tanker leaks could expose it to billions of dollars in liability A spokesman for Morgan Stanley declined to comment Ruth Porat the bank s chief financial officer said in July she expected the deal to close later this year Rosneft declined official comment Rosneft agreed to buy the unit in December Since then the United States and the European Union have imposed wide ranging sanctions on Russia s energy and military sectors to punish Moscow for its incursion into Ukraine Rosneft s chief Igor Sechin a close ally of Russian President Vladimir Putin has been on the U S sanctions list since April Rosneft itself was added to the list in July Rosneft has enough cash to buy the Morgan Stanley unit which sources said carries a price tag of between 300 million to 400 million But to operate day to day the business requires billions of dollars of bank lines of credit funding that is difficult to secure given the sanctions Reuters could not learn the precise size of these credit lines but trading houses that compete with Morgan Stanley such as Vitol VITOLV UL Mercuria and Trafigura TRAFGF UL each have 30 billion to 40 billion worth of credit lines with dozens of banks This deal just cannot go through It is not an issue of finding 300 million to buy the business Rosneft has the money But it won t be able to operate it one Russian based source with direct knowledge of the matter said One remaining obstacle for the deal is approval from the Committee on Foreign Investment in the United States a regulatory group that vets mergers and acquisitions that may affect U S security CFIUS has asked Rosneft and Morgan Stanley for more information about the deal without approving or rejecting it a step that lawyers said is not unusual for a transaction under review One Rosneft source said talks with CFIUS continued The U S bureaucracy has simply asked for more information We are still in the game Others were less sure A Western banking source who works with Rosneft said the company believes it could not do much with the assets of a U S regulated bank even if it was allowed to buy them because of sanctions BORROWING FROM CHINA In August Rosneft applied for a 42 billion loan from a state wealth fund to help it weather sanctions Last week a Russian deputy prime minister said the government is considering the applications For now Rosneft which generates 30 billion in cash flow a year is meeting its financing needs from internal resources It can also borrow from China which has made available billions of dollars of credit lines to Russia Morgan Stanley has been trying to sell its oil trading division for almost two years Previous attempts to sell to buyers in the Middle East and Asia failed due to price and operational differences according to market sources The failure to sell the unit may benefit the bank because revenue in commodity trading businesses has been rising this year as markets have gyrated Sources told Reuters in July that after more than a year of scaling back Morgan Stanley has started expanding its commodity division again with plans to hire traders sales staff and other professionals in the United States Reporting by Dmitry Zhdannikov in London additional reporting by Lauren LaCapra in New York editing by Dan Wilchins and John Pickering |
JPM | Trump is going to pitch his massive tax plan as unrigging the economy | President Donald Trump s fall push for the Republican tax reform effort kicks off Wednesday in Springfield Missouri And according to Ben White and Tara Palmeri at Politico Trump s message will paint the tax policy as a populist change aimed at unrigging the economy
The Trump administration has said for months that it will aim to bring down taxes for all while closing loopholes but Trump s speech is expected to have a decidedly populist tone
The speech crafted by Trump aide Stephen Miller will feature phrases like win again and promises to jump start the American economy Politico reported
The speech will reportedly be light on policy details That seems to be in part because there are few concrete details to present at this point
White House officials including Gary Cohn the National Economic Council director have said the administration is looking to the congressional committees in charge of taxes to hammer out a plan
In the next three or four weeks the tax bill will be written in the Ways and Means Committee and Congress is going to own the writing of legislation that is key Cohn told the Financial Times on Thursday
So while there have appeared to be some broad agreements between Trump administration and congressional leaders what ends up in legislation remains unclear
Opening the process to more than just the so called big six Cohn Treasury Secretary Steven Mnuchin Senate Majority Leader Mitch McConnell House Speaker Paul Ryan House Ways and Means Committee Chair Kevin Brady and Senate Finance Committee Chair Orrin Hatch also opens the negotiations to industries interested in protecting favorable deductions and the concerns of rank and file members
According to Bloomberg s Sahil Kapur major planks of the tax plan have not been nailed down
While selling the unfinished tax plan appears to be the next big push from Trump and the White House it is far from the top of the list for Congress to do list next month
Not only will the legislature have to deal with the relief efforts for Hurricane Harvey but it must also deal with the debt ceiling avoiding a government shutdown and a slew of agency reauthorizations before the end of September
Most experts doubt that Trump s aggressive timeline seeking to pass a tax plan this year is feasible
There will likely be months of committee hearings lobbying by affected groups and behind the scenes horse trading before final tax legislation emerges JPMorgan NYSE JPM economists Michael Feroli Jay Barry and Jesse Edgerton wrote in a note to clients on Tuesday
Our baseline forecast continues to pencil in a modest temporary deficit financed tax cut to be passed in 2Q2018 through the reconciliation process avoiding the need to attract 60 votes in the Senate |
JPM | China s wealth managers look to profit from risk and capital crackdowns | By Sumeet Chatterjee and Julie Zhu HONG KONG Reuters As regulatory crackdowns in China hit risky investment products and capital outflows the country s private banks are looking to profit as they target a bigger share of growing wealth in the world s second largest economy Wealth managers like Noah Holdings and units of China Merchants Bank and China International Capital CICC are casting wider nets to tap affluent clients who have so far remained outside mainstream private banking They are now targeting small cities where the wealthy have traditionally relied on shadow banking investment products that promise high returns but are illiquid and opaque according to bankers and consultants working for the wealth managers Beijing s clampdown since last year on sending capital outside the country was also opening up opportunities for domestic wealth managers in China they said China s onshore private wealth market has grown rapidly in the last few years This year it is set to reach 28 trillion nearly three times the country s gross domestic product in 2016 making it the second largest such market after the United States But only about 10 12 percent of China s high net worth individuals or those with more than 10 million yuan in investable assets are served by professional wealth managers which compares with roughly 20 percent in South Korea and 55 60 percent in the United States and Europe according to Noah That proportion is likely to rise as wealth managers promote their investment advice and products more widely and as awareness grows of how to diversify from bank deposits and property investments the bankers said The government is trying to clean up and trying to push the money into regulated channels with transparent investment schemes said Wu Bo head of CICC s wealth management business That plays to our advantage Wu whose firm manages about 100 billion worth of private individual wealth said the migration of money to wealth advisors represented an important business opportunity for firms like his Chinese wealth managers face little competition from bigger foreign rivals such as Credit Suisse SIX CSGN and JPMorgan NYSE JPM in the onshore market said an executive at a consultancy that works with wealth managers Regulatory restrictions and a less developed capital market have deterred some global banks from setting up a private banking presence in China Offshore businesses remain the preferred