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MS | UPDATE 4 Swiss govt in talks on UBS stake as lock up ends | No decision yet to convert or sell state s notes in UBS
Government in talks on options for stake
Decision depends on stability of finance system
State wants to recoup as much of investment as possible
UBS shares up 0 6 percent
Adds more analyst comment
By Jason Rhodes
ZURICH June 9 Reuters The Swiss government is in talks
over its investment in UBS AG with various parties but has not
yet decided to convert its debt into shares or sell them the
finance ministry said on Tuesday
The talks come as other global banks are starting to pay
back state bailouts UBS is also seen as keen to end state
involvement soon but analysts expect the Swiss government will
be cautious until it is sure the bank is back on stable ground
Berne agreed last October to give the biggest Swiss bank a
badly needed 6 billion Swiss franc 5 5 billion cash injection
in exchange for mandatory convertible notes MCN that would
give it a stake of 9 3 percent The lock up period for
conversion of the notes ended on Tuesday
The finance ministry said it is examining various
transaction possibilities in talks with several parties and
the government will take a decision at the appropriate time
It reiterated that the government only planned to stay
involved for a limited period and said its main objectives were
ensuring a stable financial system and the greatest possible
recouping of the government s investment
The conversion will definitely come soon None of the
parties are interested in this carrying on as it is causing
uncertainty said Vontobel analyst Teresa Nielsen It is not
about whether the government will convert but when and how
UBS the world s largest wealth manager in terms of assets
was forced to accept government backing after massive
investments in risky U S assets forced it to write down
billions and led to it posting the biggest annual loss in Swiss
corporate history for 2008
SHARE SALE WOULD HURT STOCK
UBS shares were up 0 6 percent at 14 93 Swiss francs at 1018
GMT in line with a firmer sector index
Julius Baer analysts said the fact the end of the lock up
had not prompted an immediate sale of the government s stake or
a share placement was supporting the stock
A conversion of the notes would have a dilutive effect and a
sale on the market could also hit the stock although analysts
have already priced in the share dilution in earnings forecasts
Lloyds Banking Group Plc announced on Monday it would repay
UK government aid after selling new shares and Dutch insurer
Aegon said on Tuesday it aims to pay back some of its bailout
this year
U S banks Morgan Stanley JPMorgan Chase and American
Express Co also said in the last week they would sell shares as
they position to repay state relief
UBS too is seen by analysts as keen for the government to
exit as quickly as possible to remove state involvement and
competitive disadvantages such as demands that it complies
earlier than other Swiss banks with new rules on banker pay
However it gave a cautious outlook last month as it
reported a big first quarter net loss contrasting with a strong
three months for some of its major rivals and UBS board member
Bruno Gehrig said at the weekend the bank was not out of the
woods yet as it was still seeing outflows of client money
UBS does not have much room for manoeuvre if it wishes to
buy the convertible back early to release it from the indignity
of being partially owned by the state said Helvea analyst
Peter Thorne
Vontobel s Nielsen said the Swiss government would be
looking for big investors to take over its stake although she
did not foresee interest from sovereign wealth funds possibly
forcing the state to gradually release shares onto the market
They would prefer to sell to one investor capable of buying
5 or 10 percent or maybe two or three investors she said
Long funds are going to be the only ones interested from asset
management or maybe insurance companies
The MCNs have a duration of 30 months or until June 2011
and carry a 12 5 percent annual coupon that UBS must pay until
maturity even in the event of a share conversion
If the government converts at or below the minimum reference
price of 18 21 Swiss francs it will receive the maximum of 330
million shares under the terms of the agreement
The Swiss government is already in the money for a sale as
UBS shares are trading above the break even level of 12 50 Swiss
francs taking into account the 750 million francs annual
interest payments it is guaranteed until the maturity date
Earlier this month Abu Dhabi sold 1 3 billion shares in
Barclays held via MCNs that had been due to convert by end June
making 2 5 billion from an investment that helped the British
bank through the crisis
1 1 096 Swiss Francs
Writing by Emma Thomasson Editing by Greg Mahlich and Simon
Jessop |
JPM | Top 5 Things to Know In the Market on Wednesday | Investing com Here are the top five things you need to know in financial markets on Wednesday December 7
1 Italian banks buoyed by bailout hopes
Shares in Banca Monte dei Paschi di Siena MPS MI BMPS the oldest and most troubled of the Italian banks soared more than 7 on Wednesday after Reuters reported that Rome could take a 2 billion 2 15 billion stake in the lender that would increase the government s stake to 40
Italy s La Stampa also reported that Rome was considering taking a 15 billion 16 1 billion loan from European authorities to shore up its financial sector though the Italian Treasury later denied the report
Italian banks led the advancers on the FTSE MIB with the top three gaining more than 5
2 Global stocks breathe sigh of relief over Italian bank bailout report
European stocks traded sharply higher on Wednesday on relief over the reports that Italian banks would receive state aid while investors also looked ahead to the European Central Bank s ECB policy decision Markets widely expect the ECB to extend its asset purchase program by around six months in its attempt to support the economy and drive inflation higher
U S futures pointed to a slightly higher open on Wednesday as market participants eyed the euphoria in Europe and waited for the publication of the job openings and labor turnover survey JOLTS for October at 10 00AM ET 15 00GMT and consumer credit for the same month at 3 00PM ET 20 00GMT
At 5 58AM ET 10 58GMT the blue chip Dow futures gained 23 points or 0 12 S P 500 futures inched up 1 point or 0 03 and the Nasdaq 100 futures edged forward 2 points or 0 04
Earlier Asian stocks closed mostly higher on Wednesday with the Nikkei bolstered by President elect Donald Trump s announcement that Japan s Softbank Corp T 9984 would invest 50 billion in the U S and aim to create 50 000 jobs in the next four years
3 Pfizer hit with record 106 million fine
The U K s Competition and Markets Authority CMA fined Pfizer NYSE PFE with a record 84 2 million 106 3 million fine for its part in driving up the cost of an epilepsy drug by as much as 2 600
Extraordinary price rises have cost the NHS National Health Service and the taxpayer tens of millions of pounds the CMA said in its decision
Pfizer used to market Epanutin itself but sold distribution rights to privately held Flynn in September 2012
The blue chip drugs giant rejected any wrongdoing and said it would appeal all aspects of the decision
4 Oil holds steady ahead of inventories producer meeting
OPEC and non OPEC oil producers are scheduled to meet this Saturday in Vienna to agree details of the output cut designed to reduce the global supply glut
Nerves over whether the agreement will be effective held back larger gains after the American Petroleum Institute API reported late Tuesday a draw of 2 2 million barrels on crude stocks
The Energy Information Administration will report official inventory data at 10 30AM ET 15 30GMT amid expectations for a fall of 1 032 million barrels
U S crude oil futures inched up 0 10 to 50 98 at 5 59AM ET 10 59GMT while Brent oil edged forward 0 06 to 53 96
5 EU antitrust regulator fines JP Morgan HSBC and Credit Agricole for euribor rigging
The European Union s EU antitrust regulator announced fines on Monday for JP Morgan NYSE JPM HSBC LON HSBA and Credit Agricole PA CAGR for conspiring to rig the euribor rate
Banks have to respect EU competition rules just like any other company operating in the single market the regulator s commissioner Margrethe Vestager said adding that the three banks had manipulated the euribor rate for their own interests
JP Morgan was fined 337 2 million 361 5 million Credit Agricole 114 7 million 123 0 million and HSBC 33 6 million 36 0 million
All three banks have rejected the allegations and suggested they may take the case to European courts |
JPM | Top 5 things to watch today | Investing com Italian banks buoyed by bailout hopes Global stocks breathe sigh of relief over Italian bank bailout report Pfizer NYSE PFE hit with record 106 million fine Oil holds steady ahead of inventories producer meeting EU fines NYSE JPMorgan NYSE HSBC PA Credit Agricole for euribor rigging |
JPM | EU fines Agricole JPMorgan and HSBC 520 million over Euribor | By Philip Blenkinsop BRUSSELS Reuters The European Commission has fined Credit Agricole PA CAGR HSBC L HSBA and JPMorgan Chase N JPM a total of 485 million euros 520 million for their alleged participation in a cartel to manipulate the price of the Euribor financial benchmark The Commission said on Wednesday they were part of a seven bank cartel that colluded between September 2005 and May 2008 to distort the Euribor interest rate which was set using quotes submitted by a panel of banks and is widely used in international money markets JPMorgan Chase was fined 337 2 million euros and Credit Agricole 114 7 million euros for five month involvements in the cartel HSBC was set to pay 33 6 million euros for participating in the cartel for just one month All three insisted they had not engaged in any wrongdoing We will continue to vigorously defend our position against these allegations including through possible appeals to the European courts JPMorgan said HSBC said it would consider its legal options Credit Agricole said it would appeal against the Commission s decision adding the fine would have no impact on its 2016 results given it had already taken provisions Deutsche Bank DE DBKGn RBS L RBS and Societe Generale PA SOGN admitted guilt in December 2013 and were fined 824 6 million euros the sixth largest collective cartel fine ever handed down by the European Commission Barclays L BARC avoided a penalty because it alerted the Commission The Commission found a series of chatroom messages between the traders at the banks congratulating each other on their actions On days when traders received money calculated on the basis of Euribor they had an interest in a high Euribor rate On days when a trader needed to pay he would want to have a low Euribor rate EU competition commissioner Margrethe Vestager said The participation in such schemes was very lucrative for the banks tiny tiny movements in the Euribor rate can have a huge impact because of the volumes of trading she added The Bank for International Settlements put the market value of over the counter interest OTC rate derivative contracts in euros at 6 4 trillion in the first half of 2016 31 percent of all OTC derivatives Such trades would typically be based on financial benchmark rates such as Euribor U S and European regulators have so far handed down large fines to more than 10 banks and brokerages for rigging the London interbank offered rate Libor used for various currencies including the yen and its euro cousin Euribor Prosecutors have also charged more than a dozen men with fraud related offences
The Commission is still looking into foreign exchange trading |
C | India s Sun Pharma Buys Troubled Ranbaxy To Create Generics Giant | By India s largest drug maker by market value Sun Pharmaceutical Industries Ltd BOM 524715 announced Sunday that it will acquire Ranbaxy Laboratories Limited BOM 500359 in an all stock deal worth 3 2 billion and the merged entity will be India s largest drug maker and the fifth largest generic drug company in the world
Mumbai based Sun Pharma said in a statement that Ranbaxy s shareholders will get 0 8 shares of Sun Pharma for each Ranbaxy share and expects the transaction to be completed by December Tokyo based Daiichi Sankyo TYO 4568 which holds a 63 4 percent stake in the Gurgaon based Ranbaxy will receive a 9 percent stake in the merged entity and will have the right to nominate a director to its board The combined unit will have operations in 65 countries with 47 manufacturing units and is expected to generate revenues worth 4 2 billion
Ranbaxy has a significant presence in the Indian pharma market and in the US where it offers a broad portfolio of ANDAs Abbreviated New Drug Application for a U S generic drug approval for an existing licensed drug and first to file opportunities In high growth emerging markets it provides a strong platform which is highly complementary to Sun Pharma s strengths We see tremendous growth opportunities and are excited with the prospects to create lasting value for both our shareholders through a successful combination of our franchises Dilip Sanghvi managing director of Sun Pharma said in a joint statement with Ranbaxy
Ranbaxy which is currently banned by the FDA from exporting to the U S from three of its India based units paid nearly 500 million in fines to the U S regulator last year In March the company recalled two batches of its generic version of the cholesterol drug Lipitor while Sun Pharma had recalled a batch of its generic version of the diabetes medicine Glumetza
Last month the U S imposed a ban on imports from a division of Sun Pharma saying that the unit was not operating in conformity with good manufacturing practices according to BBC
The U S Attorney for the District of New Jersey had sent a subpoena in March to Ranbaxy asking the company to produce documents related to its Toansa facility the company said in a release on its website Toansa is one of the plants that the company has halted export shipments from affecting exports to other key markets including Europe local media reports said in February
At the time the company had said in a statement that it was scrutinizing the processes at all its manufacturing units adding This voluntary decision was taken as a precautionary measure and out of abundant caution to better allow us to assess and review the processes and controls We will resume shipments after reassuring ourselves about the processes and controls at these facilities
Daiichi Sankyo will indemnify the expenses from the subpoena according to the joint statement released Sunday announcing the deal
Citigroup Inc NYSE C and Evercore Partners NYSE EVR are advising Sun Pharma on the transaction while Ranbaxy is being advised by ICICI Securities BOM 532174
We believe this transaction brings significant value to all Ranbaxy shareholders Sun Pharma has a proven track record of creating significant long term shareholder value and successfully integrating acquisitions into its growing portfolio of assets We are confident that Sun Pharma is the ideal partner to help us realize our full potential and are excited to participate in future value creation opportunities Arun Sawhney managing director and CEO of Ranbaxy said in the joint statement
Sun Pharma s stock gained 1 68 percent on Monday since the announcement while Ranbaxy s stock had lost more than 4 percent in mid morning trade on the BSE Sensex |
C | iFOREX Daily Analysis 15 01 2016 | The dollar edged higher against the other major currencies on Thursday helped by data showing that U S jobless claims rose unexpectedly last week and as concerns over the ongoing oil rout persisted
The U S Department of Labor said the number of individuals filing for initial jobless benefits in the week ending January 8 increased by 7 000 to 284 000 from the previous week s total of 277 000 New unemployment claims remained under 300 000 for the 45th consecutive week extending the longest stretch since the early 1970s
Always on Thursday citing the potential for diminished inflation expectations St Louis Fed president James Bullard strongly hinted that the Fed should consider delaying its first interest rate hike since it abandoned a seven year zero interest policy in December At a speech on the economy and monetary policy in Memphis Bullard also pointed to persistent weakness in China and the global economy for factors on why an imminent rate hike could be tough to justify Although the FOMC is not expected to lift short term interest rates when it meets next on January 27 28 there is a higher probability that the U S central bank could raise rates again when it meets in March
Investors yesterday also remained cautious after a series of apparently coordinated gun and bomb attacks were carried out in the heart of the Indonesian capital of Jakarta where at least seven people were killed
Today the U S is to round up the week with reports on retail sales industrial production and producer price inflation as well as preliminary data on consumer sentiment
EUR USD
The single currency fell slightly on Thursday extending losses from earlier this week amid indications from the Federal Reserve that it could consider delaying its next interest rate hike and signals from the European Central Bank that further cuts in its deposit rate could be forthcoming
The currency pair traded between 1 0835 and 1 0942 before settling at 1 0866 down 0 18 on the session While the currency pair has closed lower in four of the last five sessions the fluctuations have been minor
Yesterday in Europe the minutes from the ECB Governing Council s December meeting showed that the central bank could be ready to lower its deposit rate again in the face of persistently low inflation While the ECB lowered its deposit rate one tenth to minus 0 3 at the meeting early last month ECB president Mario Draghi was widely criticized for not instituting stronger easing measures with the bank s 1 1 trillion asset purchasing program
In the weeks since euro zone inflation has come under pressure from crashing oil prices and weakening demand for exports The ECB could lower interest rates even further when it convenes at a closely watched meeting next Thursday
Pivot 1 0895Support 1 0835 1 08 1 077Resistance 1 0895 1 0945 1 0975Scenario 1 short positions below 1 0895 with targets 1 0835 1 08 in extension Scenario 2 above 1 0895 look for further upside with 1 0945 1 0975 as targets Comment the upward potential is likely to be limited by the resistance at 1 0895
Gold
Gold futures fell sharply on Thursday amid a moderately stronger dollar as investors reacted to a slight increase in weekly U S jobless claims and a bounce among equities in China
Gold for February delivery traded between 1 076 50 and 1 095 30 an ounce before settling down 0 90 on the session After surging by more than 1 4 last Thursday gold has closed lower in four of the last five sessions
In overnight trading the Shanghai Composite Index briefly fell to its lowest level since the start of this year s rout in Chinese equities before rebounding to close up 2 on the session The Shenzhen Composite Index meanwhile surged 3 81 Earlier on Thursday a group of 28 small cap listed companies helped stabilize the market by pledging not to sell shares for a period of at least six months
Today investors focus will be on U S data released to gain more information on the strengths of the greenback
Pivot 1084Support 1070 1063 1057 75Resistance 1084 1089 1095Scenario 1 short positions below 1084 with targets 1070 1063 in extension Scenario 2 above 1084 look for further upside with 1089 1095 as targets Comment the RSI lacks upward momentum
WTI Oil
Crude oil rallied from near 12 year lows on Thursday amid heavy profit taking enjoying a brief reprieve from a massive rout to open the new year
WTI crude for February delivery traded between 30 29 and 31 75 a barrel before settling up 2 49 on the session A day earlier U S crude edged up by 1 to post its first winning session in 2016
Investors continued to digest a bearish supply report from Wednesday s session when the U S Energy Information Administration EIA said in its Weekly Petroleum Status Report that U S commercial crude inventories rose by 0 2 million barrels last week for the week ending on January 8
Energy traders also kept a close eye on geopolitical issues after militants from the Islamic State claimed responsibility for attacks in the heart of Jakarta on Thursday which killed at seven people and wounded 19 others It came two days after a suicide bomber reportedly linked to ISIS killed at least 10 people near a popular tourist area in Istanbul Furthermore on Thursday Turkey reportedly established a blockade of a Kurdish region in Syria preventing scores of Kurds from receiving critical supplies
Oil traders today turn their attention to the weekly oil rig count from Baker Hughes for further indications on the supply demand imbalance nationwide
Pivot 31 6Support 30 29 05 28 2Resistance 31 6 32 2 33 15Scenario 1 short positions below 31 6 with targets 30 29 05 in extension Scenario 2 above 31 6 look for further upside with 32 2 33 15 as targets Comment as long as 31 6 is resistance look for choppy price action with a bearish bias
S P 500
U S stocks rallied on Thursday erasing most of their losses from the previous day s sell off amid a major rebound in oil prices and indications that the Federal Reserve could delay the pace of its first tightening cycle in nearly a decade
The Dow Jones Industrial Average surged 1 41 while the NASDAQ jumped 1 96 as both completed one of their strongest one day moves in approximately six weeks The S P 500 meanwhile gained 1 67 to eclipse a key technical level For the session all 10 sectors closed in the green as stocks in the Energy Health Care and Technology sectors led each gaining more than 2
Investors also digested dovish comments from St Louis Fed president James Bullard on how a drop in inflation expectations could impact a potential rate hike during the first quarter
Always yesterday JP Morgan reported revenue of 23 7 billion on per share earnings of 1 32 above estimates of 22 86 billion in revenue and earnings per share of 1 26 This gave a boost to its shares which rose 1 48 for the day
Today investors focus will be on Citigroup N C and Wells Fargo N WFC earnings which are among companies reporting on Friday
Pivot 2005 Support 1887 1867 1821 Resistance 2005 2080 2110 Scenario 1 short positions below 2005 with targets 1887 1867 in extension Scenario 2 above 2005 look for further upside with 2080 2110 as targets Comment the RSI is bearish and calls for further downside |
MS | POLL China s CPI and PPI to fall more steeply in April | What China s April inflation data
When Monday May 11 at 0200 GMT
Both CPI and PPI to fall deeper into negative territory
BEIJING May 7 Reuters China probably saw a steeper
drop in consumer and factory gate prices in April as
deflationary pressure intensified in the world s third largest
economy
The median forecast of 31 economists polled by Reuters is
for the consumer price index CPI to have fallen 1 4 percent
in April from a year earlier compared with March s 1 2 percent
drop
It would be the third consecutive monthly fall in the CPI
Economists expect the producer price index to be down 6 5
percent in the year to April compared with a fall of 6 0
percent in the 12 months to March Prices leaving the factory
gate have been falling from year earlier levels since December
Economists are relaxed about the fall in prices seeing it
as a statistical correction of the surge in food and some
industrial commodities in early 2008 rather than the harbinger
of economic contraction
China s central bank also played down the risk of deflation
in a report published on Wednesday saying domestic economic
recovery and fast credit growth would put a floor under prices
The slower pace of deterioration in the global economy also
reduced the possibility of a big sustained fall in the price
level in China the report said ID nPEK265651
Forecasts percentage change from a year earlier
Institution CPI
PPI
Bank of China 1 5
6 5
BNP Paribas 1 5
6 9
Bohai Securities 1 3
7 0
China Galaxy Securities 1 4
7 1
China Jianyin Investment 1 3
7 0
China Merchants Securities 1 5
6 2
China Securities 1 5
6 9
CICC 1 4
6 9
Citibank 1 5
4 5
CITIC Securities 1 5
6 9
Daiwa Institute of Research 1 0
6 0
DBS 1 4
6 5
Essence Securities 1 5
6 5
Fortune Trust 1 3
6 5
Goldman Sachs 1 4
7 0
Guotai Junan Securities 1 4
7 0
Hang Seng 1 0
HSBC 1 5
6 5
Industrial Bank 1 4
6 2
ING 1 1
5 9
Merrill Lynch 1 7
7 0
Moody s Economy com 1 2
6 2
Morgan Stanley 1 7
6 5
Nomura 1 1
5 8
Orient Securities 1 5
7 0
Qilu Securities 1 7
6 6
Shanghai Securities 1 5
6 2
Shenyin Wanguo Securities 1 3
7 1
Southwest Securities 1 2
6 5
SJS Markets 1 4
6 3
UBS 1 0
6 5
MEDIAN 1 4 6 5
Previous month 1 2
6 0
Year earlier 8 5
8 1
Not available
For the full April data poll double click on
ID nPEK362735
For the China indicators fixed page double click on
For historical data double click on ID nPEK142767
Reporting by Beijing Newsroom Editing by Alan Wheatley |
MS | POLL Stimulus to boost China s Jan April investment | What China s urban fixed asset investment for Jan April
When Tuesday May 12 at 0200 GMT
Pace of spending quickens as government projects start up
BEIJING May 7 Reuters Fixed asset investment the key
driver of Chinese growth in recent years probably gathered
even more momentum in April as the government broke ground on
projects around the country as part of its 4 trillion yuan
stimulus plan
Annual growth of fixed asset investment FAI in urban
areas in the January April period accelerated to 29 1 percent
from 28 6 percent in the first quarter according to the median
forecast of 30 economists polled by Reuters
Mu Hong a vice head of the National Development and Reform
Commission China s economic planning agency said this week
that Beijing has so far spent more than a third of the total it
has promised to invest by the end of 2010 The central
government is financing a third of the overall package
With the country entering the construction season in the
second quarter the results of the central government s
investment will show through more clearly Mu said
ID nPEK195574
Wang Tao an economist with UBS said record bank lending
in the first quarter would give a big push to
government related investments entrenching the economic
recovery
The strong FAI growth is expected to push Q2 growth above
14 percent quarter on quarter Wang said in a note to
clients
Forecasts year to date percentage change from a year
earlier
Institution Urban FAI
China Securities 31 8
Shenyin Wanguo Securities 30 6
Bank of China 30 5
Citibank 30 0
Guotai Junan Securities 30 0
Qilu Securities 30 0
UBS 29 8
Bohai Securities 29 7
Essence Securities 29 5
Morgan Stanley 29 5
Southwest Securities 29 5
DBS 29 3
China Galaxy Securities 29 2
Moody s economy com 29 2
SJS Markets 29 2
BNP Paribas 29 0
Merrill Lynch 29 0
Nomura 29 0
Hang Seng 29 0
HSBC 29 0
CITIC Securities 28 9
CICC 28 8
Industrial Bank 28 8
Daiwa Institute of Research 28 8
ING 28 7
Orient Securities 28 5
Fortune Trust 28 5
China Merchants Securities 28 0
Shanghai Securities 28 0
China Jianyin Investment Securities 26 0
Median 29 1
Previous month 28 6
Year earlier 25 7
For a poll on all April data click on ID nPEK362735
For historical data double click on ID nPEK142767
For the China indicators fixed page double click on
Reporting by Beijing newsroom Editing by Alan Wheatley |
MS | ANALYSIS Dubai property market suffers as Western cash dries up | Dubai property prices to continue slump
Contractors seek new opportunities elsewhere
European investors favour more familiar markets
By Jason Benham and Sinead Cruise
DUBAI LONDON May 14 Reuters European investors have
mothballed plans to invest in Dubai s bombed out property in
favour of more familiar and mature markets prolonging the
emirate s maiden bust until at least 2011
Prices in the emirate s once booming real estate sector will
continue to slump over the next year with demand for property
waning as expat professionals lose their jobs while more Dubai
contractors will bid for projects elsewhere
Once a magnet for capital from European property investors
the emirate s appeal famed for its iconic palm tree shaped
islands is fading fast as they scramble to seize better real
estate deals closer to home and elsewhere in the Gulf
Analysts are already predicting the more stable Doha and
Saudi Arabia property markets to recover faster than Dubai
which is experiencing its first growing pangs
The consensus opinion is that the Dubai market has further
to fall and this very sentiment is itself putting off investors
who do not wish to catch a falling knife said Craig Plumb
head of research at Jones Lang LaSalle in the United Arab
Emirates
A UBS report last month said Dubai house prices could fall
up to 70 percent from a fourth quarter peak A Reuters poll in
March showed prices were likely to fall more than 40 percent in
2009 and 2010 before recovering in 2011
Dubai is not one for us I much prefer long term
established locations with underlying intrinsic attractions or
clear sustainable competitive advantages said Bill Hughes
managing director Legal General Property
By contrast the battered UK housing market is showing early
signs of revival with an uptick in investment demand seen in
Britain long before Dubai
Property prices in Dubai dubbed as the world s biggest
construction site soared sharply after the emirate opened its
real estate sector to foreign investors in 2002 granting them
freehold ownership rights at many developments
From start 2007 to mid 2008 prices rallied almost 80
percent Morgan Stanley estimates showed
The bubble burst spectacularly late in third quarter 2008
leaving the region laden with half built projects
The extreme boom bust characteristics of the market are not
compatible with the needs of most institutional investors which
are Aberdeen s core client base said Andrew Smith chief
investment officer at Aberdeen Property Investors
The financial market turmoil has caused significant injury
to demand in Dubai s property market as thousands of jobless
expat professionals are forced to leave the emirate
UBS said Dubai s population was likely to fall 10 percent in
the coming two years as a result of foreign worker job cuts
with residential vacancy rates reaching up to 30 percent in 2010
due to an expected oversupply
CONTRACTORS LOOK ELSEWHERE
International capital and indeed that from the Gulf region
is increasingly looking for distressed assets in more mature
markets with central London being seen as the pick of the
bunch Plumb said
Several Dubai based contractors are also seeking
opportunities further afield as work dries up and competition
for new projects intensifies
Dubai contractor Arabtec the largest listed construction
firm in the UAE was this week awarded a 1 6 billion dirham
435 6 million contract in Abu Dhabi It also recently started
work on its first project in Saudi Arabia and is scouring North
Africa for work
More than half of the construction projects in the UAE
worth 582 billion have been put on hold Dubai based market
research firm Proleads said in February
While abandoned buildings and empty luxury homes provide a
stark reminder of Dubai s dramatic property bust the small
number of investors with cash to spend on real estate will be
keeping their powder dry
In the short term there is a lot of confusion among
overseas investors said Stuart Law chief executive of
UK based Assetz a specialist real estate investment firm
I wouldn t buy there myself for holiday home purposes as
there s nothing going on South of France is for me he said
Editing by Andrew Macdonald
1 3 673 dirhams |
MS | European Equities Rise Led By Financials | The Forex Trader Portal
Current Futures Dow 12 00 S P 1 20 NASDAQ 0 25European and Asian markets were pulled higher as three major banks are preparing to pay back the TARP funds a sign that the financial sector is finding some stability Additionally oil broke above the 60 benchmark which pulled the commodity producers higher As such financials and raw material companies led the gains in the Asian and European trading hours In Europe the financials jumped more than 4 from the first few minutes of trading Overnight markets strengthened on news that three Wall Street banks are preparing to repay the TARP funds If the Treasury approves such a move TheLFB Forex com Trade Team notes that this will be a huge step forward since it will further strengthen the bank s positions The three banks are said to be Goldman JP Morgan and Morgan Stanley which would have to repay up to 45 billion In other news two of the biggest players in global trade China and Brazil are planning to use their own local currencies for exports and imports between them The move is meant to further erode the dollar s strength which is currently used as the standard currency in foreign transactions By doing so the Chinese are following their guideline to move away from the greenback after they said a number of times that the world must find other reserve currencies Currently the total trade balance between Brazil and China is a few billion dollars TheLFB Forex com Trade Team said that to some extent China is trying to impose the Yuan as a global currency In the past the People s Bank of China offered Yuan denominated loans to a number of foreign central banks including Pakistan Additionally China is one of the countries that lobbies for the use of IMF s special drawings rights SPRs instead of the dollar as a reserve currency Overnight the Japanese Nikkei rose 251 60 points 2 78 to 9 290 29 The Australian S P Asx gained 81 70 points 2 19 to 3 817 30 The U K Ftse gained 30 94 points 0 70 to 4 477 39 while the German Dax added 46 31 points 0 95 to 4 898 27Crude oil for June delivery was recently trading at 60 30 per barrel higher by 1 35 Gold for June delivery was recently trading higher by 1 40 to 923 40 TeamLFB provides forex related market analysis and trade signals |
MS | Global Trading Wrap Wall Street Falters On Banking Fears | Wall Street U S stocks were unable to hold onto gains and banks led the market lower in the final stages of trading Investors in bank stocks were spooked after Moody s Investor Service said commercial property values plunged by 21 in March and also predicted further declines After the report the S P 500 Banks Index dropped 4 4 The DOW lost 29 23 points to close at 8 474 85 The S P 500 lost 1 58 points but closed above the 900 level at 908 13
Europe European stocks rose to their highest level in 4 months on Tuesday as traders continue to speculate that the worst of the global recession is over and that the financial sector is recovering The German DAX gained 107 points 2 22 while London s FTSE added almost 36 points 0 8 Europe s markets were pulled higher after news broke that three major banks Goldman Sachs JP Morgan and Morgan Stanley are preparing to repay the TARP funds