route for many international wealth management firms who want to tap into the millionaires spawned by China s booming technology sector and its surging stock market LOW PROFILE CLIENTS Noah is one of the local private banks who are now looking beyond cities like Beijing and Shanghai where rivals including HSBC and some fintech giants are expanding their footprints and offerings to serve wealthy clients Founded in 2003 Noah which has assets under management of 63 billion plans to add more people to win new business in smaller cities such as the industrial center of Shenyang in the northeast and the coastal city of Wenzhou We see a lot of entrepreneurs in the second and third tier cities who are low profile said Noah s president Kenny Lam referring to cities with populations of about 7 to 10 million Noah plans to increase its headcount of 1 200 by 5 10 percent a year for the next three to five years in order to tap those opportunities In places like Wenzhou Lam said When you see them you don t know them having hundreds of millions they will be in a t shirt and jeans and say Kenny can you teach me about private equity Each of China s 22 provinces have over 20 000 high net worth individuals with nine counting more than 50 000 each according to a study by the consulting firm Bain Co and China Merchants Bank released in June Regional wealth distribution is now becoming more balanced and a number of rich individuals in central and western China and regions associated with the Belt and Road infrastructure and trade initiative have increased significantly the report said The push into smaller cities however is also raising concerns about risk management checks and balances and how carefully wealth managers are conducting background checks on clients according to the consultants It is also fuelling demand for more compliance executives That I would say is the biggest risk or challenge for the Chinese wealth managers as much as their global peers said the consulting executive referring to the client due diligence process to ascertain sources of wealth The executive who declined to be named while discussing client matters said the due diligence process was particularly onerous in China The country has a more lax corporate governance culture and that sometimes made it difficult to ascertain even company ownership structures the executive said
The know your client process is very important in China and also very difficult as in many cases the real source of wealth is not disclosed the executive said |
JPM | Wells Fargo boosts estimate of fake accounts to 3 5M | Wells Fargo s NYSE WFC fake account scandal is worse than thought as the company reports 67 more unauthorized consumer and small business accounts than previously thought some 3 5M accounts vs previous estimates for 2 1M
That s due to an expanded third party analysis that found 1 4M new accounts potentially unauthorized
The company s original analysis looked at 93 5M current and former accounts opened in a 4 5 year time period from May 2011 through mid 2015 The expanded analysis looked at 165M retail banking accounts in an eight year period January 2009 to September 2016 and reached the new estimate of 3 5M potentially unauthorized accounts
The estimate for accounts that incurred fees and charges was raised to about 190 000 from a previous 130 000 Wells will offer 2 8M in additional refunds and credits on top of an original 3 3M
It also said it found 528 000 potentially unauthorized bill pay enrollments and will refund 910 000 in charges there
Premarket WFC 0 2
Now read |
JPM | Macron s labor reforms to boost Paris in post Brexit jobs race lobby | PARIS Reuters French President Emmanuel Macron s newly unveiled labor reform will boost Paris as a destination for banking jobs post Brexit by making its labor market more flexible than Germany s the head of lobbying group Paris Europlace said on Thursday Britain s decision to leave the European Union has opened up fierce competition among financial centers elsewhere in the bloc including Paris Frankfurt and Dublin to attract banks and other financial companies seeking to secure continued access to the single market once Britain leaves Some bankers have been skeptical that France could attract much of the UK financial industry with rigid labor rules and a frequently changing tax system seen as major deterrents But Macron s government unveiled less than four months after his election a reform which includes caps on payouts for dismissals adjudged unfair and greater freedom to hire and fire as well more flexibility to adapt working hours Mission accomplished Arnaud de Bresson the head of the group in charge of promoting Paris as a financial market center told Reuters in an interview All our international partners can now see that the French president keeps his promises in terms of ability to deliver and speed of execution which is a strong signal he said For decades governments of the left and right have tried to reform France s strict labor rules but have always diluted them in the face of street protests De Bresson said that despite the introduction of measures resisted by unions before Macron s strategy to hold months of talks with them over the summer had convinced most of them to hold off from calling for protests There was a spirit of consensus of dialogue even though there will certainly be some reactions That s new in France he said However the reforms come at a time when the 39 year old president has suffered a sharp drop in popularity ratings The hardline CGT union has called for demonstrations against the new law on Sept 12 but crucially for the government was not followed by France s two other main unions the CFDT and FO France now had nothing to envy Germany which implemented similar reforms in 2004 2005 in terms of labor flexibility De Bresson said Germany is a country with some advantages in terms of social dialogue but it also has red tape in terms of labor rules and dismissal procedures in that respect France is in a better situation today De Bresson said The labor reform comes after the French government also confirmed plans to gradually cut its corporate tax rate to 25 percent by 2022 Among the big international banks only HSBC L HSBA has so far said it would shift a large number of jobs to Paris with plans to move 1 000 posts if Britain opts for a hard Brexit Among French banks Societe Generale PA SOGN told Reuters it could move up to 400 investment banking jobs to Paris out of the 2 000 it currently has in London
JPMorgan Chase Co N JPM Chief Executive Jamie Dimon said last month in a visit to Paris that the new government had made enormous leeway |
C | Citi denies involvement in illegal money transfer on behalf of MTN | ABUJA Reuters Citigroup N C has denied being involved in any illegal foreign currency transfer on behalf of MTN Group J MTNJ according to a presentation the U S bank gave to the Nigerian parliament Nigeria is investigating whether South African telecoms company MTN unlawfully repatriated 13 92 billion from Nigeria between 2006 and 2016
We wish to state categorically that Citibank Nigeria Limited was at no time involved in any illegal foreign currency repatriation on behalf of MTNN MTN Nigeria or any other customer Citibank said in a presentation to parliament last week |
JPM | Housing Auto Retail Sales Is The Economy Starting To Free Fall | In the latest retail sales report for December auto sales were nailed down 1 8 The only reason overall retail sales from November to December showed a slight gain that November s number was revised lower Electronics fell off of a cliff The housing market is about to get crushed Feedback I m getting from my articles and blog posts on housing from housing market professionals all around the country tells me that the housing market hit a wall at the end of 2013 as I have been forecasting The consumer is dead on arrival I love the way last week s retail sales were blamed on the cold weather that hit the country the previous week I guess consumers were still thawing out and decided to not restock on everything last week even though it warmed up in most of the country The only thing frozen is the real wages and disposable income of the majority of Americans And what s left over after the monthly of cost of Obamacare is spent won t be enough to buy a new car or a new home The proliferation of sub prime quality Government subsidized auto loans made it a no brainer for Americans to go out and buy a new car last year just like no document ARM mortgages coerced the peak of the housing bubble But all that did was pull sales forward into 2013 and set up another debt default crisis The delinquency rate on sub prime auto loans now 28 of all auto loans started to move a lot higher toward the end of 2013 Even worse the Dodd Frank legislation that is supposed to protect America from Wall Street s monsters which it won t as the beasts have already had their battalions of lawyers figure out ways around it has imposed new mortgage rules which will make if more difficult for the average guy with no growth in real income to get a mortgage In additions the FHA implemented a reduction in the size of the standard mortgage it will guarantee in most markets significant reductions in some markets Wave good bye to the fabled housing recovery Despite the rhetoric coming from the Obama team and the endless stream of Fed officials who loudly broadcast that the economy is recovering the truth is that the system has been set up for an epic collapse I have suggested that there has not been real inflation adjusted growth since 2006 If you strip away the accounting fraud and non GAAP nonsense that the Government lets the big corporations get away with now real cash earnings from most companies has been flat to negative since 2006 This is especially true for the big banks Witness today s earnings report from JP Morgan in which J P Morgan Chase Co JPM s net income was largely comprised of non cash add backs and absurd accounting gimmicks If we did a true independently assessed audit of JPM s books I can guarantee you that the bank is insolvent The stock market appears to be unraveling When the downside momentum really grips the market it will be an incredible sight to behold The flip side is that gold and the mining stocks have quietly in the background established a bottom and a new uptrend What s happened over the last 2 1 2 years to the precious metals market will be reversed in equally as stunning of a move to the upside as we will see with the stock market to the downside |
JPM | Consumer Discretionary Sector Looking Wobbly | Per ThomsonReuter s This Week in Earnings the forward 4 quarter earnings estimate for the S P 500 fell 0 14 this past week to 120 60 from 120 74 The forward P E ratio is now 15 25 x the forward estimate The PEG on the S P 500 using the forward estimate is now 2 36 x with the average PEG since July 1 13 being 2 18 x The PEG has gravitated around the 2 x 2 25 x for some time The year over year growth rate of the forward estimate was 6 45 last week vs 6 56 last week The average y y growth rate since July 1 13 has been 6 89 The S P 500 has gyrated around the 12 31 13 closing level of 1 848 36 Friday s close on the S P 500 is was 1 838 70 There has been a lot of chatter about the 2 year Presidential Cycle which could portend a flat S P 500 until the fall of 14 There is always a theory circulating about why the market is doing this and that and there is always a historical pattern that can be applied to current markets the causality of the pattern is what usually remains in question but my own conclusion is that until the forward growth rate breaks above the high 7 low 8 growth rate the S P 500 could be range bound for a bit Another leg higher for the forward growth rate should be the logical foundation for another round of P E expansion for the S P 500 That is just one opinion The 2 year Presidential Cycle and it s historical pattern works too
Does the Earnings Data Tell Me Anything Actionable
Reading recording and tracking the S P 500 earnings data each week can be somewhat tedious The important element to all this analysis is that the data has to be telling me something useful in terms of potential trends and it must be worth acting upon to be useful to myself and readers Sometimes the weekly earnings recaps are just old news and I have to resist reaching conclusions that just aren t there
Here is how Q4 13 earnings growth estimates have changed for each sector of the S P 500 since Oct 1 13
Consumer Disc 7 4 14 2 decline of 680 bp s in sector growth expectations
Consumer Staples 4 2 6 9 decline of 270 bp s
Energy 10 4 1 5 decline of 890 bp s
Financials 23 0 25 2 decline of 220 bp s
HealthCare 6 8 20 decline of 220 bp s
Industrials 11 5 17 3 decline of 580 bp s
Materials 6 7 12 9 decline of 620 bp s
Technology 5 3 7 7 decline of 240 bp s
Telco 22 7 19 6 improvement of 310 bp s
Utilities 4 1 4 1 no change in expected growth
S P 500 7 11 decline of 400 bp s
Nothing is really abnormal about this except for this past week when we saw the overall expected growth estimate for the S P 500 fall from 7 3 last week to 7 this week Usually as the quarter s earnings start to get reported the year over year growth rate starts to improve Telecom is the only sector to show an improvement in expected growth since 10 1 13 Energy s y y earnings decline of 10 is the worst of all 10 sectors but 2014 might prove to be better than what we are seeing in Q4 13
How does full year 2014 S P 500 earnings growth look today
Here is the change in full year 2014 sector growth estimates from 10 1 13 to 1 17 14
Consumer Discretionary 13 2 18 7 decline of 550 bp s
Consumer Staples 9 9 10 8 decline of 90 bp s
Energy 12 3 10 7 improvement of 160 bp s
Financials 11 9 3 improvement of 170 bp s
HlthCare 8 3 9 6 decline of 130 bp s
Industrials 9 3 11 decline of 170 bp s
Materials 16 4 18 decline of 160 bp s
Technology 10 7 11 6 decline of 90 bp s
Telco 13 5 10 9 improvement of 260 bp s
Ute s 4 8 4 4 improvement of 40 bp s
S P 500 10 8 11 4 decline of 60 bp s
Despite Energy s Q4 13 10 decline y y for Q4 13 something is keeping the expected 2014 earnings growth rate not just elevated but improved by 1 6 over the next 12 months The reason Energy stocks outperform here is that they get no traction currently in the mainstream financial media and thanks to the price of gasoline they seem to have fallen out of favor You can t ignore that positive revision when viewing the pattern across the rest of the S P 500 In addition Energy s expected growth rate for 2014 is still higher than the S P 500 as a whole My question is which sectors are driving it and how do we take advantage of it Our only Energy long currently is Halliburton HAL Schlumberger SLB rose 1 8 on Friday 1 17 14 on 2 x average volume after their Q4 13 earnings report but forward estimates have been stable for the oil services giant Financials look solid for 2014 I don t think you ll see the same level of earnings growth close to 25 for 2013 after excluding JP Morgan Chase s JPM litigation charge in Q3 13 in 14 at 11 that we saw in 13 The overall growth rate looks to be cut in half given the data That means other sectors will pick up the slack in 2014 Long JPM Consumer Discretionary could be a problem child The charts look to be rolling over technical analysis and look at the Q4 13 and the full year 2014 estimate reductions for the sector Using the SPDR Consumer Discretionary Select Sector ETF XLY as a proxy Amazon AMZN and Comcast CMCSA are the top weightings at 7 with media companies comprising 4 of the top 10 holdings The Top 10 holdings have a weighting of 43 in the XLY with media comprising 19 of the Top 10 positions Consumer Discretionary has been a powerhouse for the last few years in terms of S P 500 leadership the XLY was up 41 in 2013 excluding the dividend and was one of the S P 500 leadership groups along with healthcare Per Bespoke 51 of Consumer Discretionary stocks are trading above their 50 day moving averages The sector could simply be working off an overbought condition too Consumer Discretionary has the highest sector P E within the S P 500 at 21 x earnings Long small position in AMZN and long Ford Motor Company F Starbucks Corporation SBUX etc all Consumer Discretionary components Consumer Discretionary comprises 12 of the S P 500 by market cap ranking about 5th of the 10 sectors by market cap weighting Conclusion Summary Change of leadership within the S P 500 usually occurs within various stages of the business cycle The downward earnings revisions particularly for full year 14 for Consumer Discretionary have my attention Consumer Discretionary and Basic Materials were expected to be the top ranked sectors for 2014 earnings growth but note the reduction in Basic Materials expected 14 earnings growth versus Consumer Discretionary Basic Material s relative earnings strength at least in terms of the degree of reduction in estimates is quite obvious and a positive for the sector Best Buy s BBY pre announcement was painful for Consumer Discretionary as was Target TGT Not long either The S P 500 remains overbought and hasn t had a decent correction since 2011 |