Asia Asian equity markets moved higher overnight as investors continue to be optimistic the global recession is nearing an end Japan s Nikkei gained 251 points 2 78 as the strong moves seen in yesterday s U S session carried over into Asia Australian stocks closed 2 2 higher on renewed optimism that the global economic recession is nearing an end Financial Sector In trade on Tuesday the XLF the financial sector ETF dropped 0 03 points 0 16 to trade at 12 26 It moved lower on light volume 118m ETF s changed hands well below the ten day average of 208 5m Equity markets moved slightly higher overall on Tuesday and the recent trend has seen the financial lead the way However today it was the financials leading the way lower Speculation that three large banks are preparing to pay back TARP funds moved the market early but disappointing housing starts capped equity gains Treasuries Treasuries moved very little on Tuesday after housing starts dropped unexpectedly in April Ten year yields held near Monday s levels after Minneapolis Fed President Gary Stern said the economy should return to healthy growth by mid 2010 The ten year yield rose one basis point to 3 25 The Federal Reserve will buy government securities tomorrow and will resume its debt auctions next week Crude oil Oil prices gained slightly on Tuesday closing just below the 60 a barrel level as U S refinery problems increased supply fears Crude oil for June delivery gained 0 62 1 05 to 59 65 The July contract rose 51 cents to 60 10
Gold Bullion Gold prices rose on Tuesday in response to a weaker dollar which boosted gold s appeal as an alternative investment Gold futures for June delivery rose 5 to 926 70 an ounce So far this year gold has gained 4 8 |
MS | RPT FEATURE South Korea zones struggle to lure FDI in downturn | Repeats story that moved at 0000 GMT
By Jonathan Hopfner
SEOUL May 20 Reuters Even in a country known for
economic miracles trying to build the region s most
competitive city from scratch looks ambitious
But on a muddy patch of reclaimed land near South Korea s
west coast port of Incheon the skyline is already taking shape
of a metropolis envisioned as a commerce centre to rival
Singapore or Shanghai boasting a spotless environment and
unrivalled quality of life
With total building costs set to exceed 20 billion the
Songdo International Business District is according to its
backers the largest private development project ever
undertaken
Analysts however warn that South Korea s ambivalence
towards foreign investment and the fallout from the financial
crisis have also made it one of the more vulnerable
Officials voice confidence over the future of Songdo and
the Incheon Free Economic Zone FEZ of which it is part
According to IFEZ commissioner Heonseok Lee the zone has
attracted nearly 60 billion in financing and investment
commitments since it was established in 2003 offering tax
incentives subsidised office space and less rigid labour
rules
New York based Gale International which with South Korea s
POSCO Engineering Construction is Songdo s main developer
said work on the city is proceeding at a consistent pace
thanks to financing secured from partners like Morgan Stanley
before the downturn began
The city plans to celebrate its official opening in August
and by 2014 should include 50 million square feet of office
space 9 000 new homes a 100 acre park top ranked schools and
a Jack Nicklaus designed golf club
EXPERIMENT WITH LIBERALISATION
The Incheon zone is the most prominent feature of an
unprecedented drive to boost foreign direct investment FDI
an area in which South Korea has long lagged its neighbours
Despite the uncertain economic environment the government
hopes to boost FDI by 7 percent this year to 12 5 billion
with FEZs at the forefront of its strategy
Authorities have designated six zones each promising
resident companies a similar package of cheap land tax breaks
and seamless infrastructure
The costs to the government will be immense But they are
the best way to make our country more competitive an
official at the Ministry of Knowledge Economy s FEZ planning
office said
In a place where foreign money can be a touchy subject the
zones allow the government to experiment with liberalisation
without fueling fear about opening all sectors at once
Eventually the official said the whole country will be
like an FEZ
There are signs progress may be far slower than hoped
Despite the government designating three new FEZs last
year the amount of FDI pledges received in the first quarter
posted the biggest drop in six years as the financial crisis
pounded the local stock market and currency and kept investors
away
Media reports have estimated FEZs are attracting as little
as 2 5 percent of annual investment inflows
The trophy Incheon zone had received just under 500
million of a pledged 6 6 billion in foreign direct investment
as of the end of April with Songdo developers Gale and POSCO
accounting for a large share and some of the remainder tied to
recession hit firms such as General Motors
OVERHEATED COMPETITION
There are concerns one of Songdo s crown jewels an
international school for children of foreign executives
partnered with the U S s prestigious Milton Academy may not
be able to open on schedule in September due to a shortage of
students
There s serious doubt whether Songdo would be developed as
originally planned given the current economic crisis said
Soojong Kwak a research fellow at the Seoul based Samsung
Economic Research Institute SERI
Kwak also said the sudden profusion of FEZs risked stoking
overheated competition Both the Incheon and Yellow Sea Free
Economic Zone barely an hour apart by road are marketing
themselves as high tech and logistics centres as is the
Busan Jinhae FEZ on South Korea s east coast and the Gwangyang
Bay Area FEZ to the south
Zones tout similar slogans Busan Jinhae calls itself a
Northeast Asia business hub Saemangeum Gunsan in the
southwest is the hub of biz frontier in East Asia and
Gwangyang the greatest logistics and business hub of Northeast
Asia
All lean heavily on their proximity to key markets such as
China and Japan a trait analysts say is not necessarily a
plus
The advantage from locational arbitrage against China is
close to zero Kwak said with South Korean zones bound to
face tough competition from their Chinese counterparts
Analysts also warn that fencing off certain areas for
foreign investors an approach that has gained traction
globally since it was pioneered by China in the 1980s risks
masking the need for more comprehensive reforms to improve the
business climate and reduce barriers to foreign ownership
The emphasis on special zones should not distract
policymakers from these more important priorities said
Randall Jones head of the Japan and Korea desk at the
Organisation for Economic Cooperation and Development
But the FDI campaign has won some converts The
Busan Jinhae zone recently announced over 50 million in
investment commitments from European and U S marine
engineering firms while the Incheon FEZ will receive 30
million this year from Berna Biotech Korea a subsidiary of
Netherlands based biopharmaceutical company Crucell
Berna Biotech CFO Maik Slijpen said the zone s generous tax
and duty exemptions proximity to Incheon International Airport
and international atmosphere played a role in Berna s
decision to invest there though he also voiced concerns about
developers apparent focus on prestigious but non practical
projects
But officials insist aiming high is the best way to take
the zones forward
A well designed beautiful city will attract people from
other countries says IFEZ s Lee
Editing by Jonathan Thatcher |
JPM | Spain s Banco Popular to replace chairman after shareholder revolt | By Angus Berwick MADRID Reuters Banco Popular regarded as the weak link in Spain s banking sector is to replace Chairman Angel Ron after shareholders rebelled over his lackluster progress in cleaning up 30 billion euros 25 19 billion pound in toxic assets Ron has led Popular Spain s sixth largest by assets which holds an outsized proportion of bad real estate loans through its most challenging period with its shares down 95 percent to record lows since he took over a decade ago The bank s board is expected to unanimously name Emilio Saracho currently global vice president at JP Morgan Chase NYSE JPM as chairman Popular said in a statement Saracho would take the helm by the first quarter of 2017 it said Popular s volatile shares reversed a week of losses after the announcement and were up 12 percent by 1340 GMT against a slight drop on Spain s blue chip Ibex index They are however the worst performers on the European STOXX 600 banking index over the last three months Since Spain s 2012 financial collapse banks have enacted many of the reforms policymakers are now demanding in Italy namely consolidating and cleaning up balance sheets While Europe s financiers hang on the outcome of a referendum in Italy this weekend which could strain the country s already struggling banking sector Popular is now also under the microscope It has trailed its peers over the past year barely scraping a profit in the past two quarters In June it raised 2 5 billion euros 2 66 billion via a share issue to clean up its property asset portfolio and announced provisions which it said could lead to overall losses of 2 billion euros in 2016 Popular has a non performing asset ratio almost twice as high as the Spanish banking sector s average with around 30 billion euros in toxic real estate assets according to Standard Poor s RON S PLAN Ron planned for Popular to hive off 6 billion euros of its property assets into a separate division to help reduce its non performing real estate portfolio by 15 billion euros by 2018 But several board members led by Mexican billionaire Antonio del Valle believed the plan did not go far enough and a lack of detail on how it would be structured and financed cast doubt over whether it was feasible It is unclear whether the plan could now change with Ron s resignation A Popular spokesman declined to comment Del Valle according to banking sources favors merging Popular with a competitor Reuters has not been able to contact him Spain s banking sector has already shrunk by almost two thirds since the country s property bubble burst in 2008 and analysts say there is room for further consolidation Spanish newspaper Expansion reported on Thursday that Popular was in talks over a possible takeover by BBVA MC BBVA or another larger rival Representatives for BBVA and Popular declined to comment on any talks Larger rivals such as Banco Sabadell and Caixabank have held informal talks with Popular in recent years but Ron has pressed the case that Popular should remain independent The head of one Spanish fund speaking anonymously said Popular would need a second capital infusion of between 2 billion and 3 billion euros to remain an independent lender and doubted the property unit plan would be realized
Analysts at Credit Suisse SIX CSGN said Popular could be an attractive target for other banks but a takeover would be complicated by negotiations over its pricing and whether it would fit in with a possible buyer s strategic plan |
JPM | Brazil s Temer says unpopular moves by Congress hurting confidence | SAO PAULO Reuters Attempts by Brazil s Congress to water down anti corruption and campaign funding legislation that sparked public outrage in recent days have hampered confidence in the South American country President Michel Temer said on Thursday
Temer speaking at a seminar sponsored by JPMorgan Chase Co NYSE JPM in S o Paulo vowed to send to lawmakers a plan to overhaul the country s costly pension system as early as next week |
JPM | Small banks rally pauses but may not be over yet | By Sinead Carew and Chuck Mikolajczak NEW YORK Reuters The rally in regional U S bank stocks that followed last month s election of Donald Trump may not be over but investors may have to wait for policy to take shape for the massive move to extend further The S P 600 index of small cap banks has surged more than 20 percent since Trump s surprise Nov 8 victory while their large cap peers on the S P 500 index have jumped over 17 percent Investors booked profits on Friday with the small cap index down 0 8 percent and the larger banks dropping 1 1 percent Smaller lenders could potentially add as much as 40 percent to their fourth quarter 2017 earnings if Trump s promises of tax cuts and regulatory changes materialize according to Sandler O Neill analyst Brad Milsaps But Milsaps has not changed his official estimates to reflect this possibility as he is waiting for confirmation that those policy changes will happen Trump is scheduled to take office Jan 20 His Treasury Secretary nominee Steven Mnuchin on Wednesday criticized the Dodd Frank banking regulation act saying that it inhibited bank lending potentially implying a willingness to try to change regulations to help boost that revenue source It remains to be seen how much longer the rally can continue until we see some tangible evidence of changes coming from the administration that relates to regulations or tax rates said Milsaps Investors are betting that rising long term interest rates expected corporate tax cuts as well as lighter regulation will help banks under a Trump administration Domestic banks have more to gain from policy changes than their multinational counterparts as lighter regulation should make it easier for them to grow more quickly and could allow more mergers according to investors and analysts They could also benefit more from expected tax cuts and they would be insulated from currency fluctuations There s definitely more opportunity on the regional banking level David Lebovitz global market strategist at JPMorgan NYSE JPM Asset Management When you go down in market capitalization you begin to insulate yourself from a lot of these external forces Dollar strengthening is less of an issue Bank profits depend largely on the spread between long and short term rates The spread between benchmark U S 10 year Treasury notes and 2 year Treasuries has widened nearly 30 basis points since the U S presidential election touching its highest in a year on Thursday Adding to upward pressure on yields the Federal Reserve is expected to raise overnight U S interest rates at its meeting on Dec 13 14 by 25 basis points the first hike in nearly a year In relation to rising interest rates alone Keefe Bruyette Woods boosted its operating earnings growth estimates for banks with assets of 50 billion or lower to 10 percent from 6 percent next year and to 11 percent from 4 percent in 2018 Earnings revisions having been negative for many years are beginning to turn positive which is a very important step and they re turning positive on higher revenues which is even more important said KBW analyst Christopher McGratty They don t look cheap but there s a justifiable path toward the valuations they re at The current forward price to earnings for the S P small cap bank index stands at 18 4 well above the six year median of 15 and at its highest since April 2011
McGratty also noted that many analysts will likely update their estimates for 2017 in coming weeks which would tighten forward P E multiples |
JPM | Mizuho SMBC in talks to provide 800 million euros in loans to Gazprom sources | TOKYO Reuters Japan s Mizuho Bank and Sumitomo Mitsui Banking Corp are working on a deal to provide 800 million euros 845 million in loans to Russian gas giant Gazprom MCX GAZP sources familiar with the matter said on Monday The banks are in talks to finalize the deal during Russian President Vladimir Putin s visit to Japan on Dec 15 16 said the sources who were not authorized to discuss the matter publicly JPMorgan Chase Co N JPM is also likely to participate in the deal the sources said Mizuho and SMBC officials did not immediately comment JPMorgan Chase officials in Tokyo referred inquiries to their New York office which was closed outside U S business hours SMBC is also working on providing financing for Russian bank Alfa Bank with state run Japan Bank for International Cooperation and Nippon Export and Investment Insurance the sources said
1 0 9470 euros |
JPM | Manufacturing PMI gains point to support for oil other commodities | Investing com PMI manufacturing gains may underpin oil other commodities looking forward
NYSE JPMorgan Global Manufacturing PMI hit a 27 month high in November
Strong correlation between PMI performance and commodity prices three and six months out
Analysts see commodity prices up 9 on average over next three months 11 over six
Key issue will be compliance with OPEC output cut of 1 2 mn b d about 1 of global output
Attention turns to chances for non OPEC producers agreeing to 600 000 b d cut
Pick up in prices also expected to see an increase in North American shale activity |
JPM | Italy readying state bailout for Monte dei Paschi bank sources | By Stefano Bernabei and Giuseppe Fonte ROME Reuters Italy is preparing a state bailout for Monte dei Paschi di Siena MI BMPS as the bank s hopes of being saved by private funding fade following Prime Minister Matteo Renzi s decision to quit sources close to the matter said on Tuesday One of the sources said a government decree authorizing the deal could be rushed through as early as this weekend Monte dei Paschi must raise 5 billion euros 5 4 billion by the end of December to avert the risk of being wound down but investors are reluctant to provide cash after Renzi lost a referendum on Sunday and announced plans to resign He is expected to leave office in days and could be replaced by his current economy minister or another leading politician But an early election might be held next year raising fears among investors that a maverick anti euro party could come to power Italy is likely to pump government money into Monte dei Paschi under a so called precautionary recapitalization three sources familiar with the situation said to prevent the bank failing and triggering a wider banking crisis Such a crisis could destabilize the whole bank sector burdened by 360 billion euros of bad loans and inflict heavy losses on tens of thousands of ordinary Italians who hold junior bonds in the Tuscan bank The bank s chief executive Marco Morelli was in Frankfurt on Tuesday for talks with European Central Bank officials on the lender s options other sources said Monte dei Paschi rated the weakest lender in European stress tests this summer had planned to arrange a private rescue starting with a firm commitment from one or more anchor investors and then launching a share sale this week However sources close to the matter said on Monday that investment banks lined up to underwrite that plan led by JPMorgan N JPM and Mediobanca MI MDBI had in effect put the deal on hold because of the political uncertainty Under a pre underwriting deal they can drop the transaction because of adverse market conditions One source said they would make a decision by Friday but that the chances of the deal going ahead were now slim Monte dei Paschi had pinned its hopes on Qatar s cash rich sovereign wealth fund injecting up to 1 billion euros in the lender But bankers close to the underwriting consortium said the fund and other potential investors wanted to wait to see what kind of government would succeed Renzi Italy s head of state on Monday asked Renzi to put his resignation on hold until the 2017 budget is approved by parliament which could happen as early as Wednesday That in turn has delayed the formation of a new government making it more difficult to persuade investors to commit With Renzi staying on there is no time left said one of the sources familiar with the situation An injection of state cash would entail losses for institutional investors who hold Monte dei Paschi s junior debt in line with European rules on dealing with banking crises The bank has already raised just over 1 billion euros from the conversion of subordinated bonds into riskier equity as part of its privately funded rescue plan Rome wants to avoid losses being imposed on retail investors who hold 2 1 billion euros of the bank s junior debt One of the sources said these investors holdings could be guaranteed for up to 100 000 euros each in line with rules protecting depositors A meeting of the bank s board scheduled for Tuesday will now take place on Wednesday or Thursday another source said additional reporting by Paola Arosio in Milan and Frank Siebelt in Frankfurt writing by Silvia Aloisi Editing by Mark Bendeich and Timothy Heritage |
JPM | JPMorgan CEO says bank may look to pay special dividend | NEW YORK Reuters The stock of JPMorgan Chase Co N JPM has been climbing so much that at a certain price the company may consider issuing a special dividend to distribute excess capital rather than buying back additional stock Chief Executive Jamie Dimon said on Tuesday Dimon speaking at an investor conference said that if the stock is not cheap compared to its intrinsic value he would generally rather pay out capital to existing shareholders than buy back stock from selling investors JPMorgan shares traded at 82 66 shortly after Dimon spoke down 0 6 percent in morning trading They are up this year by 25 percent with three fourths of that gain having come since the U S presidential election The company reported that its tangible book value per share was 51 23 at the end of September Dimon who was speaking in a question and answer format that touched on a variety of topics also said that fourth quarter markets revenue is running higher than a year earlier by 15 percent plus In the credit card wars being waged by banks Dimon said JPMorgan plans to introduce more new cards after finding surprisingly strong demand for its Sapphire Reserve premium card this year He did not say when the new cards will be offered or how they might differ from the bank s current product line Dimon passed up the opportunity to make strong arguments for changes in Washington to regulations passed since the financial crisis He did however recommended adjustments in the Dodd Frank financial reform act to make rules that are more prescriptive and give regulators less discretion to set specific terms
Repealing the so called Volcker rule against proprietary trading would not materially impact JPMorgan s results Dimon said |
C | U S futures tumble amid geopolitical tensions Dow Jones down 0 92 | Investing com U S stock futures pointed to a sharply lower open on Monday as growing concerns over tensions between Ukraine and Russia weighed on global equity markets while markets eyed the release of U S data later in the day
Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 92 drop S P 500 futures signaled a 1 07 decline while the Nasdaq 100 futures indicated a 1 08 loss
Market sentiment weakened amid fears over the unfolding crisis in the Ukraine following Russian President Vladimir Putin s decision to send troops into the Crimea region over the weekend
The move sparked fears that the West will impose economic sanctions against Russia Russia s central bank hiked interest rates from 5 5 to 7 on Monday after the rouble fell to new record lows against the euro and dollar
Markets were also jittery after official data on Saturday showed that China s manufacturing purchasing managers index fell to an eight month low in February adding to fears over a slowdown in the world s second largest economy
Tech stocks were expected to be active amid reports Microsoft s newly appointed Chief Executive Officer Satya Nadella is preparing to shuffle management and put former political operative Mark Penn in the new role of chief strategy officer in a move to boost growth
Twitter was also likely to be in focus as the microblogging site was flooded with traffic after Academy Awards host Ellen DeGeneres took a group photot during the event and set the record for the most retweeted post ever
The move temporarily disrupted Twitter s service for some users bringing the microblogging site tons of publicity Shares in the company were still down 2 37 in pre market trade
Financial stocks were also slated to move broadly lower following a sharp downward trend in global lenders Separately Mexican authorities questioned Citigroup employees and seized records from Oceanografia SA to examine how the bank allegedly was cheated out of hundreds of millions of dollars
Shares in the U S lender were down 1 91 in early trading
Other stocks likely to be in focus included Icahn Enterprises Rockwood Holdings and Stratasys scheduled to report quarterly earnings later in the day
Across the Atlantic European stock markets were sharply lower The EURO STOXX 50 plummeted 1 87 France s CAC 40 plunged 2 03 Germany s DAX dove 2 46 while Britain s FTSE 100 declined 1 38
During the Asian trading session Hong Kong s Hang Seng Index tumbled 1 47 while Japan s Nikkei 225 Index lost 1 27
Later in the day the U S was to release data on personal spending while the Institute of Supply Management was to release data on manufacturing activity |
C | A Look At Oceanograf a Mexican Firm Behind The Citigroup Banamex Scandal | By MEXICO CITY As Citigroup Inc NYSE C faces allegations of fraud and while its Mexican unit Banco Nacional de Mexico Banamex is being investigated by the Mexican government a certain name has entered into the equation Oceanograf a S A de C V
The oil company was behind the accounts at Banamex which showed 400 million in loans for supposed services to state owned oil giant Petr leos Mexicanos Pemex Several of the receipts were later found to be suspicious and are currently pending a revision by Pemex s accountants
As Citigroup is facing an investigation by the FBI and the U S Attorney s Office for Massachusetts the attorney general of Mexico has launched its own investigation of Banamex and Oceanograf a
Oceanograf a based in Ciudad del Carmen on the Caribbean coast since 1968 had a 40 year relationship with Pemex and its main exploration and production subsidiary Exploraci n y Producci n PEP Between 1999 and 2013 the company won more than 160 competitive bids both at home and abroad for inspection monitoring maintenance and transportation worth more than 2 billion
The amount of business the company amassed made it the main contractor for Pemex during the administrations of presidents Vicente Fox 2000 to 2006 and Felipe Calder n 2006 to 2012
Some of the contracts signed between Oceanograf a and Pemex were based in the Gulf of Mexico and included the installation of oil extraction structures and maintenance of equipment which netted the company 380 million Another key project was the installation and maintenance of an off shore site in 2009 which grossed 173 million
However Oceanograf a s financial problems became apparent in January 2014 when it announced that it would not be able to pay interest on a debt of 335 million contracted in 2008
The company s CEO Amado Y ez said on a conference call with investors Jan 15 that Oceanograf a only had 50 million in its accounts A month later the Mexican Public Administration Ministry barred the company from entering into any agreements with a state owned entity including Pemex
But the biggest blow of all was when the alleged 400 million fraud to Banamex was discovered in late February Mexican Attorney General Jes s Murillo Karam attributed the move to a potential money laundering scheme Money laundering can start with the initial crime of fraud but it does not stop there he said on Tuesday
When the Comisi n Nacional Bancaria y de Valores Mexico s Bank and Securities Commission or CNBV started an investigation of Oceanograf a the attorney general s office decided to insure the company The office wants to preserve the employees jobs recover funds to compensate damaged parties and make sure the company keeps running until the investigation is over
Murillo Karam refused to name potential culprits for the time being We have not finished the investigation yet he said |
C | If US Jobs Increase Will Earnings Decrease | By Some investors fear that more U S jobs could spell the end of corporate profits and recent remarkable equity rallies noted Citigroup Inc NYSE C in a research note on Tuesday
In other words the interests of equity investors and working Americans may be misaligned if some Wall Street sentiment is anything to go by
But An improved employment environment does not mean the end of profitability reassures Citi s Tobias Levkovich in his note Historically speaking jobs and earnings growth have moved in tandem with with more jobs sprouting alongside better earnings he said
While many perceive jobs and accompanying wages as pressuring margins and earnings the opposite seems to be the case he wrote
The argument from the fearful though is declining unemployment will mean less Federal Reserve stimulus which will depress liquidity and suck money out of assets and equity markets Additionally a tighter labor market could cause higher wages dampening earnings even if workers spend more in the national economy
Fund managers appear to fear that a tighter labor market will cause wages to rise thereby hurting earnings progress reads the Citi note
Those misplaced fears might be put to bed with the chart which Levkovich provides outlining the correlation between nonfarm payroll figures and yearly earnings swings |
C | U S futures edge higher ahead of data Dow Jones up 0 13 | Investing com U S stock futures pointed to a higher open on Thursday as investors awaited the release of U S economic reports later in the day although disappointing data out of China was expected to limit gains
Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 13 gain S P 500 futures signaled a 0 18 rise while the Nasdaq 100 futures indicated a 0 22 increase
Investors remained cautious after data showed that Chinese industrial production rose 8 6 in the first two months of 2014 missing market expectations for an increase of 9 5 while Chinese retail sales rose by a smaller than forecast 11 8 in the same period
The data added to concerns over the strength of the world s second largest economy
Tech stocks were expected to be active following reports NetApp Inc plans to cut 600 jobs or about 5 of its workforce due to slowing sales growth caused in part by declining demand from U S federal agencies
Herbalife was also slated to move a day after the company announced a civil probe into its practices by the Federal Trade Commission sending shares down over 7 on Wednesday The company s stock was still down 0 74 in after hour trade
In the financial sector Citigroup rose 0 21 in early trading as the U S lender was said to be considering lowering compensation or shrinking 2014 pay for any employees linked to a 400 million loan fraud at its Banamex unit in Mexico
Separately a U S judge on Wednesday ordered former Goldman Sachs Group trader Fabrice Tourre to pay more than 825 000 after a jury found him liable for defrauding investors in a subprime mortgage product that failed during the financial crisis
Goldman Sachs shares were up 0 26 pre market
Other stocks expected to be in focus included Dollar General scheduled to report quarterly results later in the day
Across the Atlantic European stock markets were mixed to lower The EURO STOXX 50 edged down 0 09 France s CAC 40 eased 0 08 Germany s DAX added 0 16 while Britain s FTSE 100 fell 0 18
During the Asian trading session Hong Kong s Hang Seng Index declined 0 67 while Japan s Nikkei 225 Index slipped 0 10
Later in the day the U S was to release data on retail sales and import prices in addition to the weekly government report on initial jobless claims |
C | U S stocks open higher on strong economic reports Dow Jones up 0 37 | Investing com U S stocks opened higher on Thursday supported by the release of upbeat U S retail sales and jobless claims data although disappointing Chinese economic reports released earlier in the day continued to weigh
During early U S trade the Dow Jones Industrial Average rose 0 37 the S P 500 added 0 29 while the Nasdaq Composite index edged up 0 26
The Commerce Department reported that retail sales rose 0 3 in February ending two months of declines Market expectations had been for an increase of 0 2
Core retail sales which exclude automobile sales also rose 0 2 last month ahead of expectations for a 0 3 rise
Separately the Department of Labor said the number of people filing new claims for unemployment benefits fell by 9 000 to a three month low of 315 000 last week from the previous week s revised total of 324 000
Analysts had expected initial jobless claims to rise by 6 000 last week
Market sentiment had weakened earlier after data showed that Chinese industrial production rose 8 6 in the first two months of 2014 missing market expectations for an increase of 9 5 while Chinese retail sales rose by a smaller than forecast 11 8 in the same period
In the financial sector Citigroup rose 0 38 as the U S lender was said to be considering lowering compensation or shrinking 2014 pay for any employees linked to a 400 million loan fraud at its Banamex unit in Mexico
Goldman Sachs was up 0 68 after a U S judge on Wednesday ordered Fabrice Tourre one of the bank s former traders to pay more than 825 000 after a jury found him liable for defrauding investors in a subprime mortgage product that failed during the financial crisis
Adding to gains Krispy Kreme Doughnuts surged 5 78 after hiking its yearly outlook
Meanwhile Williams Sonoma saw shares rally 7 92 after the seller of upscale cookware and home furnishings projected 2014 sales above expectations
On the downside NetApp Inc tumbled 1 56 following reports it plans to cut 600 jobs or about 5 of its workforce due to slowing sales growth caused in part by declining demand from U S federal agencies
Herbalife plummeted 2 29 a day after the company announced a civil probe into its practices by the Federal Trade Commission sending shares down over 7 on Wednesday
Across the Atlantic European stock markets were mixed to higher The EURO STOXX 50 added 0 21 France s CAC 40 rose 0 21 Germany s DAX gained 0 34 while Britain s FTSE 100 eased 0 07
During the Asian trading session Hong Kong s Hang Seng Index declined 0 67 while Japan s Nikkei 225 Index slipped 0 10
Also Thursday tensions between Russia and the West escalated ahead of Sunday s referendum in Ukraine s Crimea region now controlled by pro Russian forces on whether citizens want to join Russia |
MS | ANALYSIS SWFs set to resume search for returns gradually | By Natsuko Waki
LONDON April 7 Reuters Sovereign wealth funds hit hard
by ill timed investments into Western banks may soon dip their
toes back into risky assets with a more focused approach that
avoids bargain seeking for its own sake
After their 80 billion investment into major banks since
2007 turned sour these state owned investment funds are likely
to aim for investments that help to meet their countries
economic needs
There are tentative signs that sovereign wealth funds SWFs
are coming back to the international capital market with
cash rich funds from countries like China and Saudi Arabia
expected to lead the way As interest rates drop towards zero
globally and world stocks rise 25 percent since mid March risk
appetite even among traumatised SWFs may be on the mend
To a large extent the period of withdraw and regroup for
the SWFs is more or less over Everybody in the sector would say
that the bottom has not been reached yet but bottom fishing has
already started Alexander Mirtchev independent director of
Kazakhstan s SWF Samruk Kazyna told Reuters
It is more than likely that the targets they will choose
eventually would have specific strategic significance for their
own economies said Mirtchev who is also a senior economic
adviser to the Kazakh prime minister
Talal al Zain who heads Bahrain s SWF Mumtalakat told
Reuters late last month that the fund is eyeing stakes in U S
European and Asian firms in sectors including commodities and
financial services Ninety eight percent of its holdings are
currently in local companies
Also in March Gulf emirate Abu Dhabi bought a 9 1 percent
stake in German carmaker Daimler through its listed investment
vehicle Aabar
China s 200 billion SWF China Investment Corp has said it
has avoided big risks and losses by adjusting its investment
strategy last year by reducing stock exposure and increasing
cash positions
The CIC has cash but the politics of further losses on its
external investments are likely to induce caution said Brad
Setser geo economics fellow at the Council on Foreign Relations
in New York
Recent Chinese investments abroad have largely come from
state firms looking to buy into mining natural resource assets
abroad I would expect that basic trend to continue
DEAL APPETITE
The oil rich Gulf region is home to the world s largest SWF
the Abu Dhabi Investment Authority which by some estimates has
lost up to a third of its estimated 500 billion in assets since
the start of the credit crisis
Qatar s emir Sheik Hamad bin Khalifa Al Thani told a
German newspaper late in March that the country planned to
invest in the German automotive industry and was also interested
in German high tech companies
CIC has also committed 800 million to a new real estate
fund of Morgan Stanley in which it holds a stake according to
a source with direct knowledge of the deal
Spanish food group SOS Cuetara said earlier this month it
was in talks to sell a significant stake in the company to a
sovereign fund
There are pockets of money which continue to seek out
deals There is a greater focus on long term strategic
investing said Ken Griffin president of BGR Capital and Trade
in Washington
BGR Capital and Trade is an investment banking arm of
government relations firm BGR Group which represents and
advises Middle Eastern sovereign wealth funds
There needs to be a continued pattern of positive
developments over the next quarter before you see ripple effects
in deal markets When there s more stability in the U S markets
you will see greater appetite coming out of SWFs as well he
said
RISK MODEL
Even as the firepower of the SWFs has been scaled back the
2 3 trillion industry is estimated to double or even triple in
the next several years
Mindful of future inflation risks that could erode the value
of assets state owned funds are under pressure to balance the
need for adequate liquidity and the need to take risks and
invest actively into assets that would benefit their own
economies
Through natural evolution investments strategies are now
increasingly based on the underlying strategic rationale and
the need to maintain prudent levels of liquidity and risk
diversification within their portfolios BGR s Griffin said
You are going to see large SWFs maintain a full spectrum of
investment opportunities from targeted venture fund like
opportunities within targeted sectors like green energy all the
way down to U S Treasuries
Additional reporting by Frederik Richter and George Chen
editing by Stephen Nisbet |
MS | FACTBOX Bulls vs bears as economies improve slightly | LONDON April 8 Reuters Investors are divided over the
significance of recent signs of improvement in the world economy
and rises in global stock markets
One side says it is all just a bear market rally that will
soon end the other that there is light at the end of the tunnel
after the massive disruptions over more than 1 1 2 years
Here are some recent comments
UPBEAT
Barclays Wealth in a report entitled First signs of a
thaw
Macro news is beginning to shift tone no longer being
uniformly bad Policymakers continue to act aggressively easing
fiscal policy and introducing unorthodox means of stimulating
activity such as quantitative easing
Financial markets are adjusting in order to reflect the
reduced risk of a depression Credit spreads should narrow
accordingly and in time equities should recover
BlackRock in a weekly note from Bob Doll global chief
investment officer for equities
We do believe that the recession has peaked and that the
economy will stabilise in the second half of this year
Our confidence is growing that global equity markets are
ending the bottoming process that started with the waterfall
decline last October and that the lows from early March do
represent the lows for this cycle
Merrill Lynch Global Wealth Management in a note
entitled Economic free fall looks to be halted by Gary Dugan
chief investment officer
The gain in equities reflects the hardening optimism
that the worst of the recession is now behind us and that some
sort of revival regardless of strength lies ahead
True coincident data such as the latest U S payrolls
report still indicate the U S is deep in recession valley
and there are any number of hurdles to cross in coming weeks
Yet with a 24 percent rebound in the MSCI World Index
since its low the discounting machine is certainly looking
ahead to better times We are convinced this market rally has
staying power
DOWNBEAT
Morgan Stanley in a note entitled Bear market is not
over Selling today
We are selling equities from neutral to underweight We
continue to prefer cash over equities as we have done throughout
most of this bear market and we continue to prefer earnings
stability strong balance sheets and low valuations
Our three signposts to identify the end of the bear market
do not flash green We wish to wait for fundamentals to be
close to trough before turning more bullish The three
fundamentals we look at are 1 earnings 2 U S housing and
3 banks balance sheets
Julius Baer Asset Management from Stefan Angele
managing director in an interview with Reuters
We do not see a broad based recovery We do not believe
this is a major bull trend
This is not March 2003 We do not see enough evidence to
base a positive outlook for risky assets on
Allianz Global Investors RCM in a note from Neil Dwane
European chief investment officer
The recent rally in equities has to be put into context
January and February were a much worse start to the year than
anticipated Hopes and expectations pinned to Obama s
inauguration have been disappointed Markets want to believe
that politicians and central banks will effect a reflationary
rescue of the current dire circumstances
The market has rallied quite aggressively and technically
it could still rally another 3 percent to 5 percent but we do
not believe that this is the beginning of the next bull market
because there has not been as yet a capitulation type event
which historically signal the bottom of the market
To read Reuters Global Investing Blog click on
for the MacroScope
Blog click on for Hedge
Fund Blog Hub click on |
MS | UPDATE 1 Lotte bows out of final bid for InBev s OB source | Lotte won t submit final bid for OB source
Final round of offers due Friday sources
Three private equity firms in the running sources
Financing critical to getting deal done
Adds details on lenders background byline
By Michael Flaherty
HONG KONG April 17 Reuters South Korean retailer Lotte
Group will not submit a final offer for Oriental Brewery OB a
source close to the deal said on Friday opening the way for a
private equity buyer for the country s No 2 beer company
The source along with another source with direct knowledge
of the matter said Anheuser Busch InBev the world s largest
brewer and the owner of OB is accepting final offers on Friday
for its South Korean brewer which it values at more than 2
billion
Private equity firms Affinity Equity Partners Kohlberg
Kravis Roberts Co and MBK Partners backed by teams of bank
lenders across Asia are expected to submit final bids for OB
the sources said The sources did not want to be identified
because they were not authorised to speak on the record
Lotte s original offer for OB was lower than InBev wanted
sources have said previously but the retailer later came
forward with a revised bid
That too was rejected the source close to the deal said on
Friday prompting the company to bow out of the final round
Analysts and bankers saw Lotte as a front runner to buy OB
The company has a lot of cash on hand plus beer would complete
Lotte s product line up which includes popular local liquor
soju and whisky
The sources close to the deal said other strategic buyers
had been interested but the deal now comes down to the three
private equity firms
AB InBev has committed to selling non core assets with a 7
billion loan due in November which was part of the 45 billion
in borrowing InBev took out last year to buy U S brewer
Anheuser Busch
JPMorgan and Deutsche Bank are running the OB sale process
DOWN TO FINANCING
With three private equity firms in the hunt analysts and
bankers have questioned whether the firms can get proper
financing in this tough banking climate to afford the 2 billion
price tag
Buyout firms typically pay one third in cash for a deal and
borrow the rest
With Goldman Sachs as an adviser KKR has JPMorgan Standard
Chartered and HSBC among its financial backers as well as
Calyon ING Bank Natixis and Nomura Reuters Basis Point
reported
Affinity has Citigroup as an adviser and financial backer
along with Hana Financial Korea Exchange Bank National
Agricultural Cooperative Federation Natixis and Woori Bank
according to Basis Point
MBK is being advised by Morgan Stanley and has Hana and
Korea Development Bank behind it Basis Point said
All firms named either declined to comment or could not
immediately be reached
Additional reporting by Kim Yeon hee and Basis Point Editing
by Jon Loades Carter |
MS | REFILE ANALYSIS ECB s foot dragging to benefit Bunds ultimately | Refiles to add word pound to 13th paragraph and pounds
to 14th paragraph
By Kirsten Donovan
LONDON April 20 Reuters Euro zone government bonds have
underperformed U S and UK debt due to the European Central
Bank s reluctance to adopt the sort of quantitative easing used
elsewhere but they should fare better in the next 12 months
For one thing economic recovery could be slower to take
hold in the euro zone because the ECB has dragged its feet on
unconventional easing and that is expected to mean that euro
zone interest rates will have to stay lower for longer
capping euro zone bond yields
Moreover countries that have gone down the path of printing
money to shore up growth are expected by analysts to be the
focus of concerns about eventual price pressures and see their
bond markets underperform
While the prices of longer dated UK gilts and U S
Treasuries have risen as the Bank of England and Federal Reserve
effectively act as guaranteed buyers of government bonds they
risk sharp reversal once the central banks leave the market
It looks like the European Central Bank will continue to
drag its feet compared to the Fed and BoE and that on balance
should help Bunds relative to Treasuries in the medium term
said Nick Stamenkovic rate strategist at RIA Capital Markets
The ECB at the very least will cut the refi rate to 1
percent next month but it looks unlikely they ll follow the
path of the Fed and BoE by pursuing QE consequently inflation
fears are likely to remain heightened in the U S and UK
relative to the euro zone
Investors must wait until next month to see what alternative
policy measures the ECB adopts but the view is that outright
purchases of sovereign bonds are highly unlikely not least due
to the logistical difficulties in carrying that out
The different policy approaches have seen the yield premium
offered by gilts relative to Bunds fall to close to zero from
around 50 basis points in early March before the BoE announced
plans to purchase up to 75 billion pounds of gilts over a
three month period
Similarly the yield premium Bunds offer over Treasuries has
widened around 20 basis points to 34 basis points as U S debt
outperformed and yields fell after the Fed announced its own
300 billion Treasury buying scheme
Certainly for the near term at least we think the money
printers have scope for outperformance said Nomura rate
strategist Sean Maloney
But longer term the outlook is rather different
Like any sort of monetary easing if QE works it should
stimulate the economy and ultimately put bond yields up longer
term not down so you have a conflict between short and long
term said Morgan Stanley rate strategist Laurence Mutkin
Relative to the size of their respective government bond
markets the BoE s 75 billion pound QE programme is seen as a
shorter sharper shock than the Fed s 300 billion programme
Morgan Stanley estimates that by June the BoE will have
purchased 27 billion pounds more Gilts than the UK Debt
Management Office will have issued
We suspect that as we get towards June the Gilt market
will get nervous its biggest buyer is going to evaporate said
Calyon rate strategist David Keeble
Gilts are trading flat to Bunds at the moment which isn t
sustainable given the UK economy looks to be so far ahead in its
recovery than the euro zone which seems to be lagging the whole
economic cycle
HIGHER YIELDS AHEAD
Bunds are expected to underperform their U S and UK
counterparts on a six to 12 month horizon according to a
Reuters poll which asked fixed income strategists where they saw
U S European and UK 10 year bond yields over this period
The yield spread between 10 year gilts and 10 year Bunds is
seen widening to 15 basis points in six months time and 30 basis
points in one year as gilt yields are forecast to rise faster
then Bund yields
The 10 year T note Bund spread is seen narrowing to 20 basis
points in six months and 10 basis points in 12 months as
currently lower yielding Treasuries underperform
Certainly analysts don t see a protracted period of low
government bond yields as was the case after Japan s ill fated
attempt at QE at the start of the decade as governments and
central banks have been much quicker to leap into action during
the current crisis
Against this back drop investors will find it even more
crucial to differentiate between the main government bond
markets as the effect of government and central bank stimulus
programmes begins to be felt |
MS | European Equities And U S Futures Decline Overnight | Current Futures Dow 78 00 S P 9 10 NASDAQ 11 50European markets are currently trading below the break even line while U S futures posted significant declines during the overnight session Asian shares headed higher in the first part of the trading session but after the mid day break the market shed the gains made earlier European markets opened lower with the financials trading mixed in Germany but posting significant gains on the U K s Ftse Most German stocks declined this morning with Deutsche Post the biggest European mail carrier declining more than 8 as the company was affected strongly by the economic slowdown In the U K the financials again led the pack of gainers RBS Lloyds and RBS rose 6 on average extending the gains seen over the last few days of trading On the other hand commodity stocks and companies that specialize in military equipment such as Rolls Royce and BAE Systems posted the biggest declines Later today the U K government is likely to report the biggest deficit on record so most likely the military will see its budget cut which will in turn affect its sub contractors TheLFB Forex com Trade Team noted Today the market expects earnings from a number of U S corporations It will be interesting to find out how these companies are behaving throughout the credit crisis Today s earnings reports are coming from Alcon Apple AT T MacDonald s Morgan Stanley Snap On Boeing and Wells Fargo In Europe the food company Nestle and the beer producer Heineken reported lower earnings as first quarter sales declined TheLFB Forex com Trade Team said Overnight the Nikkei added 15 97 points 0 18 to 8 727 30 The Australian S P Asx fell 9 20 points 0 25 to 3 668 20 The U K Ftse fell 9 24 points 0 23 to 3 978 22 while the German Dax declined 16 02 points 0 36 to 4 485 61 Crude oil for May delivery was recently trading at 48 20 per barrel down by 0 30 Gold for May delivery was recently trading up by 4 30 to 887 10 |
MS | FOREX Yen rises vs dollar on U S bank jitters | Yen rebounds towards a three week high vs dollar
Investors wary of U S bank stress tests
Aussie gives up gains made vs yen after Kirin news
By Satomi Noguchi
TOKYO April 23 Reuters The yen rose broadly on Thursday
climbing back towards a three week high against the dollar
touched the previous day as U S stock futures fell and concerns
about the banking sector re emerged after disappointing earnings
from Morgan Stanley
S P futures fell 0 3 percent after U S stocks faced a late
hour sell off on Wednesday with investors concerned about the
outlook for banks ahead of the U S government s stress test
results
The Wall Street Journal reported that U S banks will be
briefed by regulators as early as Friday on how they performed in
the tests before the results are made public later
Some estimates of banks likely losses that were used in the
stress tests were tougher than expected the newspaper said
That fanned fears about more losses at the banks included in
the tests after some upbeat earnings reports earlier this month
prompting investors to cut riskier trades in which they had sold
the yen against other majors traders said
The currency market is lacking a clear direction just as
U S stocks are said a trader at a Japanese bank
We have two big factors that are swinging the markets
between optimism and pessimism the eventual state of the
troubled U S automakers and the results of bank stress tests
the trader said
The dollar fell 0 2 percent to 97 79 yen sliding back near a
three week trough of 97 57 yen touched on Wednesday
The euro fell 0 4 percent to 126 99 and dropped 0 1 percent
to 1 2987
The Australian dollar gave up earlier gains against the yen
and the dollar as most Asian stocks fell and metals like Shanghai
copper dropped amid the bleak outlook for the global economy
The International Monetary Fund cut growth forecasts for
every major economy in line with the fund s assessment that the
world was in its deepest post World War Two recession
The Aussie earlier rose against the yen after Japanese beer
maker Kirin Holdings said it had offered to buy all shares in
Australian brewery Lion Nathan
It also briefly gained the New Zealand dollar on growing
speculation that while Australian interest rates will stay on
hold the Reserve Bank of New Zealand is likely to cut rates next
week
That speculation was fuelled after central bank watcher Terry
Mcrann wrote that the Reserve Bank of Australia might choose to
keep rates steady in May and June after core inflation was
surprisingly firm in the fourth quarter
The Australian dollar fell 0 2 percent to 68 82 yen after
rising to near 69 50 yen earlier and slid 0 2 percent to
0 7045
The Aussie dropped 0 2 percent against the kiwi to
NZD 1 2682 after rising above NZD 1 2700 earlier
Editing by Chris Gallagher |
MS | FOREX Yen slips broadly as equities rebound | Yen pares gains as US stock futures Nikkei turn higher
Investors awaiting results of U S bank stress tests
Some focus on Japan mutual fund launches towards month end
By Masayuki Kitano
TOKYO April 23 Reuters The yen gave up early gains and
slipped broadly on Thursday as U S stock futures and Tokyo share
prices turned positive spurring buybacks of higher yielding
currencies against the yen
The yen rose broadly earlier in the day as concerns about the
banking sector re emerged in the wake of disappointing earnings
from Morgan Stanley on Wednesday
Investors are concerned about the outlook for banks ahead of
the U S government s stress test results and an initial dip
in U S S P futures also helped temper risk appetite and lent
support to the yen
But the Japanese currency later came under pressure as S P
futures turned positive and rose 0 8 percent while Japan s
Nikkei share average shed its earlier losses and climbed 1 4
percent
The flows that are coming out are probably from hedge funds
I get the sense that traders are just sticking to short term
trading said a trader at a major Japanese trading house
The yen may also be facing some pressure from yen selling
flows linked to a slew of Japanese investment trusts expected to
be launched towards the end of the month he said Some of these
funds will invest in overseas assets or give investors the option
of taking on foreign exchange risk
But other market players said the upcoming launches had not
affected currency markets
The dollar was steady against the yen at 98 05 yen after
falling to 97 63 yen on trading platform EBS earlier just shy of
a three week low of 97 57 yen hit on Wednesday
The euro rose 0 3 percent to 127 78 yen having rebounded
from a one month low of 126 10 yen hit earlier this week
Against the dollar the euro rose 0 2 percent to 1 3030 up
from this week s one month low of 1 2888
The Australian dollar and New Zealand dollar two currencies
that tend to rise when equities climb both gained against the
yen
EYES ON STRESS TESTS
The Wall Street Journal reported that U S banks will be
briefed by regulators as early as Friday on how they performed in
the stress tests before the results are made public later
Some estimates of banks likely losses that were used in the
stress tests were tougher than expected the newspaper said
Investors will continue to be cautious until May 4 and the
market will likely fluctuate in reaction to both positive and
negative news that might come out in the meantime said Masafumi
Yamamoto head of FX Strategy Japan at the Royal Bank of
Scotland referring to the date on which the test results are due
to be made public
What s behind the cautiousness is a view that the situation
surrounding U S banks is still severe even though the worst may
be behind them Yamamoto said
The Australian dollar initially climbed against the yen after
Japanese beer maker Kirin Holdings said it had offered to buy all
shares in Australian brewery Lion Nathan
It briefly gave up its gains against the yen and the dollar
as Asian shares came under pressure but later regained ground
rising 0 8 percent to 69 54 yen and edging up 0 5 percent to
0 7094
Additional reporting by Satomi Noguchi and Aiko Hayashi
Editing by Joseph Radford |
JPM | Forex Yen gains in Asia as retail household data mixed equities eyed | Investing com The yen gained slightly in Asia on Tuesday after mixed data on retail sales and household spending with investors watchinga series of major finance houses including MOrgan Stanley and JPMorgan NYSE JPM Cazenove upping equity bets on expectations of a weaker yen as the Fed looks set to raise rates next month
USD JPY changed hands at 111 90 down 0 04 while AUD USD traded at 0 7493 up 0 16
In Japan household spending for October fell 1 0 month on month compared to a 0 1 gain seen and at a minus 0 4 pace year on year compared to a 0 6 fall expected for the eighth straight drop Unemployment for October clocked in at 3 0 as seen while retail sales rose 0 1 compared to a 1 2 fall seen year on year
The U S dollar index which measures the greenback s strength against a trade weighted basket of six major currencies was last quoted down 0 27 to 101 21
Overnight the dollar was little changed against the other majors currencies on Monday as overall confidence in the U S economy continued to lend some support to the greenback while trading was expected to remain quiet with no major U S data expected throughout the day
The greenback has been broadly supported in recent weeks amid expectations that increased fiscal spending and tax cuts under the Trump administration will spur economic growth and inflation
The euro remains in focus ahead of an upcoming referendum in Italy On December 4 Italian citizens are set to vote in a referendum on whether to overhaul their national constitution which should help Prime Minister Matteo Renzi implement badly needed economic reforms
The vote is widely seen as determining Renzi s political fate seeing as he may resign if a no vote prevails The latest opinion polls show most Italians opposing the proposed constitutional changes |
C | Natural Gas Prices In January Are Remarkable Notes SP | By U S natural gas prices have posted their biggest monthly gain since September 2009 thanks to the frigid weather in January according to Standard Poor s
January 2014 has been a remarkable month for commodities overall and for natural gas specifically as record cold temperatures disrupted the movement of goods and drove up home heating demand
S P s GCSI natural gas index had gained 19 3 percent earlier this week since its sluggish start in the new year That s the largest monthly gain since September 2009 wrote S P commodities vice president Jodie Gunzberg in a blog post
Only 17 months of the 240 in the history of the index have seen bigger gains than 19 3 wrote Gunzberg The index has existed in this form since January 1994
U S natural gas prices have been driven up by a tight supply and demand balance in recent weeks Citigroup analysts said in a recent note Rising U S production amid a broad North American energy boom may not meet demand in the short term Natural gas prices rose 32 percent in 2013
Now the question is whether natural gas will end January and earn the month a bull market title defined as a rise of 20 percent or more in value There hasn t been a bull market month for natural gas since 2009 on the index model
On Wednesday the index gained 17 9 percent for the month of January falling shy of the 20 percent threshold The benchmark spiked up 9 2 percent on Jan 24 and on Monday was up 44 percent relative to its recent low on Nov 4 2013
Bull Months in S P GSCI Nat Gas Index 1994 2014 S P Jodie Gunzberg S P Jodie Gunzberg
For the first time in a long time natural gas is in backwardation which is relatively rare We almost never see backwardation which means there s a shortage in natural gas Gunzberg told IBTimes in a phone interview Natural gas has only been in backwardation about 7 6 percent of the time in the history of the index
Any traders in the front month have a chance to profit she added It s difficult to replenish commodities and this trend has been pretty persistent for January though the fundamentals were in place at the end of December she said
Natural gas on New York s mercantile exchange NYMEX for February delivery rose above 5 per million British thermal units in Wednesday s trading beating a key price threshold Citi called that 5 threshold unthinkable
About half of U S households use natural gas to heat their homes U S natural gas demand hit its second highest on record on Tuesday at 133 billion cubic feet per day according to the Wall Street Journal |
C | Commodity Sector Outlook Got You Down Consider This Metal | By Commodities have started to seriously bore Wall Street That s because commodity prices are expected to hold steady at best this year and many are expected to fall Production is generally seen as keeping pace with or exceeding demand and inventories of a number of commodities are not low enough to bolster prices
Barclays PLC put it succinctly recently in noting that commodity returns will remain sluggish for some time to come Consider oil the most heavily traded commodity The U S shale revolution is pushing the nation closer and closer to being able to export rather than import crude oil Tensions between Iran and the West appear to be easing and there are tentative signs of improving crude oil production from western Libya particularly its massive El Sharara field which has a production capacity of some 350 000 barrels per day Oil prices are widely believed to have nowhere to go but down Even the risk of supply disruptions from South Sudan or continued output problems in eastern Libya are not expected to boost global oil prices according to Goldman Sachs analyst Jeffrey Currie writing in a note that oil price risks are substantially skewed to the downside in 2014 Other commodity prices appear headed south Ethanol prices are already trending lower in response to the U S government s decision to not increase the amount of the commodity that gasoline refiners must blend And since fuel production monopolizes as much as 40 percent of the U S corn crop that is weighing on the corn prices Capital Economics commodities economist Tom Pugh wrote recently that he forecasts corn to fall to 3 50 per bushel this year from 4 20 per bushel in December We expect demand for grains especially corn to be subdued over the next year he wrote in a note Strong supply will weigh on other commodity prices This season s wheat harvest is projected to climb to a record according to the U N s Food and Agriculture Organization Barley prices are expected to be capped by high stockpiles and competition with other grains and oilseeds International soy bean prices have fallen from the peaks of the drought reduced output in the 2011 12 season IGC said The global cotton market meanwhile is bracing for a massive influx of supply from China s huge stockpile which it now no longer wants to maintain The upshot of all these forecasts is a broad based pessimism among Wall Street investors about what comes out of the ground But amid all this gloom one commodity could begin to sparkle copper Over the last 12 months the price of the red metal has fallen more than 12 percent from 3 72 per pound to 3 26 per pound Copper prices during 2013 Thomson Reuters Eikon COMEX copper futures But there are fundamental changes afoot that should raise it out of its doldrums In fact those changes have already begun emerging from Dec 11 2013 to Jan 8 2014 copper s price edged up 1 7 percent It s hard to overstate the importance of copper prices both to numerous industries as well as the global economy In the U S demand for products made of copper 60 percent of which is used to make wire comes primarily from four sectors One is construction That includes home builders like Hovnanian Enterprises Inc NYSE HOVU D R Horton Inc NYSE DHI and Lennar Corporation NYSE LEN which buy wiring plumbing and appliances that contain the metal The construction sector also includes industrial builders like closely held Bechtel Group Inc KBR Inc NYSE KBR and Fluor Corporation NYSE FLR that assemble power plants drilling platforms and factories A second source of copper demand comes from utilities and companies that own and operate the vast transcontinental high power lines that crisscross the nation and constitute the bulk power grid Both builders and utilities buy their products from companies like Germany s ThyssenKrupp AG which turns copper into wire tubes sheaths plates and coils A third source of copper demand is manufacturers of electronic products like smart phones such as Apple Inc Nasdaq AAPL and Samsung Electronics Co Ltd A fourth industry that buys large amounts of copper products is the car and truck industry The average automobile for example contains nearly one mile of copper wiring while the total weight of copper in cars ranges from 50 pounds for compacts to as much as 100 pounds for luxury and hybrid cars There are three reasons that copper prices may rise this year Chinese demand The State Grid Corporation of China SGCC which provides power to 80 percent of the world s second largest economy aims to boost by 13 percent its annual investment to more than 60 billion according to research by Barclays PLC Given that Chinese utilities account for more than 40 percent of Chinese copper demand that sort of big jump in capital investment should firm up prices We had forecasted a gradual normalization of spending throughout 2013 as the year started with investment up 44 percent year over year Barclays analyst Sijin Cheng wrote in a note Grid investment growth softened as expected last year However the new SGCC target exceeds our expectations and suggests that copper demand from the power sector could stay as strong if not stronger in 2014 Prospects of significantly stronger Chinese copper demand this year contributed to Citigroup Inc NYSE C raising its stance on the mining sector including copper mining to Bullish from Neutral While we remain concerned about the potential long term structural demand story for commodities in China and we are cognizant of a potential seasonal slowdown in the first quarter of this year our move to bullish reflects better bottom up fundamentals particularly from the major miners We would rather be too early than too late in making this call China is not the only source of expected rising copper demand In its Global Outlook Barclays said worldwide demand for the red metal rose throughout 2013 By yearend the investment bank said its estimate of 2013 global copper demand is almost 50 percent higher than the low point for our forecasts reached in Q2 and is almost three times the average growth rate of the 2000s For 2014 we forecast demand growth to be a little slower but if our forecast of around 800 000 tons is achieved then demand growth in 2013 14 will be the third strongest two year demand growth expansion in the copper market for more than 20 years If European economic growth continues advancing this year the continent will also account for increased copper demand Supply growth Strikes storms and scheduled maintenance of major copper processing facilities are flattening the growth in copper production Barclays said in a Jan 13 note that the rate at which global copper supplies are growing will peak this year and then begin to slow next year Chile Output at Codelco s 300 000 ton per year Chuquicamata smelter was halted for most of December due to a strike Philippines Glencore s Pasar smelter in the Philippines remains closed since Typhoon Haiyan slammed into the country on Nov 7 2013 Australia BHP Billiton plans a maintenance outage at its Olympic Dam smelter in March Indonesia Freeport McMoRan has suspended copper concentrate exports from its huge Grasberg mine in Papua as it fights a sudden 25 percent export duty that will grow to 60 percent by 2016 on copper concentrate exports That led Deutsche Bank to cut its 2014 copper sales estimates by 120 million pounds assuming a full first quarter of export disruptions China Barclays said Jan 24 that its final estimate of the nation s refined copper production of 6 5 million tons was lower than the reported total of 6 9 million tons Global inventory In addition to higher demand and production constraints the global stocks of already mined copper are tightening A year ago according to Barclays copper stocks were about 1 46 million tons That rose to 1 81 million tons in April of last year and has been falling ever since On Dec 13 global copper stocks had declined to an estimated 1 27 million tons Further the metal s on warrant inventory has shrunk to its lowest level since 2008 Global copper inventories are only slightly in surplus Barclays Research ICSG Wood Mackenzie UBS AG raised its near term copper price forecast on China s robust commodity trade and due to Brazil s weak supply growth Specifically UBS increased by 6 percent an earlier 2014 copper price forecast of 2 95 per pound although the investment bank still sees copper prices this year lower than last year UBS also raised its copper price forecasts for 2015 slightly to 2 90 from 2 85 |
C | China Wheat Intake Up 5000 In December 2013 | By Here s a percentage change you don t see often on Wall Street 5319 1 percent
That s the change from December 2012 to December 2013 in China s wheat imports measured in kilo tonnes according to a recent Citigroup Inc NYSE C note
In real terms the change is also staggering