MS | Morgan Stanley Q2 adjusted EPS 0 60 beats expectations | Investing com Wall Street investment bank Morgan Stanley NYSE MS reported better than expected second quarter earnings ahead of Thursday s opening bell sending its shares higher in pre market trade
Morgan Stanley said adjusted earnings per share came in at 60 cents above expectations for 56 cents
For the current quarter income from continuing operations applicable was 94 cents per diluted share while income from continuing operations was 91 cents per diluted share
Results for the quarter included a net discrete tax benefit of 609 million or 31 cents per diluted share principally related to the re measurement of reserves and related interest
The bank s second quarter adjusted revenue totaled 8 6 billion beating expectations for revenue of 8 19 billion
Wealth Management net revenues were 3 7 billion and pre tax margin was 21 Investment Management reported net revenues of 692 million with assets under management or supervision of 396 billion
James P Gorman Chairman and Chief Executive Officer said Our quarterly results demonstrated solid performance despite a muted operating environment
Immediately after the earnings announcement Morgan Stanley NYSE MS shares rose 0 9 in trading prior to the opening bell
Meanwhile the outlook for U S equity markets was downbeat The Dow futures pointed to a loss of 0 4 at the open the S P 500 indicated a decline of 0 6 while the Nasdaq 100 signaled a drop of 0 65 |
MS | Morgan Stanley must pay 4 5 million to Banamex panel | By Suzanne Barlyn Reuters A unit of Morgan Stanley N MS must pay 4 5 million to Citigroup Inc s N C Banamex unit which alleged the firm had allowed funds in a family s trust account to be used to repay third party loans without its authorization according to a ruling on Friday
A Financial Industry Regulatory Authority FINRA arbitration panel found Morgan Stanley Co Inc liable for negligence in the case filed by Banamex in 2012 Banamex which served as trustee to a family s trust account had sought more than 5 2 million according to the ruling
We are disappointed in the arbitration panel s award a Morgan Stanley spokeswoman said in a statement The firm believes the evidence showed that the family s patriarch had pledged the trust accounts as collateral for loans that benefited the family and that the accounts were treated that way for the period at issue the spokeswoman said
The trust was set up in 2007 with proceeds from the sale of property that a group of adult siblings and their mother had inherited according to Jeff Erez a lawyer in Fort Lauderdale Florida who represented Banamex in the case
Banamex and the trust beneficiaries enlisted a broker at Morgan Stanley to manage their accounts that same year
The ruling does not disclose the broker s name
The trust accounts were held at a banking unit of Morgan Stanley Co and managed by the brokerage unit They were set up in a way that did not allow the assets to be used as guarantees to pay off third party loans taken by another family member s account Erez said
Banamex alleged that Morgan Stanley caused the trust accounts to guarantee payment of third party loans of a family member without Banamex s authorization Erez said
The FINRA arbitration panel as is customary did not explain the reasons for its decision
Reporting by Suzanne Barlyn in New York editing by Meredith Mazzilli and Matthew Lewis |
MS | Exclusive Shake Shack picks JPMorgan Morgan Stanley to lead IPO sources | By Olivia Oran
NEW YORK Reuters Shake Shack the fast food restaurant chain that has developed a cult following for its Shackburgers flat top hot dogs and eponymous shakes has selected JPMorgan Chase Co N JPM and Morgan Stanley N MS to lead a proposed initial public offering according to people familiar with the matter
The potential offering which could come as soon as this year according to the people would be the biggest public event for a company that started out of a hot dog kiosk in New York s Madison Square Park in 2004
While Shake Shack is expected to post earnings of around 20 million next year and the size of the IPO is likely to be small underwriting one of the biggest burger names in the United States is a plum assignment for investment banks JPMorgan and Morgan Stanley
Shake Shack s majority owner Union Square Hospitality Group LLC interviewed investment banks in recent weeks to appoint underwriters for the IPO Reuters first reported last week
Representatives for Shake Shack Union Square Hospitality JPMorgan and Morgan Stanley did not immediately respond to requests for comment
Shake Shack would likely be the most followed IPO out of a string of casual dining chains that have gone public this year They include El Pollo Loco Holdings Inc O LOCO Zoe s Kitchen Inc N ZOES and Papa Murphy s Holdings Inc O FRSH
Shake Shack is present in many U S states including New York New Jersey Connecticut Pennsylvania Florida and Massachusetts It has also expanded internationally in cities such as London Istanbul Moscow and Dubai
The company does not franchise and says it has no plans to do so in the future Shake Shack s chief executive is Randy Garutti a Cornell University graduate who worked his way up at Union Square Hospitality from general manager at its restaurants to lead Shake Shack
Union Square Hospitality was founded by restaurateur Danny Meyer in 1985 It also runs other popular New York eateries including Blue Smoke Gramercy Tavern and Union Square Cafe
Private equity firm Leonard Green Partners LP agreed to acquire a 39 5 percent stake Union Square Hospitality in 2012 for an undisclosed amount
Editing by Soyoung Kim and Chizu Nomiyama |
JPM | Liechtenstein s LGT Bank plays up princely ties to woo Asian clients | By Joshua Franklin and Angelika Gruber ZURICH Reuters Liechtenstein s LGT Bank owned by the mini state s ruling family hopes to stand out in Asia s crowded private banking market by touting the clan s own track record of preserving wealth LGT is trying to tap into Asia s emerging ranks of millionaires and billionaires a similar strategy to bigger rivals like UBS and Credit Suisse SIX CSGN But unlike LGT they don t have a prince as CEO In Asia I am asked very frequently how did your family manage to transfer the wealth over generations LGT Chief Executive Prince Max von und zu Liechtenstein told Reuters in an interview For Asia where the money tends to be new or more recently generated that is a big issue for them to get right Max is the second son of Crown Prince Hans Adam II whose family has ruled Liechtenstein a principality of just 38 000 people sandwiched between Switzerland and Austria since the country s formation in 1719 LGT signalled its intent to expand in emerging economies last year when it bought ABN Amro s private banking operations in Asia and the Middle East which came with 20 billion in assets Max left the door open for further acquisitions saying the bank will continue to scan opportunities In 2016 Asian Private Banker placed LGT 15th on its league table of biggest private banks in the region by assets with 29 1 billion Earnings posted on Tuesday showed LGT s overall assets under management for private and institutional clients swelled 19 percent year on year to 181 billion Swiss francs 189 71 billion thanks to the ABN acquisition and 9 6 billion in net new money Net profit rose 22 percent to 151 8 million francs PLENTY OF RISKS The Liechtenstein family s holdings include Austrian palaces and a winery and in 2011 Forbes dubbed them Europe s richest monarchs Swiss magazine Bilanz in 2016 pegged their net worth at 8 5 billion Swiss francs LGT is keen to play up its bloodline across the business and central to its offering is a private equity heavy portfolio that closely matches the investment strategy of the Liechtenstein family It is called the Princely Portfolio said Max a Harvard educated 48 year old who started out in banking as an investment analyst at JPMorgan NYSE JPM in New York Stable family ties can be a strong selling point in Asia where wealth managers sometimes display a Qing Dynasty scroll in their offices with an inscription meaning three generations under one roof five generations of prosperity With political tensions still high and sub zero interest rates in Europe Max is keeping a cautious outlook however At this point we are on a very promising track he said But as we have all learnt things can turn very quickly There are still plenty of risks around
1 0 9541 Swiss francs |