That 5319 YoY increase was not a typo wrote Citigroup China commodities analyst Shawn Shen in an email to IBTimes Chinese wheat imports were 395 22 kt in Dec 2013 and 7 29 kt in Dec 2012
From seven kilo tonnes to almost 400 kilo tonnes the startling one off statistic illustrates China s reliance on wheat imports in 2013
The country is already the world s biggest wheat consumer but suffered from a smaller harvest in 2013 reported Bloomberg Bad weather spoiling domestic harvests in 2013 meant China could stand to beat out Egypt as the world s top wheat importer
On an annual basis China s wheat imports rose from under 1 million tonnes in 2009 to 5 5 million tonnes in 2013 according to data compiled by Thomson Reuters China s imports of barley corn and rice couldn t keep up
China Top 5 Grain Imports 2013 Thomson Reuters Data Thomson Reuters China Top 5 Grain Imports 2006 2013 Thomson Reuters Data Thomson Reuters
In 2013 China imported by far the most wheat from the United States relative to any other country it imported from It bought 3 8 million tonnes of U S wheat relative to the second top partner Canada who sold China 866 000 tonnes
December 2013 too pales with October 2013 In the latter month alone China imported 1 3 million tonnes of wheat according to the Citi note
Thankfully world wheat production for the 2013 2014 season is projected to hit a new record according to the USDA s latest wheat outlook China led that increase in January 2014 up 1 million tonnes to 122 million China s Henan province is its biggest growing region
For the year overall China increased wheat imports by 50 percent thanks to the record U S harvest in its second largest yearly import boost by commodity said Citi China consumed 122 5 million tonnes of wheat in 2011 on USDA estimates China domestically produces the vast majority of its wheat consumption
Russia China India the European Union and the U S are among the world s top wheat producers
The U S winter wheat crop has suffered from bitter temperatures as their snow cover evaporated reported the USDA on Monday Wheat is used in flour noodles and livestock feed among other uses
Citigroup China 2013 Imports Recap Jan 2014 Citigroup Note Citigroup Research
China has relied heavily on imports and production of raw materials to fuel its economic growth over the past decade Lately fears of a Chinese economic slowdown have spooked commodities investors |
C | Philip Morris 4Q Earnings Preview Bigger Profit Margin Seen Offsetting Lower Sales | By Philip Morris International Inc NYSE PM the world s biggest non governmental tobacco company will report a 6 percent fourth quarter profit increase as bigger margins offset the drag of a strong dollar higher excise taxes in Europe and lower cigarette sales volumes
The New York based company which reports before the market opens on Thursday is expected to report net income of 2 2 billion compared with 2 07 billion in the year earlier quarter while earnings per share will increase to 1 35 cents per share from a 1 25 per share over the same period according to a Thomson Reuters survey of Wall Street analysts Excluding one time items analysts expect earnings per share of 1 37 cents up 10 2 percent from 1 24 cents in the fourth quarter of last year
Revenue is projected to decline 1 3 percent to 7 79 billion to 7 89 billion
Wall Street expects the company s pre tax profit margin to increase to 41 percent from 38 3 percent and its net income margin to expand to 28 3 percent from 26 2 percent
That profit margin expansion offset a variety of obstacles The U S dollar s continuing strength has weighed for several quarters on the company s results Because Philip Morris reports results in dollars revenue received overseas must first be converted into dollars When the dollar rises against other currencies those currencies purchase fewer dollars hurting results
Most of the company s sales are outside the U S According to Ted Cooper a value investor writing for MotleyFool com the European Union represents 27 5 percent of the firm s revenue and 31 percent of its operating profit while Asia accounts for about 35 percent of revenue and operating profit
The changing economics of the global tobacco industry have also hit Philip Morris in recent years
According to a note from Citigroup Inc NYSE C analysts Vivien Azar and Geoff Small taxation low priced competition changing laws and illicit consumption have impacted sale volumes in Philip Morris five key markets the Philippines Russia Japan Indonesia and Turkey Together those markets account for 40 percent of the company s sales volume
The Philippines Russia and Turkey all charge higher taxes on the firm s brands than on cheaper local products Counterfeit cigarettes as well as a new Russian smoking ban and Japanese pricing regulations continue to hurt sales
If results are anything like those of Altria Group Inc NYSE MO then investors are unlikely to be pleased said Cooper While Altria and Philip Morris operate in different geographies they both distribute the Marlboro brand Altria distributes the brand in the U S while Philip Morris distributes the brand outside the U S Altria is seeing an increase in the U S distribution of Marlboro while Philip Morris is seeing a decline in the European distribution where excise taxes can exceed 70 percent |
C | What Argentina Means For Frontier Market Investors | By After a decade long love affair with emerging markets investors turned to frontier markets as the latest in investment chic pinpointing markets where both risks and rewards were substantial
But recent troubles in Argentina once a common example of a promising frontier market may make frontier market specialists rethink their strategies
Argentina typifies the risks that loom for investors in frontier markets There has been a growing perception the last few years that frontier markets are guaranteed winners Nothing could be further from the truth wrote frontier markets expert and former Citigroup equity director Allan Dwyer in an email to IBTimes
This is a very risky asset sub class and Argentina proves the point he added
Frontier markets are sometimes called emerging emerging markets and are characterized by high growth potential but immature and illiquid markets Risky politics there contrast with low labor costs and abundant natural resources Examples include Nigeria Kenya Jordan Pakistan and Vietnam commonly included in frontier market indices
Earlier this year Argentina s peso currency depreciated the most in more than a decade The country suffers from severe inflation a black market for foreign exchange capital flight dwindling foreign reserves and a new current account deficit among other problems
Its central bank has intervened to stabilize exchange rates spending hundreds of millions Political leaders have accused foreign media and businesses of deliberately undermining the Argentinian economy according to the Wall Street Journal
Still some frontier market specialists are sticking to their guns They point out that uncertain markets and dismayed investors offer the best buying opportunities
Despite the serious problems currently facing the country investors are not going to flee in disarray Tomas Guerrero a frontier markets specialist at Spain s ESADE Business School told IBTimes
Argentina s benchmark Merval stock index has actually gained 9 percent for the year to date and has appreciated by more than 82 percent in the past year Guerrero underlined those gains as significant
The Merval 25 at 5 900 points is much better than in June of last year when it fell below 3 000 points he said Investors could be jockeying into position ready for a potential change of government in 2015 that could turn Argentina around Guerrero said
Recent discoveries of shale energy deposits in northern Patagonia also bode well he added
Wall Street analysts and other investment advisers are not as easily convinced though
UBS AG VTX UBSN analyst Rafael de la Fuente points out in a recent note that Argentina s oil and gas production is actually declining Argentina s recent swing from a current account surplus to a deficit has also upended a long established economic model he said
Without an orthodox approach to curbing inflation Argentina is indeed heading downhill without brakes he wrote on Jan 29 What is needed is a radical change in policy direction that right now is sorely missing
Jay Pelosky a principal with J2Z Advisory LLC also called Argentina a mismanaged emerging market and paired it with Venezuela
Economic troubles have been brewing in Argentina for years Pelosky told IBTimes
Argentina has really had a real issue with their domestic internal economy with inflation and the value of the currency said Pelosky who has worked in Latin American equities for 24 years
He said there was a reasonably high likelihood that Argentina would turn to the IMF for financial support within the next two quarters a move that could spark a similar request from Turkey which would deeply unnerve investors Pelosky s asset allocation and portfolio strategy consultancy has more than 3 billion under advisement
As turmoil in Argentina unfolds other frontier market analysts look to alternative markets such as Nigeria and Vietnam
Global X Next Emerging and Frontier fund analyst Jay Jacobs is bullish on Vietnam for instance Strong projected economic growth of 5 8 percent and strong 2013 exports make for an attractive investment case he said
Similarly almost two thirds of Nigeria s population are under 25 and due to enter the workforce shortly which could pay demographic dividends according to Jacobs
Jacobs isn t bullish on frontier markets as a whole but says they make sense as an investment proposition
They re not correlated to the developed markets so they can provide diversification he told IBTimes Demographically they look very appealing
There s been strong interest in frontier markets said Jacobs whose research informs Global X emerging and frontier market funds worth 570 million
Partly thanks to that interest regulators have started paying attention too
Independent securities regulator FINRA has made the marketing of frontier markets a priority for 2014 The group highlighted serious geopolitical risks less liquid markets and low investor protection standards in its annual letter in early January
Nonetheless many investors have piled into frontier markets where returns significantly beat emerging markets last year That includes institutional investors and retail investors
As for Argentina It has become in the last year one of the most attractive destinations for investors wrote Guerrero to IBTimes citing the extremely low price of assets and a climate of widespread pessimism
Investors are anticipating a sea change he said |
C | 3 Former Employees Of Barclays Charged With Libor Manipulation | By Britain s Serious Fraud Office said on Monday that it has launched criminal proceedings against three former employees of Barclays NYSE BCS charging them with manipulation of the Libor interest rate benchmark dealing yet another blow to the British bank which has been dealing with the scandal for the last two years
According to a report from Agence France Presse the Serious Fraud Office or SFO said that the three employees Peter Charles Johnson Jonathan James Mathew and Stylianos Contogoulas conspired to defraud between 1 June 2005 and 31 August 2007 The three have pleaded not guilty and will stand trial next year
The latest charges against the three employees takes the total number of people charged with Libor manipulation to six since the investigation began in July 2012 The SFO had charged two employees of RP Martin Holdings in July and Tom Hayes who was associated with UBS NYSE UBS and Citigroup NYSE C as a trader in June
According to a report by Reuters eight banks and RP Martin have paid penalties amounting to about 6 billion for the alleged manipulation of Libor and its European equivalent Euribor Barclays had paid 290 million pounds 450 million in fines in July 2012 to British and U S regulators for attempting to manipulate the Libor and Euribor interbank rates from 2005 to 2009
Johnson left Barclays on Sept 27 2012 and Mathew who reported to Johnson left the bank one day later according to Reuters Contogoulas after leaving Barclays in 2006 reportedly joined Merrill Lynch as a rates trader
What Is Libor And How Is Barclays Involved
It is a benchmark interest rate set by the British Bankers Association or BBA and affects the borrowings of consumers and companies worldwide Leading banks submit a figure to the BBA based on the rate at which they estimate they can borrow funds from other banks The BBA then calculates the average of rates which is the Libor after excluding the highest and the lowest 25 percent of estimates According to AFP Libor forms the basis for 500 trillion worth of contracts worldwide ranging from housing mortgages to corporate lending
Between 2005 and 2007 a few employees of Barclays trading unit convinced employees responsible for submitting Libor rates to the BBA to alter the rates while some also convinced other banks to alter their rates During the 2008 financial crisis Barclays submitted artificially low rates to borrow money more cheaply and project a healthier image of the bank
The news of the Libor manipulation by Barclays employees led to the resignations of the bank s then chairman CEO and chief operating officer and generated criticism over the standards and work culture at multinational banks |
C | U S futures rise ahead of home sales data Dow Jones up 0 20 | Investing com U S stock futures pointed to a higher open on Friday as Thursday s upbeat U S economic reports continued to fuel optimism over the strength of the country s economic recovery while markets still eyed upcoming home sales data
Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 20 rise S P 500 futures signaled a 0 17 increase while the Nasdaq 100 futures indicated a 0 14 gain
U S equities found support on Thursday after the Department of Labor said the number of people who filed for unemployment assistance in the U S last week fell by 3 000 to 336 000 slightly below expectations for a decline of 4 000
The Labor Department also said U S consumer prices rose 1 6 on a year over year basis in January in line with forecasts Consumer prices were 0 1 higher from a month earlier also matching forecasts
The data came after Wednesday s minutes of the Federal Reserve s January meeting indicated that that the current pace of its decrease in bond purchases would remain unchanged so long as the economy shows signs of improvement
The financial sector was likely to be in focus following reports Citigroup boosted Chief Executive Officer Michael Corbat s compensation 25 to about 14 4 million for 2013 Shares in the U S lender were up 0 21 in after hour trade
Facebook was also expected to remain active after the social network announced earlier in the week the acquisition of mobile messaging startup WhatsApp Inc for as much as 19 billion After gaining over 2 on Thursday the stock was up 0 32 in early trading
Elsewhere Juniper Networks surged 2 81 after hours as the company announced plans to return at least 3 billion to shareholders and cut 160 million in expenses bowing to pressure from activist hedge funds Elliott Management Corp and Jana Partners LLC
In earnings news late Thursday Hewlett Packard reported fiscal first quarter sales and profit that topped market estimates thanks to new orders for corporate machines and servers to run data centers The news sent shares in the personal computer maker up 1 13 in extended trade
Other stocks likely to be in focus included Charter Communications scheduled to report quarterly results later in the day
Across the Atlantic European stock markets were mixed to higher The EURO STOXX 50 edged up 0 12 France s CAC 40 rose 0 20 Germany s DAX dipped 0 01 while Britain s FTSE 100 gained 0 29
During the Asian trading session Hong Kong s Hang Seng Index gained 0 78 while Japan s Nikkei 225 Index rallied 2 88
Later in the day the U S was to release private sector data on existing homes sales |
C | U S stocks open mixed home sales report ahead Dow Jones down 0 07 | Investing com U S stocks opened mixed on Friday as markets anticipated the release of U S new home sales data later in the trading session after upbeat U S economic reports on Thursday supported equity markets
During early U S trade the Dow Jones Industrial Average eased 0 07 the S P 500 inched up 0 03 while the Nasdaq Composite index added 0 18
U S equities found support on Thursday after the Department of Labor said the number of people who filed for unemployment assistance in the U S last week fell by 3 000 to 336 000 slightly below expectations for a decline of 4 000
The Labor Department also said U S consumer prices rose 1 6 on a year over year basis in January in line with forecasts Consumer prices were 0 1 higher from a month earlier also matching forecasts
The data came after Wednesday s minutes of the Federal Reserve s January meeting indicated that that the current pace of its decrease in bond purchases would remain unchanged so long as the economy shows signs of improvement
In the financial sector Citigroup added 0 17 following reports it boosted Chief Executive Officer Michael Corbat s compensation 25 to about 14 4 million for 2013
Juniper Networks surged 2 15 as the company announced plans to return at least 3 billion to shareholders and cut 160 million in expenses bowing to pressure from activist hedge funds Elliott Management Corp and Jana Partners LLC
Amazon com added to gains up 1 01 after the Wall Street Journal reported that the online retailer had discussions on whether to add brands including Ralph Lauren
On the downside Facebook dropped 0 45 as investors were still digesting the social network s announcement earlier in the week that it bought of mobile messaging startup WhatsApp Inc for as much as 19 billion
In earnings news late Thursday Hewlett Packard reported fiscal first quarter sales and profit that topped market estimates thanks to new orders for corporate machines and servers to run data centers The news sent shares in the personal computer maker up 1 23 at the open of the U S trading session
Across the Atlantic European stock markets were mixed to higher The EURO STOXX 50 edged up 0 15 France s CAC 40 rose 0 19 Germany s DAX dipped 0 01 while Britain s FTSE 100 added 0 17
During the Asian trading session Hong Kong s Hang Seng Index gained 0 78 while Japan s Nikkei 225 Index rallied 2 88
Later in the day the U S was to release private sector data on existing homes sales |
C | Maybe More Than A Matter Of Timing Domestic Oil Inventories Increase | For the tenth straight week dating back to the week just before the global liquidations in August reported domestic crude inventories increased At 489 4 million barrels the current level of oil stock excluding the SPR is only slightly less than the record high of 490 9 million barrels reached the week of April 24 Transitory is dead
The increase in oil inventories comes again even as domestic production stalls at a significantly lower level than back in April The only answer is again demand as an astounding 35 5 million additional barrels have found themselves in storage just in those ten weeks since the heaviest breach of the latest dollar run
Given those continuing depressive dynamics crude prices again flirt with 30 with the January 2016 futures trading as low as 39 84 today Just as in that August turmoil the crude WTI futures curve is quite as flat and bearish now even though outwardly commentary and convention which includes FOMC positioning seems quite assured to have moved on
These prices look nothing like the economic and financial conditions that demand the FOMC end ZIRP not that ZIRP would do anything positive to begin with lest this and the global economy overheat Monetary practitioners are always finding themselves worried about being behind the curve in terms of inflation and thus they only grow impatient and more so after each deliberative delay What we see here is that there is no such curve for the FOMC to be behind as nothing they suggest is even remotely priced on any front
That includes of course the direct relation between these commodities particularly crude and crude eurodollar financialism that has performed the anti ZIRP activities in 2015 After obliging FOMC rhetoric in late October the eurodollar futures curve continues to renew its bearish flattening Some attention is paid to the policy threat but overall the curve suggests once more the opposite of what excites mainstream economic concerns at least those expressed in public
Even the UST curve is being traded in that manner as the belly continues to flatten down to close to its early 2015 absolute cycle lows There is some additional pressure in the 2s30s the long curve view but that once again speaks to how monetary policy can do little but make it all that much worse In other words the back end is flattening no matter what 5s and out and there is but clear additional pressure inside where the Fed is given the most charitable perceptions that they actually have some ability beyond moral suasion
Earlier today in referencing Citigroup N C enlisting a rather high recession probability for orthodox economists they did so in the context of such yield curve inversion That would make sense given at least the dynamics in the UST curve already but I think the inversion fetish rests upon some anachronistic assumptions and correlations Primary among those is the foundation for it at the start namely short term interest rates that have little bearing in actual investment and economic considerations
Beyond that the yield curve has already and for quite some time been flowing in the negative economic direction Flattening started in earnest on November 20 2013 which was a date more notable for hidden fireworks of some still unspecified kind in swap trading my own personal conjecture still holds the lingering aftershocks of the MBS rout from June as the primary contagion point with the UST curve steepening thereafter making either TBA delivery in production coupons or dollar rolls increasingly too difficult throughout the financial spectrum to the point that dealer activities IR swaps themselves and risk absorption factors simply broke it hasn t been the same since In that view the absolute level of attainment toward inversion in the yield curve is less important than the dealer activities that underpin the wholesale dollar such as indicated by swap spreads
From that view what is important about the UST curve is that it might foresee and then confirm the behavior in swaps markets now become more and more misbehavior The UST curve is compelled toward respecting monetary policy even where monetary policy holds no actual meaning or governance the swaps market and dark leverage is far less susceptible to the artificiality of such projection The introduction of interest rate targeting in the 1980s meant exactly that which is what we see in the altered history of the UST curve it has grown steeper not as a market condition and certainly not as the economy has been much better in the 2000s but only so far as policy has increasingly intruded Thus on the flipside the tendency toward inversion is likewise suppressed by the same factor
But more than that that artificiality is introduced through a money market mechanism that has increasingly been relegated to irrelevance The Fed wants you to think the federal funds rate matters and it did at one point but global liquidity is conducted far differently now than at any other point in those prior decades On that matter alone you have to question what exactly the UST curve is again projecting at least on the front side of the curve equation
Swap markets on the other hand hold no such illusions the belly of the yield curve 5s10s right now is as steep as it ever was throughout the middle and late 1980 s yet outside of Janet Yellen s ongoing economic fairy tale it would be impossible to make any kind of economic comparison to justify that recurrence Instead all that says is the yield curve respects monetary influence now still to some degree but in an ever decreasing manner the flattening since November 2013 Swap spreads by contrast have blasted through the looking glass into what in far more important respects is rabid tightening already no need to wait for some inversion to confirm what has by now in many places occurred
In the end these distinctions may be more about timing than outcome as both suggest the same thing for somewhat different reasons Again in my view the UST curve is relevant only insofar as it remains flat to flatter in comparison to 2013 and before where that artificial steepening was not an economic expectation so much as policy expectation The reversal since in the UST curve is an unwinding of that monetary policy magic toward something far less desirable From there swap rates pick up the extrapolations which assign the kinds of economic conditions where oil inventories would be at record highs and rising at the same time the FOMC is proclaiming full recovery and rising inflation Swap spreads in short don t believe any of those policy caprices and the UST curve is in the middle believing less and less |
C | Few Impediments To Further Gains By Year End For US Equities | Summary Aside from the upcoming FOMC meeting there do not appear to be many strong impediments to further gains by year end for US equities Three scenarios seem possible
A breakout higher now is likely to be a failed move especially if it occurs prior to the December 16 FOMC meeting This would the best scenario for bears
If seasonality drops the market ahead of the FOMC there is likely to be attractive upside into year end This would be the best scenario for bulls
The most frustrating scenario would be if stocks chop up and down both into and following the FOMC meeting unfortunately that has most often been the case at other times the Fed was initiating rate hikes
For the week equities made small gains led by NDX Oil lost 4 to close at its lowest level in 7 years Gold rose nearly 3 reversing the prior 3 weeks of loses
Perhaps most importantly the dollar fell 2 this week retracing the past several week s gains We have recently discussed how fund managers view the dollar as overvalued and that this has most often corresponded with a dollar decline
A weaker dollar has also been the pattern following the initiation of rate hikes in the US even if other central banks are loosening small sample data from Thomas Lee
The dollar s fall came after closing at a multi year high last week This reversal pattern has most often led to further loses in the dollar in the months ahead data from Dana Lyons
Turning to equities NDX made a new 15 year intraday high on Wednesday then fell almost 3 5 within two days On Friday it rallied all the way back to a new 15 year weekly closing high
This index has been leading the others It is now back at the top of its range for the 4th time This area has been strong resistance but with repeated hits odds are skewing to a break higher Note the pattern of higher lows and the rising 50 dma
For all the noise this week N SPY is also back within 1 of the top of its range 212 It has failed to move higher the 5 prior times Again with repeated hits the odds skew to a break higher Like NDX the pattern is supported by higher lows and a rising 50 dma
It is certainly fair to say that the index has not moved above the range established more than half a year ago But the fall in August and September resulted in a significant drop in sentiment It was a reset and these normally precede a range break This again supports a move higher
The first positive sign that a breakout is imminent will be when SPX can break the pattern of lower highs established since May with a close over 2116 top blue line Similarly on weakness the November low at 2020 is key to maintaining higher lows dashed line
It s hard to say that breadth is a significant roadblock For one the cumulative advance decline line for the SPX made a new all time high on Tuesday That hasn t always been a positive sign for equities but it does represent a broadening of participation
Moreover a majority of the 9 SPX sectors are challenging their 3 month highs supported by higher lows and rising 50 dmas green shading Only two sectors energy and utilities are diverging lower
The month of November which was flat for the indices was supported by outperformance from pro growth cyclical sectors Cyclical leadership is a positive characteristic in uptrending markets That the indices didn t move higher is mostly attributable to lagging defensives especially utilities
Small cap stocks tend to outperform in December and January RUT made a 3 month high this week but then closed lower The index is still struggling A sustained break above 1210 will be further confirmation that the equity rally is broadening Note the higher lows and rising 50 dma here too
Better breadth as small caps catch up seems likely The index is down more than 1 so far in December but usually gains an average of more than 3 into year end data from Dana Lyons
Investor sentiment continues to be very subdued Equity fund inflows on positive weeks have been modest since the August low In fact funds faced redemptions of 1b in the past week AAII and NAAIM surveys are neutral and the Investors Intelligence bull bear ratio is just 1 5x a decline over the past two weeks data from Citigroup N C
If anything more bulls are needed it takes bulls to push a market higher and investors have been tentative The 21 dma equity only put call ratio has been rising the past 3 weeks a falling ratio supports a move higher in price Bulls want to see this turn lower into year end
Corporate insiders who aren t perfect but tend to be good at knowing when to buy are still accumulating shares This continues to be a positive data from Barron s
Macro remains supportive of higher equity prices Friday s employment report showed growth of 2 with more than 2 growth in wages Both employment and wages are in solid uptrends That creates a self reinforcing cycle where better incomes support greater consumption which in turn leads to improvements in income
The consumption data has been positive There is normally a deterioration in consumption prior to the onset of a recession There is no such deterioration at present arrows
Auto sales for example are hitting new 10 year highs Yes financing is supporting sales but household debt servicing is near 4 decade lows Incomes can easily support more leverage
Positive consumption patterns are seen in many services like hotel occupancy and restaurant sales It s true that manufacturing data has been weak but economic growth is overwhelming driven by services data from Yardeni
With the economy improving albeit slowly would problems in the credit market be expected Probably not Widening spreads in the credit market are due primarily to weak pricing in the energy and material markets most other sectors are fine data from Guillermo Roditi Dominguez
So trend and macro support higher prices while breadth and sentiment are at worst neutral On balance equities should have further gains into year end That is our bias
Our view coming into December was that a swoon was high odds and would provide an attractive entry point for a year end rally As we said then There have been drops of 2 4 each year in December the last 4 years All of the drops put SPX below the close from the week prior to Thanksgiving This week s drop did as well Our chart is reproduced below
This fits the historical pattern where a typical December sees a fall Since 1928 the average December drawdown has been 3 7 since 2000 it has been 3 6 This week it was 3 data from Walter Murphy
The big question now is whether this week s steep but brief drop was it
The week after the release of NFP data has tendency to give back some gains In the past 2 years 75 have seen at least one lower close November closed lower not included in table data from Chad Gassaway
Moreover when SPX gains more than 2 on NFP day it has closed lower within the next week 9 of 11 times since 1998 data from Sentimentrader
Weakness after NFP would fit with the seasonal pattern for December the second week of the month is typically weak next week is Days 5 9 Whether that is still valid with the swoon this past week is certainly open to question data from Stock Almanac
As you can see in the chart above the pivotal FOMC meeting on December 16 Day 12 is ahead At that meeting the Fed is considered very likely to raise rates for the first time since 2006 The chart above indicates weakness ahead of the meeting and then the traditional Santa rally into year end Given that the rate increase is likely to be minor and has been very well telegraphed that might still be the case this year
It s worth noting however that the opposite has been true prior to past first rate increases stocks move sideways in the final 7 days prior to the meeting and then sell off a week or so afterwards In other words the pattern would be for stocks to chop back and forth for the next two weeks and then decline in the days after Christmas and then into January data from Stock Almanac
We can add one more data point Let s assume that NDX breaks out higher before year end and N SPY follows will the breakout last The recent evidence says probably not
The next chart looks at all the breakouts in the past 15 months The yellow shading shows the breakouts and each one has gone about 1 2 before giving the gains back Perhaps this one could be more significant after all there has been a big dip and a half year has passed since the last one
In summary the balance of evidence points to further upside by year end SPY is up about 0 5 so far in December A typical December rises 1 5 2 Aside from the upcoming FOMC meeting there do not appear to be many strong impediments to further gains by year end
Three scenarios seem possible
A breakout higher now is likely to be a failed move especially if it occurs prior to the December 16 FOMC meeting This would the best scenario for bears
If seasonality drops the market ahead of the FOMC there is likely to be attractive upside into year end This would be the best scenario for bulls
The most frustrating scenario would be if stocks chop up and down both into and following the FOMC meeting unfortunately that has most often been the case at other times the Fed was initiating rate hikes
Our weekly summary table follows |
C | Some Banks Agree That The U S Economy Is Steamrolling Toward Recession | As we approach the end of 2015 researchers at both JP Morgan and Citigroup agree that the probability that the U S economy will soon plunge into recession is rising Just last week a member of the U S House of Representatives asked Janet Yellen about Citigroup s assessment that there is a 65 percent chance that the United States will experience an economic recession in 2016 You can read her answer below And just a few days ago JP Morgan economists Michael Feroli Daniel Silver Jesse Edgerton and Robert Mellman released a report in which they declared that the probability of recession within three years has risen to an eye catching 76
Our longer run indicators however continue to suggest an elevated risk that the expansion is nearing its end and our preferred model now puts the probability of recession within three years at an eye catching 76