C | Scandal hit Wells Fargo s quarterly profit falls 3 7 percent | By Dan Freed and Nikhil Subba NEW YORK Reuters Wells Fargo NYSE WFC Co s profit dropped for the fourth straight quarter as it set aside funds for potential legal costs from a bogus account scandal that cost former Chief Executive and Chairman John Stumpf his job The bank still posted net income that topped analyst estimates helped in part by lower than expected loan loss provisions Wells Fargo which needs to reassure investors that it can keep its profit engine humming while changing its sales culture still reported a metric that tallies the number of accounts that employees in its retail banking unit were able to cross sell to customers Long the crux of Wells Fargo s strategy cross selling has been at the center of the scandal since regulators said the pressure to hit sales targets drove employees to create unauthorized accounts Stumpf under pressure from lawmakers and other critics stepped down on Wednesday after 34 years with the bank handing over the CEO role to Timothy Sloan who had been chief operating officer and the chairmanship to lead director Stephen Sanger I am deeply committed to restoring the trust of all of our stakeholders including our customers shareholders and community partners Sloan said in a statement on Friday Last month the bank agreed to pay a 185 million settlement over its staff opening as many as 2 million accounts without customers knowledge The misconduct carried out by low level branch staff to meet internal sales targets shattered the bank s folksy image and triggered a raft of federal and state investigations We know that it will take time and a lot of hard work to earn back our reputation but I am confident because of the incredible caliber of our team members Sloan said Friday s results mark Sloan s first major test since taking the helm less than 48 hours ago The scandal is a rare setback for Wells Fargo which emerged from the financial crisis relatively unscathed The bank said non interest expenses rose due in part to higher litigation accruals and salaries Wells Fargo whose shares rose 0 8 percent in premarket trading said its efficiency ratio which measures expenses as a percentage of revenue was 59 4 The bank had told investors in its latest quarterly filing on Aug 3 to expect the ratio to be in the high end of a targeted range of 55 to 59 percent throughout 2016 EARNINGS BEAT EXPECTATIONS Several analysts attributed the earnings beat to Wells Fargo setting aside significantly less money to cover problem loans than had been expected The provision for credit losses of 805 million compared to an estimate of 1 31 billion from Susquehanna Financial Group analyst Jack Micenko Revenue rose 2 percent to 22 33 billion in the third quarter ended Sept 30 while non interest income fell 0 4 percent to 10 37 billion Net income applicable to shareholders fell 3 7 percent to 5 24 billion or 1 03 per share from 5 44 billion or 1 05 per share a year earlier Analysts on average had expected the No 3 U S bank by assets to report earnings of 1 01 per share and revenue of 22 21 billion according to Thomson Reuters I B E S The cross sell ratio in Wells Fargo s retail banking unit was 6 25 compared to 6 27 in the second quarter and 6 33 a year ago Cross sell refers to the number of products sold to the same customer or household Stock analysts have cut profit forecasts for the bank for quarters to come as a result of the firestorm In addition to the settlement San Francisco based Wells Fargo has already fired about 5 300 employees in connection with the scandal Several big customers including California and Illinois have also suspended business relations with the bank The bank which is under pressure to cut costs amid a drawn out period of low interest rates said non interest expenses rose 7 percent to 13 27 billion Analysts at Keefe Bruyette Woods had estimated non interest expenses would be 12 82 billion The Federal Reserve which raised interest rates for the first time in nearly a decade in December has kept rates unchanged since but has indicated a possible hike this December Total loans rose 6 4 percent to 961 33 billion The bank set aside 805 million to cover potential loan losses up 14 5 percent from the third quarter of 2015 Wells the largest U S mortgage lender reported 70 billion in home loan originations up 27 3 percent from a year earlier and up 11 percent from the second quarter Mortgage banking revenue rose 4 9 percent to 1 67 billion accounting for about 16 percent of non interest income JPMorgan Chase Co NYSE JPM the biggest U S bank by assets earlier reported a 7 6 percent drop in quarterly profit after recording a tax expense compared with a rare tax benefit a year earlier Citigroup Inc NYSE C the fourth biggest U S bank by assets reported a 7 8 percent fall in quarterly profit
Up to Thursday s close of 44 75 Wells Fargo s shares had fallen about 10 percent since reports of the settlement emerged in early September |
C | U S stocks trade higher Dow up 100 points while waiting for Yellen | Investing com Wall Street traded higher after a string of data and slew of bank earnings with markets still looking ahead to a widely anticipated appearance by Federal Reserve Fed chief Janet Yellen
At 11 21AM ET 15 21GMT the Dow Jones gained 101 points or 0 57 the S P 500 rose 8 points or 0 36 and the tech heavy Nasdaq Composite traded up 30 points or 0 63
As investors on the Street opted to buy after a deluge of references on Friday market participants were still awaiting any possible clues from the Fed chair on the timing of the next rate hike
Yellen is scheduled to deliver a speech on Macroeconomic Research After the Crisis at the Federal Reserve Bank of Boston s Annual Research Conference on Friday at 1 30PM ET 17 30GMT according to the Federal Reserve s website the Boston Fed s agenda for the conference lists Yellen as giving a keynote address at 12 30PM ET
The speech comes after the minutes from the September 20 21 Fed meeting revealed that several voting members of the policy committee judged a rate hike would be warranted relatively soon if the U S economy continued to strengthen
While there are two more meetings scheduled this year on November 1 2 and December 13 14 several analysts have argued that the Fed would be unlikely to move next month with the policy decision set for release less than a week before the November 8 U S presidential elections
Fed fund futures currently price in the chance of a rate hike in November at just 7 2 according to Investing com s Fed Rate Monitor Tool while odds for a move in December stood at 64 8
That was a despite a firm reading on consumer spending Retail sales rose 0 6 in September bouncing back from a prior 0 2 decline Although the increase was in line with forecasts it still represents a firm reading bolstering hopes over the willingness to buy of the American consumer
Furthermore core sales which corresponds more closely with the consumer spending component of gross domestic product GDP also increased after a previous decline The 0 5 advance in September also beat analyst expectations for a 0 4 increase
The producer price index PPI for September also suggested that price pressures at factory gates were on the rise The data is relevant because it can be assumed that producers could pass price increases onto the consumer making the PPI a leading indicator of inflation and fueling speculation that the Fed will tighten monetary policy
Still not all the economic news stateside was positive as the University of Michigan s preliminary reading of consumer sentiment for October unexpectedly dropped to its lowest level since September 2015
On the company front JPMorgan NYSE JPM kicked off the third quarter reporting season for banks
Gains were still subdued in the world s largest bank as despite the beat on both the top and bottom line shares advanced only 0 2
Much was the same case for Citigroup NYSE C whose earnings topped consensus with shares only gaining a meager 0 6
Wells Fargo NYSE WFC was the day s loser after revenue rose less than expected Shares were down about 0 8
Meanwhile oil prices were trading lower on Friday as investors continued to weigh this week s surprise build in U S crude inventories against a bigger than expected decline in both gasoline and distillate stocks
Investors were also looking ahead to the latest round of Baker Hughes data Last week the oilfield services provider said the number of rigs drilling for oil in the U S rose by 3 to 428 marking the 14th increase in 15 weeks