The good news is that the economists at JP Morgan believe that a recession will probably not hit us within the next six months But due to steadily weakening economic conditions they are convinced that one is almost certain to strike within the next few years
When we first wrote only manufacturing sentiment was signaling an above average probability of imminent recession they said But recent weakening in the Richmond Fed services survey and the ISM nonmanufacturing index have now pushed the nonmanufacturing sentiment probability up somewhat as well
In the short term the note says that the 6 month likelihood is only 5 but within a year it stands at 23 in two years 48 and in three years the eye popping 76
To be honest I believe that this assessment is far too optimistic and it appears that researchers at Citigroup N C agree with me According to them there is a 65 percent chance that the U S economy will plunge into recession by the end of next year Last week Janet Yellen was asked about this during testimony before Congress
In testimony before Congress Joint Economic Committee Yellen was asked by Rep Pat Tiberi about a piece of research released by Citigroup s rates strategy team Monday
Specifically Tiberi an Ohio Republican wanted to know what Yellen made of Citi s conclusion that there is a 65 percent chance of a U S recession in 2016
The economists said that they would assign about a 65 percent likelihood of a recession in the United States in 2016 Now 65 percent sounds high to me but I m not an economist and I m not the Fed chair But zero risk might be too low as well So what would you assign a risk level of a recession next year Tiberi asked
So how did Yellen respond
Her answer
I absolutely wouldn t see it as anything approaching 65 percent the central banker said
This reminds me so much of what former Federal Reserve Chairman Ben Bernanke said when he was asked a similar question
The Federal Reserve is not currently forecasting a recession
Later on when the official numbers finally came out and all the revisions were done we learned that the U S economy was already in a recession when he made that statement
And when it is all said and done this time around I believe that history will show that a new global recession had already started when Janet Yellen made her statement
But don t just take my word for it British banking giant HSBC is the largest bank in the western world and they recently announced that the global economy has already entered a dollar recession According to HSBC total global trade has fallen 8 4 percent so far this year and global GDP expressed in U S dollars is down 3 4 percent
If their figures are correct a new global recession has definitely begun
And without a doubt we have already seen a tremendous amount of global financial turmoil This is something that I highlighted in my recent article entitled 27 Major Global Stocks Markets That Have Already Crashed By Double Digit Percentages In 2015 When Zero Hedge republished my article several excellent charts were added that really illustrate how bad things have gotten and I wanted to share a couple of them with you Of the 93 largest stock market indexes in the world an astounding 47 of them more than half are down at least 10 percent year to date This first chart shows which ones fall into that category
Another chart that was added to the article by shows how decoupled U S stocks have become from global stocks overall As you can see U S stocks are not too far from recent highs at the moment but global stocks overall are solidly in bear market territory
Since mid 2015 trillions of dollars of stock market wealth has been wiped out globally
Let that sink in for a moment
The debate is over The major financial collapse that so many warned was imminent has actually happened
It is just that U S stocks have not gotten the memo yet Up to this point they have defied gravity but at some point U S stocks and world stocks will converge once again
There is no way that U S stocks will be able to defy the underlying economic fundamentals that are pummeling other global markets for much longer Just like in 2008 a global stock market slide that starts elsewhere will eventually hit the United States It is just a matter of time
But once again even though U S stocks are doing okay for the moment that doesn t negate the fact that more than half of all major global stock indexes are down by double digit percentages year to date
We have not seen numbers like this since the great stock market crash of 2008 and it seems abundantly clear to me that the great financial shaking that so many warned was coming in 2015 is already happening
And if JP Morgan and Citigroup are correct what we have seen so far is just a preview of some very troubling times ahead |
C | US Data Trends Continue | The incoming economic data continues to disappoint The Citigroup N C Economic Surprise index set a record this year for the length of time it stayed in the negative column data less than expected of over 200 consecutive days Even in the depths of the Great Recession we never had more than 100 consecutive days in negative territory It is odd that economists have remained so optimistic overly so even as the data continues to defy their sunny outlook
The trends that have been in place for over a year continue The industrial manufacturing economy is in recession and has been for months in my opinion The ISM seems to confirm that but don t take that to mean that a recession for the entire economy is right around the corner The ISM track record on that is not great In the past when the ISM fell below 49 as it did last week recession has followed in short order about 1 3 of the time Recessions have started with the ISM above 50 1969 1974 but we ve also had many times when it has dipped below 50 with no recession
One thing that continues to amaze me is that this manufacturing recession is ongoing even with auto sales above 18 million SAR Credit is obviously having an impact on auto sales and until that changes the sector will probably continue to boom We won t know the consequence of that until much later probably during recession but if you can wait I d say hold off on buying a car now I will make the bold prediction that there will be a glut of used repo cars available sometime in relatively near future There was some improvement in Durable Goods orders last month but considering inventories I wouldn t put a lot of faith in it
One concerning development over the last couple of these reports is the slowdown in housing It isn t very deep yet and certainly can t be called a trend but we ve had two months now of soft data on new and existing home sales Construction spending continues to be robust though one of the few areas we can point to with double digit year over year change Housing warrants a bit of extra attention in coming months though if the Fed is successful in hiking rates It may be that they pulled forward some sales by telegraphing the rate hike for so long
The trade picture didn t change much from the preliminary report with imports and exports still falling However it does seem there is a bit of moderation in the contraction of trade That may be due to the nascent cyclical recovery in Europe which is looking a bit more durable despite whatever Draghi is doing or not doing
The employment report was plagued by all the problems of other recent reports and I won t rehash them here Suffice it to say that the employment picture is not as bad as the doom and gloom crowd would have you believe and certainly not as rosy as Janet Yellen seems to believe Like so much about the economy since the Great Recession it is meh
Our market based indicators haven t changed much although the yield curve did flatten a bit since my last report
A flattening curve in this case merely means that short term rates are rising faster than long term rates I d also take it as a sign that the market sees a Fed rate hike right now as a mistake that will slow the economy As I ve said many times over the last year I have no idea whether the curve will get to flat before the next recession I think though that one has to assume that it will I suspect the difference this time may be one of time in that the curve may flatten a lot quicker than it has in the past
Credit spreads generally didn t move much since the last update except in the lowest rated tranches CCC spreads are blowing out to levels now that prevailed in the middle of the 2008 crisis Other higher rated bond credit spreads are still on a widening trend but haven t moved much since the last update One thing I d like to point out though is that the developing credit crunch is not confined to the US European high yield and emerging market corporate spreads are also trending wider In other words if the US is headed for a credit crunch the rest of the world seems likely to join in
The US dollar took a big hit last week as the ECB disappointed markets and the short Euro long Dollar trade blew up Short term momentum is now down although intermediate and long term momentum remains positive pointing to more gains I guess that might depend on what the Fed does and after the ECB debacle I think it is prudent to start thinking about how the Fed might disappoint as well Maybe they only hike 1 8 instead of or maybe the change to IOER isn t as expected The point is that like the ECB the Fed may take action but still disappoint relative to expectations
Overall the economic outlook hasn t changed much since the last update To me the economy looks a lot more fragile than the Fed message is intended to convey Yellen has as much as said that she believes that hiking rates sends a signal to the market about her and the FOMC s confidence in the economy She obviously believes that will make a difference in the real economy that economic actors will change their behavior based on that Fed optimism Personally I think she vastly overstates the public s confidence in the pronouncements of economists especially those employed by the Fed
The risks right now in my mind are tilted to the downside The credit markets are still moving in the wrong direction and as I said in my weekly commentary it isn t just energy anymore Furthermore the junk bond market is almost twice the size it was going into the last recession growth has been much more dependent on junk financing in this cycle It seems obvious that it will have a greater impact on the way down too |
MS | UPDATE 1 Dubai s Arabtec targets five Egypt projects | Home real estate slump makes Arabtec look elsewhere
Egypt seen as fundamentally sound
Adds analyst comment background closing share price
By Jason Benham
DUBAI March 10 Reuters The United Arab Emirates
largest contractor by market value Arabtec Construction is
targeting five projects in Egypt as it looks to expand in the
region amid a real estate slump in its home market
We have the strategy to move into these countries if
projects become available to us Arabtec s chief executive
Thomas Barry told Reuters on Tuesday
The projects will be in Cairo and other parts of Egypt the
most populous Arab country with about 80 million people Barry
said declining to give further details
In Egypt you have relative fundamental soundness and a
population dynamic that is more stable than the United Arab
Emirates hence there is a lower perceived risk to the
downside said Saud Masud property and construction analyst
for the Middle East and North Africa at UBS investment bank
While about eight of every 10 people in the UAE are foreign
residents Egypt s booming population is mainly native The UAE
links residency rights mainly to employment
Investors are ploughing ahead with large residential
projects in and around Cairo and see continuing demand as the
country s population continues to grow
Population growth in Egypt has remained high at around 2
percent for the last decade and the fertility rate at about 3 1
children per woman compared with 2 1 in the United States
has also been stable the United Nations said last year
Arabtec said on Saturday it had set up a joint venture in
Saudi Arabia to tap growth opportunities in the Arab world s
largest economy as Dubai s once booming property sector slows
Over half the residential and commercial property projects
due for completion in the emirate between 2009 and 2012 have
been put on hold or cancelled Jones Lang LaSalle said on
Monday
It became essential for us to do so expand because of the
market conditions in Dubai so we have to seek other markets
Barry said
Dubai residential real estate prices have fallen by an
average of 25 percent from September peaks Morgan Stanley said
last month adding some 263 billion of projects had been
cancelled or put on hold in the UAE
Arabtec has laid off 250 employees of 5 000 working in
administration as a result of the financial crisis
Arabtec and Malaysian engineering firm WCT Bhd are seeking
at least 460 million in compensation for a Dubai race course
that was cancelled in January
Dubai based investment bank Shuaa Capital said Arabtec s new
joint venture in Saudi Arabia was a timely relief for the
firm in a note on Monday
Arabtec has a backlog of projects worth 39 billion dirhams
10 62 billion including 10 billion dirhams for a tower
project in St Petersburg in Russia which is awaiting final
approval by the board of Gazprom
The company s shares closed 4 12 percent lower at 1 63
dirhams on Tuesday |
MS | European property market may not recover till 2012 | Banks claim interest in new lending
Cynical investors braced for more tough times ahead
By Juliette Rouillon
CANNES France March 13 Reuters Europe s debt strapped
commercial real estate market may not experience a turnaround
for up to three years delegates at the MIPIM trade fair told
Reuters this week
Persuaded by bigger margins and weak competition
opportunistic banks are gingerly casing the market for deals but
many buyers fear a sustained market recovery is years away
Patrick Lesur head of French operations for Eurohypo is
convinced the stricken market will not be back to normal or
near normal levels before 2011 or 2012
We haven t yet touched the bottom of the crisis Lesur
said It could just take one traumatic event to prolong it by
six months to a year he said predicting a 25 percent to 40
percent price drop on the French commercial real estate market
by the end of 2010
Experts said much needed debt restructuring of the European
property market could take up a decade but some banks claim
they are keen to resume lending activity at the right price
Today banks are lending There is financing for good
projects said Alain Lemaire chief executive of French
state owned bank Caisses d Epargne The financial shock has
been not digested but integrated he said
Lemaire s comments echo sentiments from real estate lender
Hyporeal which recently said it has started a very gradual
comeback after six months of complete paralysis
Many investors do not yet believe it noting the absence of
credit is still stifling the market
There are very few transactions because there is very
little financing said Christophe Kullman chairman of French
real estate investment company Fonciere des Regions
The market freeze will go on for some time The situation
is not in the hands of investors but of lenders
Others believe the market paralysis is also due to
recessionary economic conditions which are making it harder for
buyers and sellers to agree on how far values have sunk
Today in France even if rates have gone up by 100 to 150
basis points we re facing a market with forced sellers on one
side and hesitant buyers on the other said Philippe Zivkovic
chairman of BNP Paribas Real Estate
It is important for financing problems to be worked out
and for price cuts to come into force Benoit du Passage head
of Jones Lang LaSalle for southern Europe
If access to financing is freed up that would be very
good for the market he said
Morgan Stanley and Germany s Allianz among others are
predicting discount purchases in the second half and in 2010 in
low risk markets like London where there is liquidity and where
average prices have plunged more than 37 percent since the June
2007 peak
London has seen the strongest reduction in values since
2008 I ve seen meetings at MIPIM and I d be surprised if they
didn t come to something Mark England chief executive for BNP
Paribas Real Estate unit Atisreal said
Writing by Helen Massy Beresford Editing by Sinead Cruise and
Andrew Macdonald |
MS | UPDATE 1 David Miles to replace BoE dove Besley also to go | Adds quote details
By Sumeet Desai
LONDON March 19 Reuters Morgan Stanley chief UK
economist David Miles will replace David Blanchflower on the
Bank of England s Monetary Policy Committee when the arch dove
leaves in June Britain s finance minister said on Thursday
And MPC member Tim Besley said he would not seek a second
term on the committee when his first expires in August
I am delighted that David Miles has agreed to join the
Monetary Policy Committee finance minister Alistair Darling
said
His considerable experience analysing the interaction
between financial markets and the economy will be extremely
valuable to the Committee
Besley said in a statement that he had decided not to pursue
a second three year term so that he could concentrate on his
academic career
But it also may not have made political sense for the
government to reappoint him given the hawk had voted for two
interest rate rises last year when the economy was already in
recession
In a written reply to Besley Darling said I would like to
take this opportunity to thank you for your major contribution
to the work of the committee since 2006
It is extremely important that that the committee contains
a range of experts that energetically put forward challenging
analysis and views to help shape the debate he added
QE SUPPORT
Miles a visiting professor at Imperial College London who
joined Morgan Stanley in Sept 2004 has long been regarded as a
possible candidate to join the MPC
In 2003 the Treasury commissioned him to lead a review of
the UK mortgage market which he reported back on in 2004 In it
he advocated the use of longer term fixed rate mortgages
In a Morgan Stanley research note at the start of March
Miles called into question whether the BoE s quantitative easing
plan to boost the economy would work but said it was the right
policy to pursue because the inflation risks of printing
money are not high
In an opinion piece for the Financial Times in January
Miles said in order to prevent a repeat of the credit crisis
more needed to be done to prevent big rises in asset prices
particularly house prices and to stop too much risky lending
Some element of housing costs should be reintroduced into
the measure of inflation targeted by the Bank of England s
Monetary Policy Committee he said
He also banks should have higher capital requirements that
work in a counter cyclical way an opinion held by many
policymakers
The Treasury said they would advertise to fill Besley s job
in due course
Additional reporting by Matt Falloon |
MS | UPDATE 2 BoE s Dale sees recovery end 2009 risks to downside | Dale role for targeted temporary UK fiscal stimulus
Dale start of recovery could be later than end 2009
Miles high debt levels threaten low gilt yields
Tucker caution needed on regulatory changes
Adds question and answer session BoE s Tucker and MPC
member designate Miles
By Matt Falloon
LONDON March 27 Reuters Britain s economy may need a
further boost from policymakers if it is to start to recover by
the end of the year Bank of England chief economist Spencer
Dale said on Friday
Prime Minister Gordon Brown is seeking agreement from the
G20 developed and developing economies next week on more action
to help the world economy but BoE Governor Mervyn King said on
Tuesday that Britain had little scope for big spending plans
Dale like King said Britain did have room for smaller
scale measures probably to boost jobs and training
There may well be a role for further targeted and temporary
stimulus measures he said at a London conference for the
Association of British Insurers
Economic data out on Friday showed Britain was in an even
deeper recession than previously thought in the last three
months of last year with the economy shrinking by 1 6 percent
rather than an earlier estimate of 1 5 percent
Although immediate prospects appear bleak the substantial
economic stimulus that is underway means that there are grounds
for thinking that economic conditions may start to improve later
this year said Dale
I think the risks around this central path are weighted to
the downside reflecting the possibility that the actions taken
by the authorities around the world are slow to take effect
So there may still be more to do he added
But once the recovery was underway the BoE would have to be
quick to rein in expansive policy to avoid future inflation
When the time comes we will be prepared to respond with
equal vigour on the way back up he said
FIRST BY MILES
Dale was followed on the podium by David Miles the first
public appearance by Morgan Stanley s chief UK economist since
it was announced he would take up a place on the BoE s Monetary
Policy Committee in June
Miles was relatively upbeat about the British economy and
backed Dale s view that much of the fiscal and monetary policy
stimulus had yet to be felt
There are coherent reasons to be relatively optimistic on
the UK outlook he said
But he warned that high debt levels while not
life threatening could push up gilt prices which hit record
highs in recent weeks because the BoE planned to buy them as
part of its 75 billion pound 107 4 billion quantitative
easing programme
The fiscal situation is far worse than anyone imagined 12
months ago yet gilt yields are lower Is this sustainable he
queried
Monetary and fiscal stimulus could boost the economy by up
to 5 percent while the debt to GDP ratio could rise to 70
percent he added
Separately BoE Deputy Governor Paul Tucker told an event
hosted by Britain s main financial regulator the Financial
Services Authority that policymakers needed to be cautious on
making big regulatory changes
More research was needed on whether macroeconomics could
provide a tool to tame swings in bank lending over the economic
cycle he said
Writing by David Milliken and Sumeet Desai editing by Keith
Weir and Andy Bruce |
MS | UPDATE 4 BoE s Dale sees recovery end 2009 risks to downside | Dale role for targeted temporary UK fiscal stimulus
Dale start of recovery could be later than end 2009
Miles high debt may affect gilt yields but no disaster
Tucker caution needed on regulatory changes
Adds details
By Matt Falloon
LONDON March 27 Reuters Britain s economy should start
to recover around the end of the year but may still need a
further boost from policymakers Bank of England chief economist
Spencer Dale said on Friday
Prime Minister Gordon Brown is seeking agreement from the
G20 developed and developing economies next week on more action
to help the world economy but BoE Governor Mervyn King said on
Tuesday that Britain had little scope for big spending plans
Dale like King said Britain did have room for smaller
scale measures probably to boost jobs and training
There may well be a role for further targeted and temporary
stimulus measures he said at a London conference for the
Association of British Insurers
Economic data out on Friday showed Britain was in an even
deeper recession than previously thought in the last three
months of last year with the economy shrinking by 1 6 percent
rather than an earlier estimate of 1 5 percent
Although immediate prospects appear bleak the substantial
economic stimulus that is underway means that there are grounds
for thinking that economic conditions may start to improve later
this year said Dale
I think the risks around this central path are weighted to
the downside reflecting the possibility that the actions taken
by the authorities around the world are slow to take effect
So there may still be more to do he added
But once the recovery was underway the BoE would have to be
quick to rein in expansive policy to avoid future inflation
When the time comes we will be prepared to respond with
equal vigour on the way back up he said
FIRST BY MILES
Dale was followed on the podium by David Miles the first
public appearance by Morgan Stanley s chief UK economist since
it was announced he would take up a place on the BoE s Monetary
Policy Committee in June
Miles was relatively upbeat about the British economy and
backed Dale s view that much of the fiscal and monetary policy
stimulus had yet to be felt
There are coherent reasons to be relatively optimistic on
the UK outlook he said
He suggested high debt levels while not life threatening
could push down gilt prices which hit record highs in recent
weeks because the BoE planned to buy them as part of its 75
billion pound 107 4 billion quantitative easing programme
The fiscal situation is far worse than anyone imagined 12
months ago yet gilt yields are lower Is this sustainable he
queried
Monetary and fiscal stimulus could boost the economy by up
to 5 percent while the debt to GDP ratio could rise to 70
percent he added
But he also suggested demand for gilts would likely remain
strong given looming changes to bank capital requirements and
noted that current debt levels were far from unprecedented
This is a time when it s pretty helpful to look back at the
long term history rather than get fixated on where we are now
he said
Separately BoE Deputy Governor Paul Tucker told an event
hosted by Britain s main financial regulator the Financial
Services Authority that policymakers needed to be cautious on
making big regulatory changes
More research was needed on whether macroeconomics could
provide a tool to tame swings in bank lending over the economic
cycle he said
For highlights of comments made by Dale and Tucker click
ID nLR337886
Writing by David Milliken and Sumeet Desai editing by Keith
Weir Andy Bruce Victoria Main |
MS | RPT UPDATE 2 Esprit in talks with CEO candidate shares see saw | in talks with CEO candidate
chairman will stay on until December 2010
stock falls despite succession concerns easing
Repeats to fix transmission error
Add details background comments stock price
By Donny Kwok
HONG KONG March 31 Reuters Fashion retailer Esprit
0330 HK whose shares have been battered by investor concerns
over management moves said it was in talks with a candidate
for chief executive and Heinz Krogner currently chairman and
CEO would stay on as executive chairman until late 2010
Shares of the world s No 6 fashion retailer erased early
gains to fall almost 3 percent pressured by selling orders
from Europe brokers said By 0700 GMT the stock was down 1 9
percent at HK 39
The golden age of Esprit is now over said Francis Lun a
general manager at Fulbright Securities Some funds might
unload their stakes when they lose confidence in the
management
Esprit shares had earlier risen more than 5 percent after
the company said it was in discussions with a candidate CEO
with Krogner staying on as chairman It said it had not
received notice of Krogner s resignation as CEO
Until the dust settles the management issue would likely
continue to overshadow Esprit s share DBS Vickers said in a
note With a new management team still being put in place
there are still uncertainties regarding the stability and
ability of the new team hence the issue would remain an
overhang
Esprit shares had slumped 17 percent in the last two
trading days after the company announced on Thursday that
Thomas Grote a director and president of brand operations was
leaving Grote touted as a successor to 67 year old
Krogner resigned as a director but will keep his brand
operations role until June 30 He is the third senior executive
to leave Esprit in the past year following CFO John Poon and
North America operations head Jerome Griffith
Analysts said news of Grote s sudden resignation heightened
investor concern as the Europe focused retailer is grappling
with a recession in its key markets ID nSEO66033
Morgan Stanley said in a note that Krogner had told an
analyst call late on Monday that the management changes should
help move Esprit to more of a team show from a few men s
show
Krogner s clarification on Esprit s strategy and management
should provide some assurance to the market that the system is
still intact the note added
We believe the market will welcome this news but whether
Krogner s new dream team will succeed remains to be seen Its
retail initiative will inevitably result in lower margins given
the nature of the business Renee Tai analyst at CIMB GK
Research said in a note
Esprit said late on Monday it appointed Erik van Dijk an
executive at European fashion chain operator C A as global
marketing director
Editing by Ian Geoghegan |
JPM | JPMorgan says French labor law in way of big move to Paris post Brexit | PARIS Reuters JPMorgan N JPM would be reluctant to move many jobs to Paris following Britain s exit from the European Union because of France s protectionist labor laws the U S based investment bank s France head told Reuters on Tuesday
Paris could be an attractive option to move small groups of well paid traders who are on expatriates contracts but not for back offices with thousands of people Kyril Courboin added
However the bank stressed it was nowhere near making a decision on a possible move due to political uncertainties and was doing a technical analysis of its options
Bankers have cast doubts on the chances of France luring much of the UK s financial industry after the Brexit vote citing the country s unstable tax regime and labor rules that make people difficult to fire as major deterrents
It s certain that today we would not move thousands of people to Paris where we would find ourselves facing very very protected employment contracts Courboin told Reuters on the sidelines of a conference in Paris
French financial lobby Paris Europlace has called for a special more flexible status in French labor law to apply to senior staff in financial firms to make Paris more attractive to banks
However Socialist Finance Minister Michel Sapin has said that France is determined to make Paris attractive without any such special status
I do not think we will have clarity on this before the presidential elections Courboin said France goes to the polls to choose a new president and a new government next spring
European financial centers especially Frankfurt and Paris have been mounting a charm offensive since the Brexit vote saying they expect banks to start moving some operations from London next year to ensure continued access to the EU market after Britain leaves |
C | Citigroup Q4 earnings revenue miss estimates shares fall 3 | Investing com Banking conglomerate Citigroup reported worse than expected fourth quarter earnings and revenue on Thursday sending its shares lower in pre market trade Earlier in the day in its third quarter earnings report Citigroup said adjusted earnings per share came in at USD0 82 below expectations for USD0 95 per share The bank s fourth quarter revenue totaled USD17 94 missing forecasts for revenue of USD18 31 billion Net income in the fourth quarter was USD2 7 billion compared to USD1 2 billion in the same period a year earlier Michael Corbat Citigroups Chief Executive Officer said Although we didn t finish the year as strongly as we would have liked we made substantial progress toward our key priorities in 2013 Immediately after the earnings announcement Citigroup shares dropped 3 1 in trading prior to the opening bell Meanwhile U S stock futures pointed to a lower open The Dow Jones Industrial Average futures pointed to a loss of 0 25 at the open S P 500 futures dipped 0 3 while the Nasdaq 100 futures indicated a downtick of 0 25 at the open |
C | El Erian Is Leaving PIMCO Now What | By On Tuesday the Pacific Investment Management Company PIMCO announced that its Chief Executive Officer and Co Chief Investment Officer Mohamed El Erian will be leaving the world s largest bond fund manager in March though staying on with its parent company Allianz as an advisor
El Erian a respected economic expert will likely move on to new ventures as he always has But a few rising stars will be taking his place at one of the world s largest bond fund managers which didn t have a great year in 2013
In 2013 investors pulled 47 billion from the 237 billion PIMCO Total Return Fund which dropped 1 9 percent its first loss since 1999 according to Morningstar Late in the year it was overtaken by the Vanguard Total Stock Market Fund as the world s largest retail fund They were exposed to fixed income assets more than most large fund management firms and they were hurt by a shift in investor interest toward equities from fixed income Todd Rosenbluth director of ETF and mutual fund research at S P Capital IQ told Marketwatch
But these problems aren t necessarily why El Erian is leaving
I think it s pretty natural for those kind of stumbles to happen and I doubt that anything in particular can be attributed necessarily to Mohamed Eric Jacobson senior fund analyst at Morningstar said in a video interview
It s also not his first time changing course
El Erian was born in New York but grew up in Egypt His father was a diplomat who worked with the United Nations whom he often traveled with as he wrote in the Financial Times
He studied at Oxford and Cambridge before starting at the International Monetary Fund in 1983 He later served as a managing director at Salomon Smith Barney Citigroup in London before starting at Pimco in 1999 In 2005 he left to manage Harvard s endowment fund but returned to Pimco in 2007
In 2008 his book When Markets Collide Investment Strategies for the Age of Global Economic Change became a bestseller
In 2012 President Obama appointed El Erian to the President s Global Development Council a group that advises on global economic strategy and policy
Throughout his career he has been well known for his economic commentary and wrote for a variety of publications After the financial crisis he popularized the idea of a new normal to describe the environment of a slowly recovering global economy
Despite his highly public role in the firm he only managed three smaller funds which all lost money last year For example the Pimco Global Advantage strategy fell 2 6 percent in 2013 according to Morningstar
At Pimco he was known for championing a switch in focus from bonds to diversified funds pushing the firm towards stocks which has been more difficult than expected
Being the co chief investment officer he s had a very large impact I believe particularly on the macroeconomic calls that have been implemented in probably every other PIMCO fund in existence said Jacobson
it s really important for us to keep an eye on how the investment committee continues to evolve what those voices look like and try to get a handle on whether or not it s a big enough change to have any concern
William Gross Pimco s founder and co chief investment officer will remain at the helm overseeing more than 1 9 trillion in assets
In 2010 he told Bloomberg that he was thinking of the future when he brought El Erian back on
Your most important job certainly in your 60s is to plan for your succession he said
We knew that Mohamed could fill an important part of the puzzle
But it looks like he will remain in the post longer than expected possibly for quite some time writing on Twitter that he s ready for another 40 years
However things will be a little different Two Pimco money managers will be moving up to become co deputy chief investment officers at Pimco after El Erian departs
One of them is Andrew Balls currently a managing director and head of European portfolio management at the company s London office He manages eight funds including the PIMCO Global Advantage strategy which beat 49 percent of its peers over the last three years
His brother Ed is a British politician and member of the British Labour and Co Operative Party
More than once I heard Andrew referred to as Ed s clever brother He s a modest cerebral guy Andrew Gowers a former Financial Times editor who had worked with both brothers told the Guardian in 2012
He worked at the Financial Times as an economics correspondent and joined Pimco in 2006
The other is Danial Ivascyn a managing director at Pimco since 2007 and who has been a rising star for a while In 2013 Morningstar named him Fixed Income Fund Manager of the Year
He co manages the 29 9 billion PIMCO income Fund which took in 7 8 billion in new money and was up by 4 8 percent last year beating more than 82 percent of peers according to Morningstar
He used to work with asset backed securities at Bear Stearns as well as T Rowe Price and Fidelity Investments before joining Pimco in 1998
Pimco s chief operating officer Douglas Hodge will become its chief executive officer in March
Hodge led the firm s Asia Pacific region from Tokyo from 2002 2009 but has been with the firm since 1989
These are a few who will be moving up thanks to El Erian s departure But for Jacobson the selection is important for the future of the company
Bill Gross has been and remains one of the best managers in the business He s also been one of the best at evaluating macroeconomic conditions if not as we said before perfect Jacobson said
But we want to also have a sense that he will continue to be challenged in his ideas much in the same way that he has been over the year he added
That s probably the biggest thing on my radar |
C | Technical Analysis C COPPER 2015 10 16 | Copper rebounds as supply rebalancesCopper prices are rebounding on output cuts by major producers Declining capital expenditure plans for mining expansion also contribute to supply rebalancing Will copper prices continue recovering on the backdrop of slowing global economic growth Copper prices have been rising from a six year low in the last ten sessions as major producers Glencore L GLEN Plc Freeport McMoRan Inc and others announced output cuts Glencore has said it will close copper mines in the Democratic Republic of Congo and Zambia accounting for about 2 of global supply Citigroup N C report in September estimated more than 1 5 million metric tons of planned output has not been produced due to riots in Chile and droughts in Zambia and Papua New Guinea The recent report by the bank provided further evidence of tightening copper supply as data indicated capital expenditures for copper mining expansion projects next year will fall to 11 1 billion the lowest since 2007 and this year capital expenditures will be down about 50 from the 2012 high Recent customs data from China were also supportive for copper prices as they showed China s imports of copper rose 33 from previous month to 460 000 tons in September COPPER has been rising since the end of September The price has breached above the wedge formation Parabolic indicatorgives a buy signal The Donchian channel is tilted upward indicating uptrend The bars of RSI Bars oscillator are rising within an upward channel confirming the uptrend The indicator is above 50 and hasn t reached the overbought zone We believe the bullish momentum will continue after the price closes above the last Bill Williams fractal high and upper Donchian boundary at 2 4358 A pending order to buy can be placed above that level The stop loss can be placed below the last fractal low at 2 3173 After pending order placing the stop loss is to be moved every day to the next fractal low following Parabolic signals Thus we are changing the probable profit loss ratio to the breakeven point If the price meets the stop loss level without reaching the order we recommend cancelling the position the market sustains internal changes which were not considered PositionBuyBuy stopabove 2 4358Stop lossbelow 2 3173 |
C | Silver Prices And The Management Of Perception | Silver prices and the management of perception economics that s basically what MOPE stands for I m not sure if it was that coined that acronym I think it was but that s where I heard it for the first time
It s appropriate to have a subsection of propaganda for economics and finance so this management of perception economics It s basically a system or an extension of generalized propaganda You can also call it social engineering You could call it a public relations campaign In fact public relations is just a PC term for propaganda The specific type of propaganda that is associated with finance and economics is this management of perception economics
You might also call it behavioral economics or Keynes ism Behavioral economics is really a pseudo It s a psychology of why people make certain decisions human behavior and the assumption that if we can create the conditions that people will behave in a consistent way
It s quite absurd almost as absurd as the underlying foundation for all of this The need for this is because we have a system that is dependent on exponential growth and is fed by synthetic inputs That s just probably a too fancy of a way of saying basically we have this system that the only way that it can keep going is if we keep printing
Synthetic inputs are money printing or it could be credit or it could be all sorts of basically essential ingredients or instruments of this great financial ization that has occurred since we ve lost the tether since currency has become purely fiat
It has led to the evolution and the growth of this massive system that must have this continuation of inputs Therefore because it s so detached it needs some sort of mechanism some sort of behavioral system that can keep everyone in line so that the players who are involved can whistle past the graveyard even though many of them know what s going on Because they have a vested interest they won t say what s really happening
Basically there are a number of ways that it manifests in the commodities markets or in silver for example First of all it enables the interaction that we ve been discussing between the commercial banks and the managed money traders while allowing the regulator to look the other way
In fact it creates a revolving door where you ve enabled this interaction Now you have this revolving door where regulators are writing the laws these complicated laws These regulators write the laws The laws are so big and complicated that they re then hired by the banks in order to interpret the laws That s the revolving door They re basically the same group of people
It also incites investment banks to bet against the rise of commodity prices We ve talked about this from It s a key ingredient for what the Fed is involved in doing The reason this is important is that this incitement to bet against the rise of commodity prices Commodity prices would rise in a natural world based on all these synthetic inputs that are being put in but they are prevented from rising because they re incited to bet against this rise and that leaves the independent observer the 99 9 confused and unsure about the value or having no benchmark in order to value what the underlying currency is worth That leads to this perpetual confusion
What this also does is this management of perception economics it justifies intervention and that intervention could be anything from the which was created in the aftermath of World War II It has direct influence on the gold market
Today we have the plunge protection team or the president s working group that evolved out of the late 80 s in order to intervene in the markets They sound like conspiracy theories but they ve been written into law They re part of the system so this whole behavioral economics this MOPE system justifies this intervention
It also creates these veils of obscurity We have closed door meetings I don t know if any of you have ever done this but I found myself I couldn t believe it The other day I was doing a little bit of research for this and I happened upon the Federal Reserve s website They have an archive section with transcripts from meetings that occurred 5 years ago They don t release them until it s been 5 years but you can read the transcripts of these meetings that occur 8 10 times a year I decided to read the one from the meeting that is usually the most important meeting occurs in December I read the one from December in 2008 and I was blown away Whether it was a distraction maybe I spent an hour It was a 242 page transcript of this discussion and most of the discussion 90 of it was How do we convey this to congress How do we present the message for the public How do we present the message for the banks It s all about messaging It s all about this management of perception I couldn t believe it
I suggest if you have some time and you re interested it s actually quite fascinating to read this and to realize that these are not omnipotent people These are academics having these discussions This was in the midst of a crisis but there was a lot of confusion and a lot of uncertainty about what they could do It s actually quite insightful to go back in time read those transcripts and with the knowledge of what s happening right now to go back there and check them out I suggest doing that
Another thing that management of perception economics enables really is control I mentioned this the whistling past the graveyard It extends this whole system this Ponzi into the future We pretend We pretend like Not we but people the people who are involved pretend like nothing s wrong This is all quite normal You should do this with your money Your money should go into the stock market Bonds are the place to be When in reality we re always walking on this tight rope
Think of it as all these little bubbles that we ve experienced as just little bubbles within this much bigger bubble this larger bubble that grew out of
What happened in 1971 was the end point of a gradual move away from a commodity backed currency We haven t been on a real gold standard since the late 1800 s and so it s been a gradual move away from that over time and this is what we re left with today
A couple of things that I thought that would be interesting some examples of how this management of perception economics works there s 2 examples
Many of you probably heard maybe in 2007 2008 during maybe in 2009 we had this during the crisis There was this idea being floated about It was the idea that because the markets had crashed many people had lost a good portion of their retirement money like if you had a 401 k and you lost half of its value in the market that wouldn t have been uncommon There was this idea floated around and mostly it was picked up by the fringe the people who were discussing this kind of stuff
The idea was that you can take your account and convert it into a government account or a government bond program and get a fixed rate It s safe It s a safe haven You don t have to worry about the volatility of the market and we can do that for you It was this radical idea that people laughed at and thought there s no way that they would ever do this but lo and behold that was part of a system a system that was announcing early floating a concept and then eventually that s basically what the new government IRA program the My IRA program that was announced about a year ago it may be 2 years by now Time flies Essentially that issue was floated as an idea It was thought of as a conspiracy idea No one would ever think to do that but now this program exists and it is a way of capturing more of the so called low hanging fruit the retirement money that s out there the trillions of dollars that could be used instead of these synthetic inputs to keep the whole Ponzi alive
You can actually use this low hanging fruit That s the confiscation the willing confiscation in a sense because you can use behavior to convince people that they need to do this out of fear or out of their for their own good or for their own safety That brings up another issue that I want to share with you about something that I ve been researching and I want to present to you in a format like this because I think it s fascinating and has a direct relationship to silver to where we may go as things begin falling apart
There has been this call and it s getting louder and louder to abolish cash to abolish paper money from the system to make all money electronic I know many of you have heard this probably another announcement from some high from some figure in the upper echelons of academia comes out It s probably once a week or even more than once a week the two major figureheads Ken Rogoff and Willem Buiter who s at Citigroup N C have written op eds for the Financial Times and also the Wall Street Journal This is coming as the Fed has run out of tools They re talking about raising interest rates but really they ve hit the lower bound They can t go below zero
QE doesn t work because the real issue with quantitative easing was that it was competing for the collateral the treasury bonds that are used for collateral in the repo market They were causing an underground liquidity crisis Most people didn t see it but it was happening The was raising red flags for months and so that program ended and now they re talking about negative interest rate policy Of course I should come back Forward guidance this idea that CPI and unemployment could be the gauge where decisions are made everyone just about knows that CPI and unemployment are just complete farces just in terms of the way that they use them so they re not really great policy tools anymore I think most people are aware of that
Negative interest rates which is also an absurd idea to begin with they seem to be floating this as an idea that s coming The only way they can really get away with it is if they can prevent people from taking money out of the bank because if you re going to be punished for keeping your savings in a bank or anyone is going to be ultimately people will begin pulling money from the bank and just keeping it at home To prevent them from doing that one idea is just to abolish cash but the way that they re presenting this is that they re presenting it in conjunction They re using the arguments They re bringing in the war on terror or the war on drugs drug dealers use cash predominantly a terrorist could use cash justifying this as a way to protect you as a way to keep everything safe when obviously there are many things that can go bad go wrong with this
Obviously privacy is gone because now any transaction that you make is monitored What are people going to do What would the impact be on small businesses How are people who are not comfortable using electronic money The point of this is that this is being floated This is something that I believe they will try to seriously use a kind of intervention or as a policy tool in the future The irony of all this is like many of these tools they will backfire because if cash is suddenly made completely electronic where they abolish it all together what are people going to be faced with There s always going to be people who realize they need to move around the system or be out of the system and it could be a way to stoke investment demand which the last thing any of the powers that be want is to awaken the masses to the underground investment demand that always exists for the precious metals
With that said I will end that right there and take any questions that you have I appreciate you for listening and going through those stories with me so I m going to check in with you |
MS | UPDATE 2 British Land rights issue to raise 740 mln stg | Plans to offer 341 mln new shares at 225 p each
Offer represents 53 pct discount to Feb 11 closing price
Shares fall 3 4 pct by 0937 GMT
Posts 31 pct fall in NAV in the quarter to Dec 31
Adds more details CEO quotes shares and analyst comment
By Sinead Cruise
LONDON Reuters UK property heavyweight British Land is
looking to raise 740 million pounds of equity through a 2 for 3
rights issue it hopes will quell the risk of a financial
covenant breach and bankroll an opportunistic acquisition spree
Britain s second largest property company announced plans on
Thursday to sell 341 million new shares at 225 pence each in the
latest phase of a multi billion pound deleveraging plan that has
already triggered the sale of several landmark assets
It becomes the second major UK real estate company to ask
for more cash from shareholders this week after rival FTSE 100
constituent Hammerson conceded on Monday it needs to issue new
shares to shore up its finances
However British Land s newly appointed chief executive
Chris Grigg who intends to purchase 800 000 pounds worth of
new shares personally said his company s balance sheet was
not in need of radical surgery
We re doing this transaction from a position of strength
Grigg told a conference call I would describe any changes we
are about to make as evolution rather than revolution what
this deal has done is put us in a very strong position with
respect to covenants he said
However some analysts disagreed If a huge 740 million
pounds rights issue on the back of a massive portfolio
write down and selling down interests in serially
underperforming trophy assets is not radical what is
Nomura property analyst Mike Prew told Reuters adding that the
issue was larger than the broader market anticipated
The price of the new shares represents a 53 percent discount
to the middle market closing price on Feb 11 The issue is
fully underwritten by Morgan Stanley Securities UBS and Euro
Lights Limited an affiliate of GIC Real Estate the property
unit of the Government of Singapore
Finance Director Graham Roberts said the issue combined
with the 590 million pounds sale of a stake in its Meadowhall
shopping mall would enable the company to tap up to 3 billion
pounds of undrawn debt facilities giving it substantial
firepower for new asset buys
British Land shares which have almost halved in value in
the past 12 months were trading 3 4 percent lower at 467 pence
by 0937 GMT
THIRD QUARTER CORRECTION
In its fiscal third quarter report tracking performance to
Dec 31 British Land showed it continued to suffer from the
same freefalling UK real estate prices it hoped to exploit
Its net asset value per share tumbled 31 percent to 718
pence and the total value of its portfolio sank 13 3 percent
over the quarter to 10 2 billion pounds
This third quarter report comes at a time of unprecedented
dislocation in financial markets the challenging conditions
will continue to affect the property market but British Land is
now very well placed to weather to the storm Grigg said
Average commercial property prices have dived by more than a
third since mid 2007 forcing some companies to seek new equity
to placate lenders and curb soaring loan to value ratios
Grigg said the company had already sold more than 5 7
billion pounds of assets in the last three years but he quashed
rumours the company was in negotiations to sell its Broadgate
office complex in London s City financial district
Despite sharp markdowns British Land said its operational
business remained sound The portfolio is 96 percent let with
only 4 percent of leases up for renewal before March 2011
It posted like for like rental growth of 3 8 percent
year on year in the nine months to December 2008 ahead of
industry benchmarks
The dividend rose 7 percent to 9 375 pence for the quarter
in addition to 18 75 pence for the first half year
See for the global service for real
estate professionals from Reuters
Editing by Simon Jessop |
MS | UPDATE 3 U S woes plunge Dubai s Emaar into red in Q4 | Posts 481 9 million loss mostly on U S writedowns
Puts new projects in Dubai on hold
Analysts had forecast 438 3 million profit
adds share price Burj Dubai details
By Jason Benham
DUBAI Feb 12 Reuters Emaar Properties swung to a
surprise fourth quarter loss due to heavy U S writedowns and
put new projects on hold in its weakening home market of Dubai
where it is constructing the world s tallest building
Emaar the largest listed Arab real estate developer posted
a loss of 1 77 billion dirhams 481 9 million as further
sharp falls in property valuations in the recession hit U S
dragged the company deep into the red
We definitely expected a decline in profitability but the
loss is greater than expected said Bikash Rout senior finance
analyst at Global Investment House in Kuwait
The writedowns in the U S amplified losses in the fourth
quarter I wouldn t be surprised to see more provisions in the
next quarter because there is so much negativity in the market
and we don t expect property prices to stabilise in the UAE
Emaar said its aim would now simply be to complete the
developments that it had started not to begin new ones
That marked a sharp reversal from its frenetic expansion
during the real estate boom culminating in the
multi billion dollar Burj Dubai project which includes a tower
that will be at least 800 metres 2 625 feet tall when
completed
Dubai s real estate sector has been hit hard by the global
financial crisis as property prices fall developers cancel or
defer projects and jobs are slashed
Whilst inventory writedowns are normally not a recurring
item we see a risk that in full year 2009 and 2010 Emaar will
have to start writing down inventory in other markets notably
Dubai Morgan Stanley said in a note
We believe the risk is Emaar s operating profits will
continue to deteriorate in the coming quarters
Morgan Stanley said last week that Dubai property prices had
fallen by an average of 25 percent since their peak in September
and that some 263 billion worth of projects throughout the
United Arab Emirates had been delayed or cancelled
Putting new projects on hold is going to affect profit
going forward but it is a sensible move given the correction in
prices we are seeing and the uncertainty in the property
sector Global Investment House s Rout said
Emaar s shares have plunged nearly 85 percent from their
12 month high The stock closed 0 5 percent lower at 2 dirhams
on Thursday before the results were released
Analysts had forecast a profit for Emaar s fourth quarter
ranging from 1 33 billion dirhams to 2 10 billion dirhams for an
average of 1 61 billion 438 3 million according to a Reuters
survey in December
Revenue fell to 3 50 billion dirhams from 5 14 billion
dirhams a year ago and the company wrote down 919 million
dirhams of inventory and another 1 77 billion dirhams in
goodwill on John Laing Homes its U S subsidiary
The firm posted full year profit attributable to
shareholders of 3 06 billion dirhams compared with 6 58 billion
dirhams in 2007
Emaar recorded a loss per share of 0 29 dirhams in the
fourth quarter compared with a profit per share of 0 29 dirhams
a year earlier
Emaar made a profit of 1 74 billion dirhams in the fourth
quarter of 2007 and 4 82 billion dirhams in the first nine
months of 2008
Reporting by Jason Benham Editing by Rupert Winchester
Erica Billingham John Stonestreet |
MS | ANALYSIS U S housing bailout plan has virtues challenges | By Patrick Rucker and Al Yoon
WASHINGTON NEW YORK Feb 13 Reuters A housing rescue
plan being considered by the Obama administration could strike
at the heart of the credit crisis but its scale complexity
and the potential for controversy poses challenges for
policymakers
The plan is due to be announced by President Barack Obama
on Wednesday and is expected to break new ground by helping
troubled borrowers even before they miss a mortgage payment
If it works officials will have a standardized approach to
quickly determine whether a borrower is in trouble revalue the
home and set new mortgage terms under a program that could
help contain losses for banks that have incurred huge losses on
on bad housing investments
The hope is that a uniform standard will do two things
give legal cover to rewrite loan terms and provide a universal
template to quickly churn through the rolls of troubled
borrowers Mortgage servicers the companies that collect a
borrower s monthly payments are often hamstrung by contracts
and cannot loosen loan terms
Currently there are 57 varieties of mortgage modification
plans out there That is totally disabling said John Courson
president of the Mortgage Bankers Association
If all troubled borrowers went through a standard program
mortgage experts could process loans quickly he said
We need this cookie cutter approach Courson said
Wall Street stock indexes erased nearly 250 points of
losses or 3 0 percent Thursday afternoon as investors
digested a Reuters report detailing the mortgage aid plan
Washington s tentative efforts to stabilize the housing
market have unnerved financial markets but investors were
encouraged by signs on Thursday that an aggressive rescue plan
was finally on the way
While investors generally oppose programs that let
homeowners escape the original terms of a mortgage a
comprehensive plan could get Wall Street s backing
The critical thing is how they structure the qualification
process said Mahesh Swaminathan a strategist at Credit
Suisse in New York Who gets it and how is it done simply and
transparently
If it doesn t force one party to take the bulk of the
losses that would very materially benefit the securities
market he added
The Obama plan envisions that the government would make
matching payments with mortgage servicers to cover some monthly
costs sources familiar with the plan have said That program
could quickly outstrip a 50 billion kitty of federal money
that is earmarked for foreclosure prevention according to data
compiled by Amherst Holdings LLC
Monthly payments on an estimated 1 17 trillion in
defaulted loans total about 8 8 billion so the subsidy would
be depleted in a year if the government picks up half the tab
said Sean Dobson Amherst s CEO
Still Obama and Treasury Secretary Timothy Geithner have
said they may seek more federal rescue funds if needed
A total of 8 1 million U S homes or 16 percent of all
households with mortgages could fall into foreclosure by 2012
according to Credit Suisse
As the housing crisis reaches the two year mark and
foreclosures continue to climb there is some political will
for a bold program to control the spread of failing loans
And policymakers may not have such a hard time crafting new
standards since Wall Street is now relying on Washington for
billions of dollars in emergency financing
On Friday Citigroup Inc JPMorgan Chase Co
and Morgan Stanley all agreed to suspend home
foreclosures In all those lenders have received 80 billion
in taxpayer investments
I d bet anyone who is getting government aid is going to
be mandated to take part in the modification program
Courson said
Still developing standards will not be easy and the Obama
administration will have to sell the public on the idea of
helping borrowers in good standing who could wrongly get relief
under the program
There is no test that I have seen that can t be gamed by
someone who is clever enough and determined enough to do so
said David John a senior fellow at the right leaning Heritage
Foundation a Washington think tank
A poorly managed program raises the prospects of irate
neighbors turning on one another because one family sought aid
while the other did not
But consumer advocates argue that failed mortgage relief
programs of the last year prove that waiting until a borrower
is delinquent means waiting too long to do any good
I think we could live with that Courson said of giving
aid to borrowers who are currently timely but could face
problems making their payments
Additional reporting by Julie Haviv and Jonathan Stempel
in New York and Andrea Hopkins in Cincinnati |
MS | RPT ANALYSIS U S housing bailout plan has virtues challenges | By Patrick Rucker and Al Yoon
WASHINGTON NEW YORK Feb 13 Reuters A housing rescue
plan being considered by the Obama administration could strike
at the heart of the credit crisis but its scale complexity
and the potential for controversy poses challenges for
policymakers
The plan is due to be announced by President Barack Obama
on Wednesday and is expected to break new ground by helping
troubled borrowers even before they miss a mortgage payment
If it works officials will have a standardized approach to
quickly determine whether a borrower is in trouble revalue the
home and set new mortgage terms under a program that could
help contain losses for banks that have incurred huge losses on
on bad housing investments
The hope is that a uniform standard will do two things
give legal cover to rewrite loan terms and provide a universal
template to quickly churn through the rolls of troubled
borrowers Mortgage servicers the companies that collect a
borrower s monthly payments are often hamstrung by contracts
and cannot loosen loan terms
Currently there are 57 varieties of mortgage modification
plans out there That is totally disabling said John Courson
president of the Mortgage Bankers Association
If all troubled borrowers went through a standard program
mortgage experts could process loans quickly he said
We need this cookie cutter approach Courson said
Wall Street stock indexes erased nearly 250 points of
losses or 3 0 percent Thursday afternoon as investors
digested a Reuters report detailing the mortgage aid plan
Washington s tentative efforts to stabilize the housing
market have unnerved financial markets but investors were
encouraged by signs on Thursday that an aggressive rescue plan
was finally on the way
While investors generally oppose programs that let
homeowners escape the original terms of a mortgage a
comprehensive plan could get Wall Street s backing
The critical thing is how they structure the qualification
process said Mahesh Swaminathan a strategist at Credit
Suisse in New York Who gets it and how is it done simply and
transparently
If it doesn t force one party to take the bulk of the
losses that would very materially benefit the securities
market he added
The Obama plan envisions that the government would make
matching payments with mortgage servicers to cover some monthly
costs sources familiar with the plan have said That program
could quickly outstrip a 50 billion kitty of federal money
that is earmarked for foreclosure prevention according to data
compiled by Amherst Holdings LLC
Monthly payments on an estimated 1 17 trillion in
defaulted loans total about 8 8 billion so the subsidy would
be depleted in a year if the government picks up half the tab
said Sean Dobson Amherst s CEO
Still Obama and Treasury Secretary Timothy Geithner have
said they may seek more federal rescue funds if needed
A total of 8 1 million U S homes or 16 percent of all
households with mortgages could fall into foreclosure by 2012
according to Credit Suisse
As the housing crisis reaches the two year mark and
foreclosures continue to climb there is some political will
for a bold program to control the spread of failing loans
And policymakers may not have such a hard time crafting new
standards since Wall Street is now relying on Washington for
billions of dollars in emergency financing
On Friday Citigroup Inc JPMorgan Chase Co
and Morgan Stanley all agreed to suspend home
foreclosures In all those lenders have received 80 billion
in taxpayer investments
I d bet anyone who is getting government aid is going to
be mandated to take part in the modification program
Courson said
Still developing standards will not be easy and the Obama
administration will have to sell the public on the idea of
helping borrowers in good standing who could wrongly get relief
under the program
There is no test that I have seen that can t be gamed by
someone who is clever enough and determined enough to do so
said David John a senior fellow at the right leaning Heritage
Foundation a Washington think tank
A poorly managed program raises the prospects of irate
neighbors turning on one another because one family sought aid
while the other did not
But consumer advocates argue that failed mortgage relief
programs of the last year prove that waiting until a borrower
is delinquent means waiting too long to do any good
I think we could live with that Courson said of giving
aid to borrowers who are currently timely but could face
problems making their payments
Additional reporting by Julie Haviv and Jonathan Stempel
in New York and Andrea Hopkins in Cincinnati |
MS | WRAPUP 2 Central Europe currencies dip as EU summit disappoints | EU rejection of wider CEE bailout hits currencies
Morgan Stanley cuts forecasts on CEE banks stocks fall
Latvian PM designate says 2009 fight to avoid bankruptcy
EU s Almunia says more CEE help may be needed
Adds Almunia comments Latvia PM quotes
By Jason Hovet
PRAGUE March 2 Reuters Emerging European currencies
plunged on Monday led by a 2 5 percent drop in the Hungarian
forint after a summit of European Union leaders rejected a mass
bailout plan for the region
The dismissal of a Hungarian call for a 180 billion euro
plan dashed hopes of a swift move toward a broader deal to
underpin the EU s eastern wing and steady nerves that have hit
even its better balanced economies
Central Europe s currency debt and stock markets have been
battered by concerns about weakening growth and banks and their
heavy reliance on external funding despite some policymakers
efforts to distance themselves from weaker neighbours
The Poles and Czechs have watched a euro zone recession and
the credit crunch slam the brakes on their economies but contend
they are still far better off than Hungary and Latvia which
have sought bailouts from the International Monetary Fund
European Monetary Affairs Commissioner Joaquin Almunia said
on Monday the EU was doing a huge amount to support its eastern
members but said more may be needed
He said Monday s falls were not a result of weekend
decisions Analysts said the lack of a unified response had hurt
markets and that investors would not differentiate between
states until the region secures a broader aid package to
underpin confidence
Markets especially currencies will continue to push for a
strong policy response and so we must wait and see what next
steps are taken at an EU level Nomura emerging markets
economist Peter Attard Montalto said in a note
STAGGERING
EU leaders also held out the prospect on Sunday of faster
euro zone entry for single currency aspirants but analysts said
that offered little solace to investors who fear the region s
woes could also spill over to the West
The most immediate trouble is a collapse in industry due to
consumers snapping their purses shut in richer Western EU
states PMI purchasing managers data showed the Czech and
Polish manufacturing sectors ticking up slightly in January but
contracting significantly overall
Polish gross domestic product data also showed the economy
grew 2 9 percent year on year in the fourth quarter better than
expected although analysts said the slowdown would deepen in the
region s largest economy
We are still very much at the stage where every month
forecasts for 2009 are being revised and the 2010 outlook
becomes bleaker said ING analyst Agata Urbanska
The sliding currencies also threaten hundreds of thousands
who borrowed in euros or Swiss francs and now face skyrocketing
loan payments while in Poland firms are struggling under the
weight of currency options contracts made last year when the