Market participants fear that increases in U S production would only serve to bolster the global supply glut putting downward pressure on prices
U S crude futures fell 0 50 to 50 19 by 11 23AM ET 15 23GMT while Brent oil lost 0 56 to 51 74 |
C | Global stocks dollar rebound on Chinese U S data | By Herbert Lash NEW YORK Reuters Global stocks and the dollar rebounded on Friday from losses a day earlier buoyed by a surprising rise in Chinese producer prices and strong U S economic data that bolstered expectations the Federal Reserve would raise interest rates in December The dollar was on track for its largest weekly increase in more than three months with rebounding U S retail sales and a broad rise in producer prices last month indicating the economy regained momentum in the third quarter after a lackluster first half U S producer prices rose in September to record their biggest year on year rise since December 2014 while retail sales gained 0 6 percent after a 0 2 percent decline in August Observers are increasingly confident that December will finally bring the long awaited interest rate hike said Dennis de Jong managing director at UFX com in Limassol Cyprus The dollar index which tracks the greenback against a basket of six major currencies added 0 4 percent to 97 862 DXY and was up 1 3 percent for the week In China September producer prices unexpectedly rose for the first time in nearly five years and consumer inflation also beat expectations easing some concerns about the health of the world s second biggest economy Disappointing Chinese trade data on Thursday had rattled investors and pushed global equity markets to three month lows European shares tracked Asian markets higher and Wall Street jumped as better than expected results from JPMorgan and Citigroup lifted financial stocks Shares of JPMorgan N JPM the biggest U S bank by assets rose 0 77 percent after it beat forecasts for revenue and profit Citigroup N C rose 1 18 percent after earnings fell less than expected In Europe the pan regional FTSEurofirst 300 FTEU3 index rose 1 55 percent to 1 344 44 while MSCI s all country world index MIWD00000PUS of equity markets in 46 countries rose 0 77 percent The Dow Jones industrial average DJI rose 141 07 points or 0 78 percent to 18 240 01 The S P 500 SPX gained 14 08 points or 0 66 percent to 2 146 63 and the Nasdaq Composite IXIC added 37 96 points or 0 73 percent to 5 251 29 Oil slipped below 52 a barrel giving up earlier gains as abundant crude supplies outweighed tighter U S fuel inventories and plans by the Organization of the Petroleum Exporting Countries to cut output The fundamental backdrop is still bearish said Commerzbank DE CBKG analyst Carsten Fritsch Every increase is driven by speculation and optimism rather than tighter supplies he said Global benchmark Brent LCOc1 was down 23 cents at 51 80 a barrel U S crude CLc1 slide 8 cents to 50 36 a barrel The gain in Chinese producer prices helped lift U S Treasury yields with the benchmark 10 year note US10YT RR down 8 32 in price to yield 1 7659 percent Rising U S Treasury yields on the growing perception the U S Federal Reserve will raise interest rates in December pushed euro zone government bond yields higher The benchmark 10 year German bund rose 2 1 basis points to 0 056 percent
The dollar rose 0 63 percent to 104 31 yen while the euro fell 0 45 percent to 1 1006 |
C | Strong auto purchases lift U S retail sales inflation stirring | By Lucia Mutikani WASHINGTON Reuters U S retail sales rebounded in September amid a surge in motor vehicle purchases and rise in discretionary spending pointing to solid demand that reinforces expectations of an interest rate increase from the Federal Reserve in December Other data on Friday suggested a pickup in inflation with producer prices rising broadly last month to record their biggest year on year increase since December 2014 The reports were the latest indication that the economy regained momentum in the third quarter after a lackluster first half performance Today s data give the Fed a green light to raise interest rates by year end Retail numbers were solid and confirm that the economy is moving in what the Fed believes is an acceptable fashion said David Donabedian chief investment officer at Atlantic Trust Private Wealth Management in Baltimore The Commerce Department said retail sales increased 0 6 percent after declining 0 2 percent in August Sales were up 2 7 percent from a year ago Excluding automobiles gasoline building materials and food services retail sales edged up 0 1 percent last month reversing August s 0 1 percent drop These so called core retail sales correspond most closely with the consumer spending component of gross domestic product Though the small gain in core retail sales last month suggests a moderation in consumer spending from the second quarter s robust 4 3 percent annualized rate economists said they expected consumption grew at around a still solid 2 8 percent pace in the third quarter Overall the details of the report are more positive than what the modest print on core sales suggests said Brittany Baumann an economist at TD Securities in Toronto Together with healthy levels of consumer sentiment and continued improvement in labor market conditions today s report is enough to keep a December Fed rate hike firmly on the table Economists had forecast overall retail sales increasing 0 6 percent and core sales advancing 0 4 percent last month The dollar rose against a basket of currencies on the data while prices for U S government debt fell U S stocks were trading higher also boosted by better than expected quarterly profits from JPMorgan NYSE JPM Citigroup NYSE C and Wells Fargo NYSE WFC INFLATION RISING A second report from the University of Michigan showed consumer sentiment softened in early October amid uncertainty over the U S presidential election on Nov 8 with the campaign taking a more acrimonious tone It is likely that the uncertainty surrounding the presidential election had a negative impact especially among lower income consumers and without that added uncertainty the confidence measures may not have weakened the University of Michigan said in a statement Minutes of the Fed s Sept 20 21 policy meeting published on Wednesday showed several officials believed it would be appropriate to increase interest rates relatively soon if the economy continued to gain strength The U S central bank raised its benchmark overnight interest rate last December and has held it steady since largely because of concerns over low inflation But inflation is steadily rising In a third report the Labor Department said its producer price index for final demand increased 0 3 percent last month after being unchanged in August In the 12 months through September the PPI jumped 0 7 percent the biggest increase since December 2014 The PPI was flat in the 12 months through August A 0 7 percent increase in the cost of goods including energy accounted for more than three quarters of the rise in final demand prices Producer prices are gaining as some of the drag from the dollar s past surge starts to ease The dollar rally appears to have peaked early this year and oil prices having pushed off multi decade lows which economists expect could allow inflation to gradually rise toward the Fed s 2 percent target The retail sales report added to upbeat data on the labor market and manufacturing and services sector surveys that have suggested economic growth picked up in the third quarter Growth estimates for the third quarter are currently as high as a 2 6 percent rate The economy grew at a 1 4 percent pace in the second quarter September s retail sales were boosted by a 1 1 percent jump in auto sales There were also strong increases in sales at furniture and building material stores Online sales also rose cutting into sales at the traditional department stores which left receipts at clothing outlets flat
Sales at restaurants and bars advanced 0 8 percent the largest gain since February and receipts at sporting goods and hobby stores surged 1 4 percent pointing to strong discretionary spending |
C | Citi s e commerce digital tie ups boost Asia consumer revenues | HONG KONG Reuters Citigroup Inc s N C tie ups with e commerce companies in Asia such as ride hailing firm Grab and online retailer Lazada Group are boosting revenues at its consumer business in the region the boss of Citigroup Asia said Revenues at Citi s Asia consumer division rose 3 percent in the third quarter from a year ago helped by a 4 percent rise in credit card sales which was aided by partnerships with more digital technology focussed firms Asia CEO Francisco Aristeguieta said in an internal memo to staff on Tuesday seen by Reuters We now acquire one out of every four new cards online and over 46 percent of our credit card payments in China are now settled via digital partners he said in the memo A Citigroup spokesman in Hong Kong confirmed the content of the memo For Western banks digital banking is a cheaper and faster way to grow in Asia than traditional banking channels because they can offer loans fund management and payment services via mobile Internet Citigroup the fourth biggest U S bank by assets last week beat expectations for third quarter net profit
The U S bank last month added Grab and Lazada to its network of credit card partnerships which include Alipay the biggest online payments platform in China and Chinese messaging app WeChat |
JPM | 3 ETFs That Will Benefit From The Capital Shift Overseas | There s not much question that the U S stock market is in a traditional sense overvalued The S P 500 currently flashes a price to earnings P E ratio that is 20 higher than its historical average over a trailing 12 month period Similarly its price to sales P S ratio of 1 6 is conservatively speaking 25 greater than a more typical ratio of 1 2 The dwindling number of bearish prognosticators suggests that the easy money has already been made and that billionaires are already dumping shares For example Warren Buffett s holding company Berkshire Hathaway BRK A decreased its exposure to consumer companies by 21 John Paulson s hedge fund Paulson and Company significantly reduced its stake in J P Morgan Chase JPM while exiting its position in Family Dollar Stores Inc FDO altogether George Soros He bid farewell to many of the big financial companies like Goldman Sachs Group Inc GS and Citigroup Inc C Note Due in large part to the hangover from 2008 09 the financial sector still remains cheaper than a number of other sectors that make up the S P 500 Perhaps ironically many foreign and emerging market stock ETFs remain relatively cheap Whereas the S P 500 s P E jockeys around 18 6 the SPDR S P China ETF GXC has a P E near 9 9 and the iShares Emerging Markets Fund EEM has a multiple near 11 2 The discrepancies in valuations are what develop after one country s equity market dominates for three years At this point however one might anticipate that the valuation differences will eventually lead to some capital flowing out of U S equity ETFs and into foreign stock ETFs When will it begin It may be fair to assume that some of that activity will occur in 2014 particularly if foreign central banks find the need to further stimulate their respective economies The U S Federal Reserve while still stimulating in a massive capacity is still planning to wind down its unconventional program of creating dollars electronically and acquiring U S debt to suppress borrowing costs In other words a perception that foreign countries are still loosening monetary policy while the U S may be tightening and or maintaining its monetary stance could lead to a changing of the guard Here are 3 ETFs that may be direct beneficiaries of capital shifting abroad 1 iShares MSCI New Zealand ENZL Developed Asia Pacific funds often focus on Japan and Australia excluding significant contributions from smaller nations like New Zealand Yet HSBC Bank forecasts annualized economic growth of 3 4 in 2014 for the Kiwi crowd Not only is that the fastest pace in seven years for the island nation but the solid gross domestic product GDP means that New Zealand will not need to engage in any controversial forms of monetary gamesmanship It is true that the country s well being is often tied to the fortunes of Australia That said iShares Australia EWA is known for rising and falling alongside demand for global materials In contrast ENZL is diversified across a wider range of sectors including health care consumer discretionary and industrials Solid economic fundamentals are only one piece of the puzzle ENZL is also a probable beneficiary of the yen carry trade Currency traders worldwide sell yen to buy higher yielding currencies like the New Zealand dollar and or the Australian dollar ENZL should benefit from this practice ENZL also offers an enviable 4 annualized yield that is desirable in a rate environment that should be more stable in 2014 Keep in mind since the May June tapering swoon that crushed bonds and yield oriented investments last year ENZL has stayed above its 52 week lows 2 iShares MSCI Netherlands EWN It is true that Standard Poor s recently downgraded Dutch debt And losing one s triple AAA rating should be a big deal at least theoretically On the other hand Fitch and Moody s reaffirmed the heralded triple AAA ratings and the Dutch bond market has not skipped a beat Even better a rising number of folks believe that the Netherlands may have turned the proverbial corner by placing recessionary forces in the rear view mirror Economic concerns notwithstanding EWN largely focuses on non cyclical stalwarts like Unilever and Heineken with a 27 weighting to the consumer staples sector Furthermore EWN remains in a strong price uptrend with limited volatility over the previous 18 months 3 SPDR S P China GXC This particular basket of Chinese equities could qualify as a must own from both a technical and fundamental basis The Chinese economy grows at a clip that is the envy of the industrialized world and it does so without an unconventional quantitative easing QE package Corporations in GXC are trading at a collective P E below 10 In fact the current price of GXC is below the highs reached in April of 2011 nearly three years ago Have these companies grown their earnings since 4 2011 You bet What s more GXC is above its long term 200 day moving average You may need to be patient with China but its a country worthy of an allocation Disclosure Gary Gordon MS CFP is the president of Pacific Park Financial Inc a Registered Investment Adviser with the SEC Gary Gordon Pacific Park Financial Inc and or its clients may hold positions in the ETFs mutual funds and or any investment asset mentioned above The commentary does not constitute individualized investment advice The opinions offered herein are not personalized recommendations to buy sell or hold securities At times issuers of exchange traded products compensate Pacific Park Financial Inc or its subsidiaries for advertising at the ETF Expert web site ETF Expert content is created independently of any advertising relationships |
JPM | Daily Insight US Economic Growth Gets A Boost | Market Snapshot US economic growth was given an extra boost as the trade deficit gave its lowest reading in 4 years driven by America s domestic energy revolution As a result Morgan Stanley MS has raised its Q4 growth to 3 3 and J P Morgan Chase Co JPM claim this is more in line with 3 as opposed to 2 5 as previously thought USD CAD broke out to a record high today NZD is by far the strongest single currency this week and currently trading at record highs against CHF CAD and JPY BRENT Within bearish correction with potential down to 105 20 This trade may take a little while to play out but the bearish bias is assumed due to the speed and trajectory of the direct losses from 111 50 swing high We have also broken beneath the Monthly S1 pivot which has also acted as resistance along with the pivotal S R level of 107 80 As long as 107 80 holds as resistance then next target is the lower area of 106 50 with a suspected breakout down to 105 30 In the event we break above 107 80 then the preference is to wait for a pullback to this area and seek bullish positions with a possible target around 109 00 As Brent is traded in USD should the bearish bias play out then this would cause inflow to USD and help it appreciate in strength Therefor it is always adviseable to keep an eye on the commodity markets even if you trade Forex exculsively GOLD Potential 5 wave count projects target at 1220 Yesterday s analysis played out much better this time around The broken trendline held and we formed a Hanging Man Reversal bearish candle with high wick beneath the resistance level before reversing and hitting the initial 1228 target I am not one to usually use Elliot Waves as part of my day to day analysis but this potential 5 wave move down did jump out at me Additionally the Fibonacci extension of the 3rd wave does project a potential 5th wave ending around a support level so I decided to include it in today s analysis What I am not as clear on is if we have seen the end of wave iv If we have then we should see direct losses down to the 1220 area However we may have to also consider we are still within wave iv and for either a flat dotted line or expanded flat to occur before resumption of losses Due to the pivotal S R at 1233 I have excluded the possibility of the expanded flat as this would break above this level so my bias is for direct losses down to 1220 with the potential for a rally to 1233 before a resumption of losses XAU USD border 0 height 644 width 700 |