zloty was around 50 percent stronger than now
Analysts also fear countries like Latvia and Bulgaria that
operate currency boards may have to devalue which could push
many borrowers towards loan default and undermine banking
On Monday Latvian prime minister designate Valdis
Dombrovskis said 2009 would be a fight to avoid the state going
bankrupt as the economy worsens and social tension rises
Latvia s central bank said it spent 40 million euros on
buying lats last week the first time since a December IMF deal
while the outgoing government warned its budget deficit would
near 10 percent of GDP without further spending cuts
EMERGING MARKET WORRIES
Investors also cut riskier emerging market positions as
financial sector worries were fuelled by a huge rights issue
from HSBC and news the U S government was set throw a fresh
lifeline to troubled insurer AIG
The forint sank to 307 2 per euro by 1311 GMT down 2 5
percent from Friday s closing level but still off its all time
low of 310 The Polish zloty lost 1 7 percent to 4 751 per euro
and the Czech crown shed 1 percent to bid at 28 37 per euro
The weaker currencies hurt government bonds with yields
continuing to tick up Romania s leu outperformed on speculation
the central bank may intervene dealers said
Stocks weakened mirroring losses in Western Europe due to
the financial sector fears Prague lost 1 6 percent while Warsaw
nudged lower Banks came under pressure after Morgan Stanley
cut several price targets saying it remained cautious on the
region
The zloty has shed 13 4 percent this year and a third of its
value versus the euro since hitting record highs last summer
The forint has lost 14 2 percent in 2009 while the crown is off
5 7 percent and the leu 6 7 percent
Reporting by Reuters bureaus writing by Mike Winfrey and
Patrick Graham |
MS | WRAPUP 3 Central Europe currencies dip as EU summit disappoints | EU rejection of wider CEE bailout hits currencies
Romania says in preliminary talks with IMF on deal
Morgan Stanley cuts forecasts on CEE banks stocks fall
Latvian PM designate says 2009 fight to avoid bankruptcy
EU s Almunia says more CEE help may be needed
Changes prices adds Romania talks with IMF
By Jason Hovet
PRAGUE March 2 Reuters Emerging European currencies
plunged on Monday led by an almost 2 5 percent drop in the
Hungarian forint after a summit of European Union leaders
rejected a mass bailout plan for the region
Romania looked to be preparing to join a list of countries
rescued by the International Monetary Fund after a source said
Bucharest had started preliminary talks on a potential deal to
help finance its vast trade deficit
That list already includes Hungary and Latvia the latter of
whose prime minister designate Valdis Dombrovskis said 2009
would be a fight to avoid bankruptcy
The events followed EU leaders dismissal of a Hungarian
call for a 180 billion euro plan which dashed hopes of a swift
move toward a broader deal to underpin the bloc s eastern wing
and steady nerves that have hit even its better off economies
Central Europe s currency debt and stock markets have been
battered by concerns about weakening growth and banks and their
heavy reliance on external funding despite some policymakers
efforts to distance themselves from weaker neighbours
The Poles and Czechs have watched a euro zone recession and
the credit crunch slam the brakes on their economies but contend
they are still far better off than Hungary and Latvia
European Monetary Affairs Commissioner Joaquin Almunia said
on Monday the EU was doing a huge amount to support its eastern
members but said more may be needed
He said Monday s market falls were not a result of weekend
decisions Analysts said the lack of a unified response had hurt
markets and that investors would not differentiate between
states until the region secures a broader aid package to
underpin confidence
Markets especially currencies will continue to push for a
strong policy response and so we must wait and see what next
steps are taken at an EU level Nomura emerging markets
economist Peter Attard Montalto said in a note
SLIDING
EU leaders also held out the prospect on Sunday of faster
euro zone entry for single currency aspirants but analysts said
that offered little solace to investors who fear the region s
woes could also spill over to the West
The most immediate trouble is a collapse in industry due to
consumers snapping their purses shut in richer Western EU
states PMI purchasing managers data showed the Czech and
Polish manufacturing sectors ticking up slightly in February but
still in a significant contraction
Polish gross domestic product data also showed the economy
grew 2 9 percent year on year in the fourth quarter better than
expected although analysts said the slowdown would deepen in the
region s largest economy
We are still very much at the stage where every month
forecasts for 2009 are being revised and the 2010 outlook
becomes bleaker said ING analyst Agata Urbanska
The sliding currencies also threaten hundreds of thousands
who borrowed in euros or Swiss francs and now face skyrocketing
loan payments while in Poland firms are struggling under the
weight of currency options contracts made last year when the
zloty was around 50 percent stronger than now
Analysts also fear countries like Latvia and Bulgaria that
operate currency boards may have to devalue which could push
many borrowers towards loan default and undermine banking
EMERGING MARKET WORRIES
Investors also cut riskier emerging market positions as
financial sector worries were fuelled by a huge rights issue
from HSBC and news the U S government was set throw a fresh
lifeline to troubled insurer AIG
The forint sank to 306 6 per euro by 1539 GMT down 2 3
percent from Friday s closing level It was still off its
all time low of 310 but negative pressure built when agency
Fitch cut Hungary s ratings outlook to negative
The Polish zloty lost 1 8 percent to 4 751 per euro and the
Czech crown shed 0 4 percent to bid at 28 217 per euro
The weaker currencies hurt government bonds with yields
continuing to tick up
Romania s leu outperformed on speculation the central bank
may intervene dealers said and a 92 million euro drop in the
country s foreign currency reserves in February signalled it
had done just that last month
Stocks weakened mirroring losses in Western Europe due to
the financial sector fears Prague lost 1 6 percent while Warsaw
nudged lower Banks came under pressure after Morgan Stanley cut
several price targets saying it remained cautious on the
region
The zloty has shed 13 4 percent this year and a third of its
value versus the euro since hitting record highs last summer
The forint has lost 14 2 percent in 2009 while the crown is off
5 7 percent and the leu 6 7 percent
MARKET SNAPSHOT
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown 28 217 28 101 0 41 5 19
Polish zloty 4 759 4 672 1 83 13 53
Hungarian forint 306 61 299 52 2 31 14 04
Croatian kuna 7 43 7 435 0 07 0 87
Romanian leu 4 304 4 296 0 19 6 73
Serbian dinar 93 57 93 533 0 04 4 37
Yield Spreads
Czech treasury bonds
2 yr T bond CZ2YT RR 33 basis points to 252bps over bmk
4 yr T bond CZ4YT RR 3 basis points to 249bps over bmk
8 yr T bond CZ8YT RR 11 basis points to 306bps over bmk
Polish treasury bonds
2 yr T bond PL2YT RR 13 basis points to 452bps over bmk
5 yr T bond PL5YT RR 11 basis points to 385bps over bmk
10 yr T bond PL10YT RR 9 basis points to 324bps over bmk
Hungarian treasury bonds
3 yr T bond HU3YT RR 23 basis points to 1173bps over bmk
5 yr T bond HU5YT RR 33 basis points to 1036bps over bmk
10 yr T bond HU10YT RR 39 basis points to 845bps over bmk
Benchmark is German bond equivalent
All data taken from Reuters at 1739 CET
Currency percent change calculated from the daily domestic
close at 1600 GMT
Reporting by Reuters bureaus writing by Mike Winfrey and
Patrick Graham Editing by Andy Bruce |
MS | POLL Japan Q4 revised GDP seen unchanged after capex survey | For more stories on the Japanese economy click
By Mari Terawaki
TOKYO March 5 Reuters Capital expenditure figures
issued on Thursday showed Japan s economy likely shrank by its
most since 1974 a Reuters poll found but a slide in
inventories would limit the size of the plunge
Revised figures next week will likely show gross domestic
product fell 3 3 percent in the final quarter of 2008 the poll
found the same as an earlier government estimate
The finance ministry survey showed that Japanese companies
cut spending on plants and equipment by 17 3 percent from a year
earlier slightly worse than a median forecast for a 16 6
percent slide but economists also said this was offset by lower
inventories
Stockpiles of unsold goods fell 74 8 percent from a year
earlier in the fourth quarter Third quarter figures had shown
40 3 percent growth
When you consider the lower inventories the two factors
offset each other said Kyohei Morita chief economist for
Japan at Barclays Capital
The decline in capital spending was the largest fall in
comparable data going back to July September 2002 although the
fall was exaggerated by changes in accounting rules on leasing
Excluding investment by financial holding firms and leasing
companies capital spending fell 9 7 percent
A decline in fourth quarter GDP would follow a 0 6 percent
contraction in the third quarter and a 0 9 percent decline in
the second quarter confirming that the world s second largest
economy remains mired in a recession A widely used definition
of a recession is two straight quarters of contraction
Following are economists forecasts for revised GDP data due
out on March 12 percentage point contribution to GDP
CAPEX INVENTORY GDP GDP ANNUALISED
Median 5 0 0 2 3 3 12 7
High 3 7 0 5 3 1 11 8
Low 6 8 0 1 3 7 13 9
Daiwa SB Investments 3 7 n a 3 1 11 8
JP Morgan 4 3 0 1 3 1 12 0
Barclays Capital 4 1 0 3 3 2 12 1
Mitsui Sumitomo AM 4 3 0 3 3 2 12 2
UFJ Research 4 5 0 3 3 2 12 3
Daiwa SMBC 4 8 0 3 3 3 12 4
BNP Paribas 5 5 0 5 3 3 12 4
Japan Research 4 7 0 3 3 3 12 4
Shinkinchukin Research 3 9 0 2 3 3 12 5
Informa Global Markets 4 1 0 2 3 3 12 7
Calyon 5 3 0 2 3 3 12 7
Norinchukin Research 5 5 0 3 3 4 12 8
Monex 5 9 n a 3 4 13 1
Daiwa Research 5 0 0 1 3 5 13 4
NLI Research 6 1 0 2 3 5 13 4
Mitsubishi Securities 6 0 0 3 3 5 13 4
Deutsche Securities n a n a 3 5 13 4
Dai ichi Life Research 5 5 0 2 3 5 13 5
Mizuho Research 6 8 0 2 3 6 13 8
Mitsubishi Research 5 5 0 0 3 7 13 9
Morgan Stanley n a n a n a 13 8
Writing by Stanley White Editing by Edwina Gibbs |
MS | Financial Sector Volker On Banks Wells Loans | According to former Federal Reserve Chairman Paul Volcker believes that commercial banks should be separated from investment banks in order to avoid another crisis like the U S is experiencing
Maybe we ought to have a kind of two tier financial system Volcker who heads President Barack Obama s Economic Recovery Advisory Board said today at a conference at New York University s Stern School of Business
What used to be the traditional investment banks Morgan Stanley Goldman Sachs so forth which used to do some underwriting and mergers and acquisitions are dominated by other activities we would exclude very heavy proprietary trading hedge funds he said So there s some separation to be made
Volcker s comments come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul of finance especially companies deemed vital to the stability of the financial system
Volcker who ran the Fed from 1979 to 1987 said the financial industry s problems stem from larger issues I don t think this is just a technical problem it s a societal problem he said He cited bankers on Wall Street receiving multimillion dollar bonuses for engineering failed mergers
There s something wrong with the system Volcker said What are the incentives what s going on here
Wells Fargo said today that its January and February results were strong
The bank made 59 billion in mortgage loans in the first two months of this year exceeding its fourth quarter total the company said today in a statement and took in more deposits
Regulators are prodding banks that took money from the Troubled Asset Relief Program to cut dividends as they try to shore up the financial system Wells announced yesterday it was reducing its dividend 85 to save 5 billion
Wells Fargo took over failed bank Wachovia last Fall and has suffered in the process Wachovia had issued 120 billion of option adjustable rate mortgages ARMS and Wells Fargo in the fourth quarter wrote down the value of Wachovia s loans by 37 2 billion including 24 3 billion of option ARMs and an additional 7 7 billion in commercial real estate loans |
MS | UPDATE 3 Deflation grips China as economy struggles | Adds stocks paragraph 9 central banker paragraph 17
By Zhou Xin and Jason Subler
BEIJING March 10 Reuters China fell into deflation at
the consumer level last month for the first time in more than
six years as ministers painted a gloomy picture of the
economy s near term prospects
The 1 6 percent drop in the consumer price index CPI in
the year to February which was bang in line with a Reuters
survey of 26 analysts gives the central bank ample scope to
cut interest rates further if need be to boost the economy
Goldman Sachs said now seemed a natural point to lower
borrowing costs to ease the financial burden on firms which
are battling a slump in overseas demand and in domestic
construction
Commerce Minister Chen Deming and Industry Minister Li
Yizhong speaking at a joint news conference both used the
word grim to describe the immediate outlook for Chinese
exports and the manufacturing sector
Li said he was encouraged that power consumption had
declined at a slower pace in the first two months of the year
But he added The situation of industrial production remained
grim
The year on year drop in the CPI reported by the National
Bureau of Statistics was the first since December 2002
Economists worry that unless China s 4 trillion yuan 585
billion stimulus plan kicks in soon these deflationary
pressures will intensify because the economy is saddled with
excess capacity at a time of depressed demand
Consumers who expect more price declines in future may
delay their purchases weakening the economy and undermining
corporate profits
I think this is the first sign of deflation Qing Wang
China economist for Morgan Stanley in Hong Kong said of the
CPI drop We expect an additional policy response mainly to
prevent deflationary expectations from getting entrenched
Shanghai stocks recouped early losses and ended 1 88
percent higher as investors shrugged off the slide into
deflation and took comfort from strong lending data
DON T PANIC
Wang expects consumer prices to decline 1 percent in 2009
By contrast the government of Premier Wen Jiabao who has
sought to bolster confidence by talking up the economy s
fundamentals expects inflation to average around 4 percent
Mingchun Sun with Nomura in Hong Kong agreed the lapse into
deflation was likely to be temporary Inflation would return by
the second half of the year and reach 2 8 percent in the fourth
quarter For all of 2009 the CPI was likely to rise 0 6
percent
Considering the inflationary nature of the stimulus
package we believe the People s Bank of China will hesitate in
cutting rates Therefore we now expect just one more 27 bp
basis point cut this year down from three in our earlier
forecast and see that as more of a symbolic reaction to
deflation Sun said in a report
Protracted deflation is also debilitating because it
increases the real burden on companies of repaying debts And
if the cost of money is already close to zero deflation makes
it impossible for central banks to set negative real interest
rates
The government in Beijing and some private economists say
China s circumstances are different
The price falls are mainly caused by declines in
international commodity prices they do not mean that the
Chinese economy is contracting Su Ning a deputy central bank
governor told reporters during the annual meeting of
parliament
The statistics office said the drop in the CPI was largely
due to a high base of comparison in the 12 months to February
2008 consumer prices were up 8 7 percent near a 12 year peak
as the cost of food oil and imported raw materials soared
Even if prices had not changed last month from the end of
2008 the bureau said the statistical effect of last year s
high inflation rate would have been to drive the CPI down 2 5
percent
Moreover given rapid credit growth and ample liquidity in
the banking system it was not warranted to conclude that China
had relapsed into deflation for the third time in a decade the
statistics office said
Still it drew attention to a sharp decline in prices of
raw materials like crude oil iron ore and metals due to the
global economic slowdown
This was the driving force behind an acceleration in the
pace of decline in China s producer prices to 4 5 percent in
the year to February from 3 3 percent in the 12 months to
January
I worry about PPI The sharp fall in PPI shows that the
financial crisis is gradually spreading to the real economy
said Qi Jingmei an economist with the State Information
Centre a government think tank in Beijing
In another ominous sign Chinese urban property prices fell
1 2 percent in February from a year earlier the steepest
annual decline since official records began in 2005
Reporting by Zhou Xin Langi Jiang Lan Wang Jason Subler
and Simon Rabinovitch Writing by Alan Wheatley Editing by Kim
Coghill |
JPM | Hong Kong Shenzhen stock link to start in days as China opens up markets more | Reuters A long awaited stock trading link between Hong Kong and Shenzhen will go live in coming days the CEO of Hong Kong s bourse said further opening up China s capital markets to global investors and giving them access to some of its fastest growing companies With more than 1 800 listed companies that have a combined market capitalization of 3 3 trillion the Shenzhen stock market is viewed by analysts as offering tremendous investment potential HSBC in fact calls it the largest untapped investment opportunity in the world But sky high valuations and wild swings in Chinese stock prices mean investment flows from Hong Kong into its northern neighbor could take time to materialize On the other hand as Chinese retail investors seek to diversify away from their home market and put their funds into assets in a stronger currency Hong Kong may be a key beneficiary Certainly I don t think you will see significant interest in the northbound part of the connect until you have greater optimism about the outlook for domestic equities Richard Titherington head of the Asia Pacific Equities team at JPMorgan NYSE JPM Asset Management told the Reuters Global Investment Outlook Summit in Hong Kong The launch of the so called Shenzhen Connect scheme is expected in a few more days Charles Li chief executive of Hong Kong Exchanges and Clearing Ltd HK 0388 said on Friday The move expands an existing trading link between Hong Kong and Shanghai allowing foreign investors to trade stocks directly in Shenzhen the world s second busiest exchange from Hong Kong Speaking at the Shenzhen stock exchange in the first stop of a roadshow in mainland China to promote the trading link Li urged Chinese investors to diversify their holdings with Hong Kong stocks and joked that with real estate prices in the city so expensive shares may be a better bet China residents have a lot of wealth and they need to preserve the value and add value to it so they have to diversify their investments Li said DELAYED START The Shenzhen Connect had been expected to start more than a year ago but was put on hold after a slump in the Shenzhen and Shanghai bourses with stocks diving more than 40 percent and the government implementing a series of measures to prop up markets China approved the Shenzhen trading scheme in August Among HSBC s top recommendations to investors on Shenzhen listed companies are Wanda Cinema Line Co Ltd 002739 SZ China s largest cinema operator and Hangzhou Hikvision Digital Technology 002415 SZ the world s second largest maker of video surveillance cameras the bank said a report this month For Chinese investors facing a weakening economy and currency investing in mid size Hong Kong listed companies may be one way to offset the domestic downturn investors said Investment flows into Hong Kong shares since the trading link with Shanghai was unveiled two years ago are nearly double the volumes from Hong Kong into China and the Shenzhen link means strong southbound inflows will continue HSBC said We do see pretty strong interest at least from our client base in investing in the Shenzhen Hong Kong link said Wang Ren chief financial officer at China Minsheng Financial the investment arm of China s largest private fund at the Reuters summit
In the initial few days definitely we will see a pickup in volume but it depends on the currency situation People want to allocate more money offshore Wang said |
JPM | How Russia s battle for Eurobond went to the brink | By Lidia Kelly Katya Golubkova and Sujata Rao MOSCOW LONDON Reuters When Russia sought to raise money on Western debt markets this year with a Eurobond only three people at the state run investment bank organizing the issue were told in advance about the date and details of the launch The reason for the clandestine preparations the Eurobond was a crucial step for Russia s limping economy and Moscow feared its Western adversaries might try to sabotage it by pressuring foreign financial institutions to steer clear I had not experienced such secrecy in my life before said Andrey Solovyov head of debt capital markets at the state run investment bank VTB Capital and one of the three people in the know Western governments led by Washington have imposed sanctions on certain Russian individuals and entities over Moscow s annexation of Crimea and its role in the separatist conflict in eastern Ukraine aiming to hinder access to Western financing The sanctions do not however forbid Western firms from taking part in a Russian Eurobond an international bond denominated in a foreign currency Reuters interviews with about a dozen government officials bankers and investors involved in the deal shows the lengths that Russia was willing to go to secure Western finance The May 23 launch was shrouded in secrecy even from managers who were going to handle it And it came close to collapsing in the fraught hours that followed Russian Deputy Finance Minister Sergei Storchak said the U S administration found a way to pressure its financial institutions to eschew the placement And at the eleventh hour in a highly unorthodox move officials had to turn to a local intermediary to handle the technicalities of the issue after two European clearing houses declined to handle it one of them hours into the launch day according to two banking sources familiar with the placement In the end Russia placed the Eurobond in the market and raised 1 75 billion as targeted Views differ about whether this was a triumph Moscow said it showed it could still access Western credit markets despite U S resistance Buyers included at least one big U S asset manager which declined to be named due to the political sensitivity of the matter But some Western financial industry insiders said the issue was a hollow victory because some of the biggest financial institutions including the likes of BNP Paribas PA BNPP and JPMorgan NYSE JPM kept away from the primary issue and they have the capital Russia needs in the long term CLEARING CONUNDRUM The fact Russia was planning a Eurobond was not a secret This had been announced by Moscow in February and according to multiple sources in Russian and Western financial institutions around that time the Obama administration had advised Western players not to participate A U S Treasury spokesman told Reuters it had not barred U S entities from taking part but highlighted potential risks that could arise if sanctioned entities were indirectly involved in the issuance He did not elaborate but lawyers said the main risk was that investors money might end up going to sanctioned entities which could theoretically breach the sanctions Russian officials and bankers say they acted specifically to catch U S officials off guard From about two months before the launch they did not tell VTB Capital managers or workers apart from the select three about the details of the issue such as the date and the terms offered Once the day of the launch came it was a rollercoaster The bond was launched in the morning Moscow time so VTB could talk to would be clients in Europe and Asia at least for a few hours to assure them there was no sanctions risk before they received countervailing calls from the U S Treasury the sources said The terms were attractive the yield was 4 75 percent a significant premium on the ultra low yields on offer in European markets and on existing Russian sovereign bonds On May 23 a Monday the order was given to VTB Capital bankers to start pitching to clients Would be investors put in their bids Business was brisk The expectation among the organizers and on the market was that the order book would be closed quickly Yet by lunchtime the first glitch occurred the order book was still open The problem according to two banking sources familiar with the discussions around the placement was with the clearing houses crucial to placing such a bond The two big houses Euroclear and Clearstream act as intermediaries taking money from investors and holding the securities on their behalf Rules at most big banks prevent them taking part in a Eurobond if one of the two is not on board Before the bond launch Clearstream had declined to get involved in the deal according to a government source who said this was the result of political reasons without elaborating on this Clearstream declined to comment That left Euroclear The two banking sources who spoke on condition of anonymity about private discussions said that shortly before VTB Capital opened the order book for its issue it reached a loose agreement with Euroclear that it would act as clearing agent Yet by midday in Moscow on May 23 Euroclear had still not given a formal definite answer on whether it would clear the issue or not according to one of the bankers Launching without one of the two houses on board was a highly unusual if not unprecedented move for a country issuing a Eurobond an indication of Russia s determination to place the bond The two banking sources said Euroclear held back because it was worried about the risks stemming from the U S government s attitude to the bond Euroclear declined to comment MAKE OR BREAK By the end of Monday with the bond still not placed and no international clearing house to handle the issue investors were getting anxious Rumours started to spread that the goods are sub standard rotten that you should make a run for it said the first banking source Investors started to gradually take back their orders The next morning VTB staff were fighting a rearguard action trying to persuade customers not to withdraw orders Senior executives at the bank kept pressing Euroclear to say if it would take part or not the source said VTB Chief Executive Andrei Kostin personally called Euroclear executives said the first banking source Asked about this VTB said that as sole arranger the bank was in contact with all parties involved in this process The issue had reached a make or break point by late on Tuesday At the end of the second day we took the decision that we re going ahead without Euroclear said Solovyov the VTB Capital head of debt capital markets It is unclear if Euroclear ever came back with an answer but Moscow anyway had a plan B A month earlier the finance ministry had got in touch with the National Settlement Depository NSD Russia s domestic clearing house asking it to handle the Eurobond in case Euroclear did not take part said NSD head Eddie Astanin It was unexpected Astanin said of that request to the depository which had never handled a Eurobond He had assigned his team to draw up a plan which was ultimately put into action HITTING THE PHONES It was now evening on day two in Moscow VTB bankers knew they were still on thin ice regarding potential clients While the terms offered better returns than outstanding Russian Eurobonds the bond would not be euroclearable so buyers would need to take a leap of faith handing over their money to a Russian settlement system that was untried Bankers hit the phones at VTB Capital where patriotic anthem Rise up vast country was played in the VIP elevator after sanctions were imposed in 2014 Unusually the bank s senior management also picked up the phones to clients to offer all sorts of assurances said the first banking source Some investors could not be persuaded We were honest and gave them feedback that because of the spirit of the sanctions we would not be taking part said Bryan Carter head of emerging markets fixed income at BNP Paribas Investment Partners One London based hedge fund manager who declined to be identified said his fund wanted to buy but missed the deadline because the fund s compliance department worried by U S warnings took a long time to give the green light For those who did buy there were arguments in favor Pavel Mamai portfolio manager at UK hedge fund Promeritum Investment Management for example believed U S investors who did not take part in the initial issue would want to buy the bond later allowing him to sell at a profit I wasn t sure it would become euroclearable but I still thought it would have upside as it came so cheap he said Mamai did later resell the bond twice and made money each time he said The order book was closed soon after 8 p m Moscow time 6 p m in London with the primary issue raising 1 75 billion The finance ministry said around 75 percent of it was bought by foreign investors though Reuters cannot independently verify that The next morning the bond started selling on the secondary market Over the following days Western investment banks included the bond in their indices making it easier to trade
On July 28 Euroclear started clearing the bond meaning every investor in the world could buy it |
JPM | Politics may trigger shift in European economic policy | By Noah Barkin BERLIN Reuters Slowly but surely the economic policy tide in Europe is turning and it may only be a matter of time before Germany is swept up By adding its voice this week to the long list of institutions pressing Germany to spend more the European Commission left Berlin looking more isolated and out of step than at any time since the outbreak of the global financial crisis nearly a decade ago Predictably the Commission s call for a significantly more positive fiscal stance in the euro area was shot down by Finance Minister Wolfgang Schaeuble and the conservative media establishment in Germany On Friday Schaeuble accused the Commission of overstepping its mandate and urged it to focus its energies on enforcing the EU s fiscal rules But by this time next year the episode may be looked back upon as the first step toward a broader change in Europe s economic approach away from the austerity first stance pushed successfully by Berlin for many years This could be fueled by a range of factors the pressures arising from Donald Trump s victory in the U S election and the arrival of new governments in France and Germany in 2017 We expect that the German position will gradually lose influence Marco Protopapa of JPMorgan NYSE JPM said this week Trump s win is especially significant On the one hand it is likely to increase pressure on Germany to spend more public money on defense and security On the other it sends a powerful signal to the German political establishment about the dangers of ignoring an increasingly frustrated underclass buffeted by the forces of globalization that has shown a readiness to vent its anger at the ballot box GRAND BARGAIN The looming French election will be crucial Center right frontrunner Alain Juppe and his top conservative rivals Francois Fillon and Nicolas Sarkozy are all promising radical economic reform if they are elected in May of next year That could open the door to the sort of grand bargain or reforms for stimulus compromise between France and Germany that has been talked about for years but was impossible with a weak unpopular Francois Hollande in the Elysee and the French economy languishing We are very much in the grand bargain game an adviser to Juppe told Reuters The real game changer could be the German election in the autumn of next year and the fate of Schaeuble the personification of Germany s rule based restrictive approach to fiscal policy The most likely outcome of that vote looks like another grand coalition between Chancellor Angela Merkel s conservatives and the center left Social Democrats SPD Schaeuble 74 has already said that he plans to run for a seat in the Bundestag again a signal to many that he would like to continue to play an important role in the next cabinet But the SPD which would probably have first choice of ministries in such a constellation could claim the finance ministry this time around as they did in 2005 in Merkel s first term That would push Schaeuble into another ministry blunting his role as a guardian of fiscal rectitude One senior official who served in both grand coalitions said the lessons of the past years would push Merkel s next coalition partner to take the finance ministry instead of the foreign ministry the traditional first choice Regardless of who that partner is everyone has understood that the finance ministry has a great deal more value than the foreign ministry the official said FROM WITHIN Christian Odendahl chief economist at the Centre for European Reform said the European Commission s call for more spending was unlikely to sway Germany The change needs to come from within he said But Odendahl does believe that a more vigorous debate is developing within Germany over the wisdom of Schaeuble s Schwarze Null or balanced budget policies A poll for public broadcaster ARD in September showed that 58 percent of Germans favored spending additional tax revenues on infrastructure investments compared with 22 percent who prefer debt reduction and 16 percent who want tax cuts If you had a different finance minister or if the political case for a topic based fiscal expansion grew then you could see a shift he said citing the messages from Trump s election Merkel is far too pragmatic and political to make the Schwarze Null a priority when there are other problems to address A more expansive German fiscal policy after the election may help pave the way for a tightening of monetary policy a step Schaeuble himself has called for The European Central Bank ECB which meets next month to decide on whether to extend its quantitative easing QE or bond buying program has been looking for ways out of its ultra loose stance It too has called on Germany to grab the stimulus baton Marcel Fratzscher who runs the Berlin based DIW economic institute and is a former senior official at the ECB says the pressure is building on Berlin to shift its stance His worry is that the ruling parties may end up wasting the fiscal wiggle room they have by making lavish promises to pensioners in the coming election campaign
I think there will be a further shift even if Schaeuble stays If the United States ratchets up spending and this is successful then it would be a signal he said My worry is that it could come too late that the government will have used its fiscal space for pension increases and tax reductions |