JPM | Here s What You Need To Know About Volume | How often do you hear a trader investor or the media talk about volume I would wager that you hear about this topic pretty often As you may know volume is the number of shares or contracts traded in an equity during a specific period of time While that definition might seem helpful it really doesn t tell us what we need to know about volume or how to use it properly In this article I will detail three helpful tips on how you can use volume to your advantage each and every trading day regardless of the time period that you are trading When stocks move higher or lower with heavier than normal volume it is a signal that the institutional money is involved in the equity Why would this be important It is important because the institutional money moves stocks and equities it is not the individual investor at home trading a 100 shares of stock that move markets Anytime you see a surge in volume it means the big money crowd is involved and that could mean further upside or downside is very likely in the near term Traders should always watch for high volume moves from the past The reason why traders and investors want to watch for high volume moves from the past is because that is generally an area where the institutional money big money crowd will support a stock should it decline into that area on lighter volume See the chart below for an example of this Volume is a leading indicator These days there are so many traders that rely on oscillators and algorithms for trading and investing Almost every oscillators and algorithm that I have seen is lagging the current price of an equity Have you ever wondered why a stock or commodity didn t move the way you expected it to move when a MACD or stochastic crossover has taken place It is because these are lagging instruments not leading Volume happens in real time and it always tells us what s happening as it is moving Understand volume and how to use it like the Pros In doing so you will give yourself an advantage over the masses who do not know how to read utilize volume properly The three tips above should help you get started Nick Santiagowww InTheMoneyStocks com |
JPM | Why JPM Is Going Higher Despite Missing The Street s Expectations | JP Morgan Chase JPM may have officially missed Wall Street s earnings consensus this morning but the report was better than the market ACTUALLY expected And the data suggests JPM stock price will drift upward relative to the broader market not down over the next three days Here s why The information below is derived from data submitted to the Estimize platform by a set of Buy Side and Independent analyst contributors Before the market opened this morning JP Morgan Chase reported 1 30 earnings per share while the Wall Street consensus was 1 34 A set of buy side and independent contributing analysts at Estimize were expecting 1 26 so JPM actually beat the consensus from investors Sell side estimates are plagued by a couple of biases which hinder accuracy One of which is a misalignment of incentives the primary motivation of a sell side analyst is NOT to be accurate it s job security This bias comes from a don t stray from the herd mentality As long as the sell side keeps their estimates in line with one another then no one can be singled out for poor performance and the result is a less accurate consensus that does not reflect what the market actually expects That s why Leigh Drogen launched Estimize By tapping into a wider range of contributors including hedge fund analysts asset managers independent research shops students and non professional investors Estimize has created a data set that is up to 69 5 more accurate than Wall Street but increased accuracy is just icing on the cake The real value of the Estimize data set comes from the fact that it better represents the market s expectations In order to to come up with the best possible forecast Estimize crowd sources data from over 3 400 contributors Confidence ratings for each user are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy This morning the Estimize consensus was only calling for 1 26 which JPM beat by 4c per share despite missing Wall Street s consensus Estimize has released a whitepaper which has been confirmed by an independent academic study from Rice University which shows that if you benchmark against the broader market a stock s post earnings drift over the 3 days after reporting earnings is more highly correlated to the Estimize consensus than to the Street s That means that over the next three days it s reasonable to expect JPM stock price to push higher not lower Get access to estimates for JPM follow the expectations for earnings season and register for free to make your own estimates to see how you stack up to Wall Street by heading over to Estimize now |
JPM | WFC And JPM Report Earnings Know These Levels | This morning the S P 500 Index e mini futures ES H4 are trading higher by 4 00 to 1819 00 per contract Traders and investors seem to be stepping back into the market after yesterday s sharp broad based decline Earlier today both JPMorgan Chase Co JPM and Wells Fargo Company WFC reported earnings These stocks could be in motion throughout the trading session |
MS | Fed Rejects Capital Plans Of 5 Banks | By The U S Federal Reserve on Wednesday approved the capital plans for 25 major banks but denied its approval to five others including that of Citigroup Inc NYSE C news reports said
The Fed did not allow Citigroup which was the largest American bank to have its capital plan rejected to reward its investors with higher dividends and stock buybacks worth 6 4 billion indicating that the bank is not ready to handle an economic crisis as part of its annual stress test which is conducted to measure a bank s ability to continue lending
Meanwhile HSBC North America RBS Citizens Financial and Santander Holdings USA were reportedly noted by the Fed to have qualitative shortfalls in their capital foundations while Zions Bancorp failed the stress tests because its basic capital ratio did not meet the minimum requirement
The Fed said that these banks are not permitted to implement their requested plans for increased capital distributions adding that they are required to resubmit their capital plans to the Federal Reserve following substantial remediation of the issues that led to the objections Agence France Presse reported
This is the second time in three years that Citigroup has failed to get an approval for its capital plan from the Fed
Needless to say we are deeply disappointed by the Fed s decision regarding the additional capital actions we requested Michael Corbat Citi s CEO said in a statement adding We will continue to work closely with the Fed to better understand their concerns so that we can bring our capital planning process in line with their expectations and meet their standards on a qualitative basis as well
Tom Jalics a portfolio manager at Key Private Bank told the Wall Street Journal The Fed wasn t happy with the process Citi put together to read their risk adding that It s a bit of a black eye for management which has done a good job of cleaning up the balance sheets
Other banks including J P Morgan Chase NYSE JPM Wells Fargo Co NYSE WFC and Morgan Stanley NYSE MS had reportedly announced increased dividends after receiving the Fed s approval
Both the firms and supervisors have more work to do as we continue to raise expectations for the quality of risk management in the nation s largest banks Daniel Tarullo a member of the Fed s Board of Governors reportedly said in a statement on Wednesday according to Reuters
The five banks can continue shareholder payouts at current levels but will be required to change their proposals and resubmit them again if they want to increase the payouts an option which Citigroup is reportedly considering
Citi needs to make this defeat into victory by improving the pace of restructuring said Mike Mayo an analyst at CLSA according to Reuters The bank s stock was down more than 6 percent in pre market trading on Thursday |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.