JPM | Ex JPMorgan executive who fled to Argentina pleads guilty in U S | By Nate Raymond NEW YORK Reuters A former JPMorgan Chase Co NYSE JPM executive who spent eight years on the run in Argentina pleaded guilty on Friday to U S charges that he embezzled 5 4 million from clients at the bank and at a prior employer UBS AG Hernan Arbizu who became involved in a tax evasion probe involving JPMorgan pleaded guilty in Manhattan federal court to charges including wire fraud and embezzlement He was extradited in June from Argentina I knew what I was doing was wrong he said in court I m very sorry and am ashamed by my actions The 48 year old citizen of Argentina faces a mandatory minimum two year prison sentence and a maximum of 422 years But under a plea agreement Arbizu agreed to cooperate with prosecutors which his lawyer Guy Lewis said could help him avoid further prison What that cooperation entails Lewis said remains to be seen JPMorgan declined to comment on Friday Arbizu was first indicted in 2008 the same year he was fired by JPMorgan where he was a vice president in its private banking division He worked at UBS from 2002 to 2006 While at JPMorgan Arbizu oversaw more than 200 million of client assets and was responsible for managing relationships with high net worth Argentine customers according to the bank Prosecutors said that from March 2007 to April 2008 Arbizu initiated 12 wire transfers from clients at UBS and JPMorgan totaling nearly 5 38 million about half of which came from a single JPMorgan account In lawsuits JPMorgan filed against Arbizu in 2008 and 2009 the bank said he wired the 2 8 million to an account at UBS to conceal the millions of dollars that he had previously stolen from one of its customers JPMorgan said that after it discovered evidence of the wire transfers Arbizu then living in Connecticut fled to Argentina taking with him confidential data on clients That data later became the basis of a tax evasion investigation and raid by Argentina authorities of JPMorgan s office in Buenos Aires in 2008 after Arbizu handed over a list of customers No case against JPMorgan appears to have resulted The case is U S v Arbizu U S District Court Southern District of New York No 08 cr 615 |
C | U S stocks open lower despite jobless data Dow Jones down 0 11 | Investing com U S stocks opened lower on Thursday despite upbeat U S jobless claims data as markets took a breather after the Federal Reserve s decision to begin tapering its stimulus program next month sent global equities higher on Wednesday During early U S trade the Dow Jones Industrial Average edged down 0 11 the S P 500 index fell 0 22 while the Nasdaq Composite index shed 0 31 The U S Department of Labor said the number of individuals filing for initial jobless benefits in the week ending December 14 increased by 10 000 to a seasonally adjusted 379 000 the highest level since late March Analysts had expected U S jobless claims to to 334 000 last week from the previous week s revised total of 369 000 The S P 500 and Dow Jones closed at record highs on Wednesday after the Fed said it would reduce its USD85 billion a month bond buying program by USD10 billion in January In his last press conference as Fed Chairman Ben Bernanke said the economy was continuing to make progress The U S central bank reiterated that interest rates are likely to remain low even after the unemployment rate drops below 6 5 the threshold at which the Fed has previously said it would start to consider rate increases In the auto sector Ford Motor plummeted 1 41 after predicting stalled revenue growth and sliding profit in 2014 Adding to losses Citigroup fell 0 27 after the Financial Times reported that the bank chose AIA Group as its partner in a multi billion dollar distribution deal that will allow the Asian life insurer s products to be sold through the U S lender s network across the region Facebook shares tumbled 1 39 after the social networking company said founder Mark Zuckerberg would sell 41 4 million shares worth about USD2 3 billion as part of an offering of 70 million shares Target was also on the downside retreating 1 26 after the retailer said about 40 million credit and debit card accounts used by its customers may have been impacted by a data breach On the upside McDonald s rose 0 23 as the fast food giant s Japan business said it plans to close 74 outlets in the country after the company cut its full year profit forecast by more than half in its second largest market Other stocks likely to be in focus included Nike Red Hat Darden Accenture Rite Aid Worthington Industries and Tibco Software all scheduled to release quarterly earnings later in the day Across the Atlantic European stock markets were sharply higher The EURO STOXX 50 rallied 1 41 France s CAC 40 jumped 1 13 Germany s DAX advanced 1 11 while Britain s FTSE 100 climbed 0 92 During the Asian trading session Hong Kong s Hang Seng Index tumbled 1 10 while Japan s Nikkei 225 Index jumped 1 74 Later in the day the U S was to publish data on existing home sales and manufacturing activity in the Philadelphia region |
C | U S futures point higher in thin trade Dow Jones up 0 30 | Investing com U S stock futures pointed to a higher open on Monday as Friday s upbeat U S economic growth data continued to support market sentiment in holiday thinned trade Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 30 gain S P 500 futures signaled a 0 41 increase while the Nasdaq 100 futures indicated a 0 69 climb Sentiment remained supported after official data on Friday showed that U S gross domestic product expanded by 4 1 in the third quarter above initial estimates for 3 6 growth U S equities had rallied last week after the Federal Reserve announced that it would reduce its USD85 billion a month bond buying program by USD10 billion in January Outgoing Fed Chairman Ben Bernanke said the economy was continuing to make progress The U S central bank reiterated that interest rates are likely to remain low even after the unemployment rate drops below 6 5 the threshold at which the Fed has previously said it would start to consider rate increases The tech sector was expected to be active following reports of a deal between Apple and China Mobile to launch the iPhone across China next month sending shares in the U S company up 3 27 in pre market trade Luxury jeweler Tiffany Co was also likely to be in focus as it ordered to pay Swatch an arbitration award of about CHF402 million after the Swiss watch maker claimed a breach of contract at their joint venture In the financial sector Bloomberg reported that the U K s Standard Chartered and U S lender Citigroup are struggling to sustain profits in South Korea where the economy us plagued by rising household debt Standard Chartered took a USD1 billion writedown on the value of its business in the country in August while Citigroup said Chief Financial Officer John GerspachKorea will hurt the U S bank s revenue in Asia through 2014 Other stocks likely to be in focus included Piedmont Natural Gas Company scheduled to release quarterly earnings later in the day Across the Atlantic European stock markets were higher The EURO STOXX 50 added 0 18 France s CAC 40 inched up 0 05 Germany s DAX gained 0 47 while Britain s FTSE 100 rose 0 36 During the Asian trading session Hong Kong s Hang Seng Index advanced 0 48 while Japan s Nikkei 225 Index remained closed for a national holiday Later in the day the U S was to release official data on personal spending as well as a report by the University of Michigan on consumer sentiment |
C | U S stocks open higher eyes on UoM report Dow Jones up 0 43 | Investing com U S stocks opened higher in subdued trade on Monday as investors eyed the release of U S consumer sentiment data later in the trading session after a tepid U S personal spending and personal income report During early U S trade the Dow Jones Industrial Average gained 0 43 the S P 500 index advanced 0 48 while the Nasdaq Composite index climbed 0 76 The Bureau of Economic Analysis said that U S personal spending rose 0 5 last month matching expectations Personal spending for October was revised up to a 0 4 gain from a previously reported increase of 0 3 The report also showed personal income rose 0 2 in November missing expectations for a 0 5 increase after falling by 0 1 in October The data came after a report on Friday showed that U S gross domestic product expanded by 4 1 in the third quarter above initial estimates for 3 6 growth Apple shares surged 3 08 following reports of a deal between the U S tech giant and China Mobile to launch the iPhone across China next month On the downside luxury jeweler Tiffany Co slipped 0 28 after it was ordered to pay Swatch an arbitration award of about CHF402 million after the Swiss watch maker claimed a breach of contract at their joint venture In the financial sector Bloomberg reported that the U K s Standard Chartered and U S lender Citigroup are struggling to sustain profits in South Korea where the economy us plagued by rising household debt Standard Chartered took a USD1 billion writedown on the value of its business in the country in August while Citigroup said Chief Financial Officer John GerspachKorea will hurt the U S bank s revenue in Asia through 2014 Citigroup shares were still up 0 46 following the news Other stocks likely to be in focus included Piedmont Natural Gas Company scheduled to release quarterly earnings later in the day Across the Atlantic European stock markets were higher The EURO STOXX 50 climbed 0 44 France s CAC 40 added 0 15 Germany s DAX gained 0 67 while Britain s FTSE 100 advanced 0 75 During the Asian trading session Hong Kong s Hang Seng Index advanced 0 48 while Japan s Nikkei 225 Index remained closed for a national holiday Later in the day the U S was to release a report by the University of Michigan on consumer sentiment |
C | European stocks rise in subdued trade Dax closed for New Year s Eve | Investing com European stocks opened higher in subdued holiday trade on Tuesday as equity markets remained supported before the year end despite recent European Central Bank comments The German Italian Scandinavian and Swiss markets were all closed on Tuesday while London Madrid and Paris opened for a half day During European morning trade France s CAC 40 gained 0 28 while Spain s IBEX 35 inched up 0 02 Trading volumes were thin as many investors already closed books before the end of the year reducing liquidity in the market and increasing volatility which helped exaggerate market moves On Friday ECB Governing Council member Weidmann who also heads the German Bundesbank said that keeping interest rates low may endanger political reforms He added that low inflation shouldn t be used to justify loose monetary policy We must take care to raise interest rates again in a timely manner should inflation pressures build Weidmann said Separately ECB President Mario Draghi said he sees no urgent need to cut the euro zone s main interest rate further and sees no signs of deflation In the financial sector French lenders BNP Paribas and Societe Generale gained 0 19 and 0 53 while Spanish banks Banco Santander and BBVA fell 0 17 and 0 22 respectively Elsewhere Orange shares dropped 0 76 amid reports the company is preparing its legal response to a report alleging the U S National Security Agency accessed customers data transmitted by a submarine cable partly used by the French telecoms operator In London FTSE 100 rose 0 26 supported by gains in financial stocks Shares in Lloyds Banking edged up 0 04 and the Royal Bank of Scotland added 0 24 while HSBC Holdings and Barclays advanced 0 39 and 0 75 respectively Adding to gains International Personal Finance climbed 0 40 after Citigroup recommended that investors buy the shares On the downside mining giants Rio Tinto and BHP Billiton slipped 0 28 and 0 16 while Randgold Resources and Vedanta Resources tumbled 1 01 and 1 95 In the U S equity markets pointed to a steady open The Dow Jones Industrial Average futures pointed to a 0 01 dip S P 500 futures signaled a 0 04 rise while the Nasdaq 100 futures indicated a 0 03 gain Later in the day the U S was to produce private sector data on consumer confidence and house price inflation as well as a report on manufacturing activity in the Chicago region |
C | European stocks hold gains in shortened session Dax closed | Investing com European stocks remained higher in thin holiday trade on Tuesday as equity markets remained supported before the year end despite recent European Central Bank comments The German Italian Scandinavian and Swiss markets were all closed on Tuesday while London Madrid and Paris opened for a half day During European afternoon trade France s CAC 40 gained 0 31 while Spain s IBEX 35 inched up 0 02 Trading volumes were thin as many investors already closed books before the end of the year reducing liquidity in the market and increasing volatility which helped exaggerate market moves On Friday ECB Governing Council member Weidmann who also heads the German Bundesbank said that keeping interest rates low may endanger political reforms He added that low inflation shouldn t be used to justify loose monetary policy We must take care to raise interest rates again in a timely manner should inflation pressures build Weidmann said Separately ECB President Mario Draghi said he sees no urgent need to cut the euro zone s main interest rate further and sees no signs of deflation In the financial sector BNP Paribas added 0 12 and Societe Generale dipped 0 01 in France while Spanish banks Banco Santander and BBVA fell 0 17 and 0 22 respectively Elsewhere Orange shares slipped 0 12 amid reports the company is preparing its legal response to a report alleging the U S National Security Agency accessed customers data transmitted by a submarine cable partly used by the French telecoms operator In London FTSE 100 rose 0 36 supported by gains in financial stocks Shares in Lloyds Banking edged up 0 12 and HSBC Holdings gained 0 64 while Barclays climbed 0 50 The Royal Bank of Scotland underperformed however down 0 04 International Personal Finance erased earlier gains plummeting 2 25 even as Citigroup recommended that investors buy the shares Adding to losses mining giants Rio Tinto and BHP Billiton slipped 0 18 and 0 13 while Randgold Resources and Vedanta Resources tumbled 0 78 and 1 55 In the U S equity markets pointed to a steady open The Dow Jones Industrial Average futures pointed to a 0 01 dip S P 500 futures signaled a 0 05 rise while the Nasdaq 100 futures indicated a 0 05 gain Later in the day the U S was to produce private sector data on consumer confidence and house price inflation as well as a report on manufacturing activity in the Chicago region |
C | European stocks little changed after German data Dax up 0 01 | Investing com European stocks were almost unchanged on Tuesday after positive German retail sales data as investors remained cautious ahead of the minutes of the Federal Reserve s latest policy meeting this week During European morning trade the EURO STOXX 50 eased up 0 02 France s CAC 40 fell 0 15 while Germany s DAX 30 inched 0 01 higher Official data showed that German retail sales rose 1 5 in November beating expectations for a 0 6 increase after a 0 8 fall the previous month Investors were eyeing Wednesday s minutes of the Federal Reserve s December meeting and Friday s U S jobs report for December for further indications on the possible timing of reductions in Fed stimulus Financial stocks were broadly higher as French lenders BNP Paribas and Societe Generale rose 0 34 and 0 13 while Germany s Deutsche Bank edged up 0 15 Among peripheral lenders Spanish banks Banco Santander and BBVA gained 0 25 and 0 48 respectively while Italy s Intesa Sanpaolo advanced 0 63 Elsewhere AP Moller Maersk climbed 0 56 after the owner of the world s largest container shipping company said it plans to sell a stake in its supermarket business and book a gain of USD2 56 billion On the downside Swedish Match plunged 5 19 after Citigroup advised investors to sell the shares In London FTSE 100 inched up 0 02 led by gains in Legal General up 2 09 still supported by recent news the insurance company which has already invested around GBP1 billion in student accommodation is planning to build retirement homes Meanwhile financial stocks were mixed as HSBC Holdings climbed 0 42 and Lloyds Banking jumped 1 15 while the Royal Bank of Scotland and Barclays lost 0 15 and 0 31 respectively In the mining sector stocks were broadly lower Shares in Glencore Xstrata retreated 0 57 and BHP Billiton declined 0 47 while Vedanta Resources and Rio Tinto tumbled 1 35 and 1 65 In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 14 rise S P 500 futures signaled a 0 15 increase while the Nasdaq 100 futures indicated a 0 15 gain Later in the day the U S was to publish a report on the trade balance |
C | European stocks push broadly higher after mixed data Dax up 0 60 | Investing com European stocks pushed broadly higher on Tuesday after the release of mixed economic reports from the euro zone added to expectations for additional stimulus measures by the European Central Bank During European afternoon trade the EURO STOXX 50 advanced 0 86 France s CAC 40 gained 0 39 while Germany s DAX 30 climbed 0 60 Eurostat said consumer price inflation increased by a seasonally adjusted 0 8 last month in the euro zone down from 0 9 in November Economists had expected an unchanged reading The rate stands below the European Central Bank s target of near but just below 2 The report came after data showed that the number of people out of work in Germany fell by 15 000 in December to 2 96 million better than expectations for a decline of 1 000 The country s unemployment rate remained steady at 6 9 A separate report showed that German retail sales rose 1 5 in November more than double expectations for an increase of 0 6 Financial stocks extended earlier gains as French lenders BNP Paribas and Societe Generale surged 2 15 and 2 35 while Germany s Deutsche Bank rallied 2 15 Among peripheral lenders Spanish banks Banco Santander and BBVA soared 2 42 and 3 78 respectively while Italy s Unicredit and Intesa Sanpaolo gained 2 09 and 3 25 Elsewhere AP Moller Maersk climbed 0 50 after the owner of the world s largest container shipping company said it plans to sell a stake in its supermarket business and book a gain of USD2 56 billion On the downside Swedish Match plunged 5 24 after Citigroup advised investors to sell the shares In London FTSE 100 rose 0 44 as U K lenders tracked their European counterparts higher Shares in Barclays gained 0 87 and the Royal Bank of Scotland jumped 1 37 while HSBC Holdings and Lloyds Banking rallied 1 54 and 2 45 respectively Legal General up 3 42 continued to lead gains on the index still supported by recent news the insurance company which has already invested around GBP1 billion in student accommodation is planning to build retirement homes Meanwhile mining stocks were mixed as BHP Billiton rose 0 27 and Glencore Xstrata climbed 0 98 while Vedanta Resources and Rio Tinto retreated 0 53 and 0 83 In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 38 rise S P 500 futures signaled a 0 38 gain while the Nasdaq 100 futures indicated a 0 44 increase Later in the day the U S was to publish a report on the trade balance |
C | iFOREX Daily Analysis October 16 2015 | On Thursday the dollar turned broadly higher against the other major currencies bouncing off a two and a half month trough after U S Department of Labor said that the number of individuals filing for initial jobless benefits fell by 7 000 last week to 255 000 matching the lowest level in 42 years Analysts had expected jobless claims to rise by 8 000 to 270 000
At the same time the U S Commerce Department said that consumer prices fell 0 2 last month matching forecasts and following a fall of 0 1 in August While core consumer prices which exclude food and energy costs increased 0 2 above expectations for a gain of 0 1 Core prices are viewed by the Federal Reserve as a better gauge of longer term inflationary pressure because they exclude the volatile food and energy categories The central bank usually tries to aim for 2 core inflation or less In addition the Federal Reserve Bank of New York said that its general business conditions index improved to 11 4 this month from a reading of 14 7 in September
The mostly upbeat data eased concerns over the health of the economy and prompted market players to bring forward their expectations for a U S rate hike
EUR USD
The euro fell sharply against the dollar on Thursday retreating from seven week highs after European Central Bank policymaker Ewald Nowotny said fresh measures to bolster price growth in the euro zone are needed Infact both headline and core inflation in the euro area are undershooting the ECB s target The annual rate of inflation in the euro area turned negative in September for the first time since the ECB launched its trillion euro asset purchase program in March
The ECB targets annual inflation is to close at 2
The euro remained under pressure also after the latest batch of positive U S economic data
Today the euro zone is to release revised data on consumer prices while the U S is to round up the week with data on consumer sentiment and industrial production
Pivot 1 142
Support 1 13451 13051 1265
Resistance 1 1421 1451 1495
Scenario 1 Short positions below 1 142 with targets 1 1345 1 1305 in extension
Scenario 2 Above 1 142 look for further upside with 1 145 1 1495 as targets
Comment As long as the resistance at 1 142 is not surpassed the risk of the break below 1 1345 remains high
Gold
Gold moved to fresh three month highs on Thursday as relatively soft U S inflation data appeased dovish sentiments for delaying an interest rate hike by the Federal Reserve beyond the end of the year
But gold prices eased in Asia on Friday on profit taking on recent gains on a soft outlook for U S interest rates
Today the U S is to round up the week with data on consumer sentiment and industrial production both will be closely watched by investors for further indications on the strength of the greenback
Pivot 1129
Support 112910971073
Resistance 120512301251
Scenario 1 Long positions above 1129 with targets 1205 1230 in extension
Scenario 2 Below 1129 look for further downside with 1097 1073 as targets
Comment The RSI is supported by a rising trend line Gold broke above a triangle pattern as well as the key resistance at 1170
WTI Oil
West Texas Intermediate oil futures extended losses on Thursday with a 2 drop after data showed that oil supplies in the U S rose by 7 6 million barrels last week much more than expected underlining concerns over weak demand Total U S crude oil inventories stood at 468 6 million barrels as of last week remaining near levels not seen for this time of year in at least the last 80 years
But crude prices rebounded sharply in early Asia on Friday as overnight declines provided a new buying opportunity even as the U S remains significantly oversupplied
Now oil traders are betting on which side will win in the battle regarding oil prices either Venezuela with its plan to resurrect OPEC s old price band mechanism attempting to set a 70 floor price for WTI or the big producers outside the Organization of Petroleum Exporting Countries especially Russia that shows zero interest in returning to a strategy of supporting prices
All the focus will be on October 21 meeting of technical experts in Vienna with also eight non OPEC countries Azerbaijan Brazil Colombia Kazakhstan Norway Mexico Oman and Russia where will be discussed the Venezuela s plan progressive production cuts to control prices with a first floor of 70 per barrel and a later target of 100 per barrel
Pivot 45 8
Support 45 845 2344 27
Resistance 47 8548 649 2
Scenario 1 Long positions above 45 8 with targets 47 85 48 6 in extension
Scenario 2 Below 45 8 look for further downside with 45 23 44 27 as targets
Comment The RSI is mixed to bullish
S P 500
On Thursday Wall Street jumps to eight week high due to a tame inflation reading and strong earnings from Citigroup N C that led investors to pile back into stocks
Equities added to gains late in the session and eight of the S P 500 sectors registered increases of more than 1 More than four stocks rose for every one that fell on both the New York Stock Exchange and the Nasdaq
The S P 500 health care index jumped 2 2 despite a disappointing forecast from HCA Holdings which fell 5 to 72 21 The Nasdaq Biotech Index jumped 4 4 rallying sharply before the close And the Dow Jones industrial average rose 217 points or 1 28
Today the U S is to round up the week with data on consumer sentiment and industrial production both will be closely watched by investors for further indications on the status of the economy
Pivot 2044
Support 1867 1820 1798
Resistance 2044 2135 2180
Scenario 1 Short positions below 2044 with targets 1867 1820 in extension
Scenario 2 Above 2044 look for further upside with 2135 2180 as targets
Comment As long as 2044 is resistance look for choppy price action with a bearish bias |
MS | UPDATE 1 Canary Wharf to help fund London s Crossrail project | Adds details background shares
LONDON Dec 24 Reuters Crossrail London s most
ambitious transport project took another step forward on
Wednesday as the owner of the Canary Wharf business complex
agreed to part fund a station on the line
Canary Wharf Group CWG said it would contribute 150
million pounds 221 2 million to help build a station in the
Docklands area of east London where its office complex is sited
giving a boost to the 15 9 billion pound Crossrail programme
The development of a Docklands station on the planned
Crossrail network means thousands of people in Canary Wharf
Britain s second largest business district will have direct
access to Heathrow airport as well as to towns as far apart as
Maidenhead to the west of London and Shenfield to the east
It is vitally important for transport infrastructure to
improve to help London keep pace with rapidly developing cities
in other parts of the world CWG Chief Executive George
Iacobescu said in a statement
Crossrail will bring 1 5 million people within an hour of
London s major business districts and will cut commuting times
for many staff employed by Canary Wharf occupiers such as HSBC
Morgan Stanley and Barclays
CWG will design and build the Isle of Dogs station in
Docklands for a fixed price of 500 million pounds Building is
due to start in early 2009 said a statement from CWG s majority
owner Songbird Estates and the station is scheduled to open in
2017
CWG said it had planning approval for 9 300 square metres of
retail space and a rooftop park above the underground station
London Mayor Boris Johnson said the development would usher
in a number of improvements
Once Crossrail arrives in Canary Wharf it will act as the
catalyst for a further economic boost allowing the
construction of more offices and other facilities Johnson said
in a statement
Reporting by Sinead Cruise Philip Waller and Dan Lalor
Editing by David Holmes and Sharon Lindores
1 6754 Pound |
MS | WRAPUP 2 U S housing factories services remain in slump | U S service sector contracts for 3rd consecutive month
U S pending home sales hit lowest in at least 7 years
U S factory orders suffer 4th straight monthly decline
Adds Fed minutes updates with market close
By Burton Frierson
NEW YORK Jan 6 Reuters The slumping U S housing
factory and service sectors produced more misery for the
world s largest economy in the last two months of 2008 as the
year old recession looked set to drag on into 2009 data showed
on Tuesday
The Federal Reserve in minutes of its December interest
rate meeting did nothing to dispel worries over the economy
Fed officials believed the U S economy would face
substantial risks even after benchmark interest rates were
cut to near zero with some worrying about the risk of
deflation the minutes showed
In the housing market the original source of the U S
economic morass pending sales of existing U S homes plunged
to their lowest in at least seven years in November according
to data from a real estate industry group
The service sector which represents about 80 percent of
U S economic activity contracted for a third straight month
in December the Institute for Supply Management said in a
separate statement
Though the slump in services was less severe than expected
the ISM s employment gauge painted a bleak picture of the job
market while tumbling factory orders in November also
indicated a weak outlook
We are in the throes of the worst recession since the
early 1980s said Kevin Flanagan fixed income strategist for
global wealth management at Morgan Stanley in Purchase New
York
Factory orders are getting hit again The economy is
really not receiving any support from any cylinders of the
engine Pending home sales are down much more than expected as
well Flanagan added
On Wall Street U S stocks rose as hopes of a government
stimulus package from the incoming Obama administration
outweighed the earlier economic reports
U S government bond prices however rallied on the
Federal Reserve s grim assessment of the economy
SERVICES SERVICES
The Institute for Supply Management said its
non manufacturing index came in at 40 6 in December versus
November s record low 37 3 The level of 50 separates expansion
from contraction The index dates back to July 1997
Economists had expected a reading of 37 0 according to the
median of 56 forecasts in a Reuters poll which ranged from
34 5 to 42 0 Like the overall index the ISM s employment
gauge was also at its second lowest on record
The National Association of Realtors said its Pending Home
Sales Index based on contracts signed in November dropped 4
percent to 82 3 the lowest since the series started in 2001
Economists polled by Reuters ahead of the report had
forecast pending home sales dropping by 1 percent
New orders received by U S factories plunged a
much greater than expected 4 6 percent in November the fourth
straight monthly decline and a sign the sharp drop in
manufacturing is deepening the recession a government report
showed
It was the first time factory orders had fallen for four
consecutive months since the government began assembling the
data in its current form in 1992 the Commerce Department
said
Analysts polled by Reuters were expecting factory orders to
drop 2 5 percent
This was consistent with a report by the the Institute for
Supply Management published on Friday that showed U S factory
activity fell to a 28 year low in December
Additional reporting by Lucia Mutikani and Mark Felsenthal in
Washington and John Parry in New York Editing by Dan Grebler |
MS | ANALYSIS Mexico s factory pain may just be getting started | By Jason Lange
MEXICO CITY Jan 9 Reuters A slump in Mexico s crucial
manufacturing sector will likely worsen as the snowballing U S
recession hammers demand for exports like cars televisions and
refrigerators
Factories across the country are cutting workers by the
thousand because of falling orders and sour outlooks for U S
consumer spending and employment mean the pain might be just
beginning analysts said
With the collapse of demand in the U S things are going
to get really really nasty said Eugenio Aleman a senior
economist at Wells Fargo in Minneapolis
The U S economic crisis triggered by a steep decline in
the housing market is slamming exporters across Asia Europe
and Latin America whose livelihoods depend on big spending
Americans
In Tijuana a factory city on Mexico s border with
California output at many electronics plants has plunged by up
to 30 percent said Saul Garcia the head of the city s
association of maquiladoras or assembly for export factories
Dozens of companies there are slashing workers hours and
thousands were laid off in 2008 he said
We re worried because the worst is yet to come Garcia
said in a telephone interview
The U S economy which takes in about 80 percent of
Mexican exports is expected to have contracted by more than 5
percent during the last three months of 2008 The decline is
widely expected to continue well into this year
EXPORT POWER
Mexico vaulted into the exporting big leagues after
entering the North American Free Trade agreement or NAFTA
with the United States and Canada in 1994
Now with hundreds of factories dotting Mexico s border
with the United States only China and Canada sell more things
to Americans Mexico exported around 211 billion in goods and
services to its northern neighbor in 2007 more than four times
what it sent in the year before NAFTA came into effect
Factory jobs in Mexico pay some of the best wages in the
country and the sector is a vital motor for economic growth
A plunge in car sales in the United States is hitting
Mexican car and auto parts plants and Mexico s manufacturing
exports fell 7 percent in November from a year earlier
December is also looking grim for factories with nearly
100 000 workers cut from manufacturing payrolls in that month
alone sharply higher than the almost 60 000 axed in November
according to labor ministry data released this week
Mexico s IMEF manufacturing index hit an all time low in
December pointing to future contraction for a sixth straight
month
Finance Minister Agustin Carstens predicted on Thursday the
Mexican economy will not expand at all this year down from
expected growth of around 2 percent in 2008 and many private
sector economists are even more pessimistic
For Mexico this is going to be a really tough year said
Gray Newman an economist at Morgan Stanley in New York who
expects the economy to contract 1 5 percent this year
Editing by James Dalgleish |
MS | Stocks End Mixed Dollar Extends Its Gains | Federal Reserve chairman Ben Bernanke said Tuesday the fiscal stimulus being planned by Congress and the Obama administration may not be enough to revive the economy A continuing barrier to private investment in financial institutions is the large quantity of troubled hard to value assets that remain on institutions balance sheets he said in a speech to the London School of Economics The presence of these assets significantly increases uncertainty about the underlying value of these institutions and may inhibit both new private investment and new lending
Bernanke believes more needs to be done to strengthen the financial system and said the Treasury could purchase troubled assets or even provide asset guarantees to reduce the uncertainty surrounding their values Under a third option he outlined the Treasury could set up and capitalize so called bad banks which would purchase assets from financial firms in exchange for cash and equity in the bad bank
Addressing banks troubled assets was supposed to be the goal of the Troubled Asset Relief Program TARP
In September Bernanke and Treasury Secretary Paulson told lawmakers the aim of TARP would be to purchase toxic mortgage related assets from banks Paulson described the asset purchases as the single most effective thing we can do to help homeowners the American people and stimulate our economy
But in November Treasury did a controversial about face and signaled that program had been shelved The Treasury used most of the 350 billion Congress allocated to recapitalize troubled banks It also engineered several bank takeovers
At the close of floor trading on the NYSE the DOW was on 8448 56 after falling 25 41 points 0 30 The S P was on 871 78 up 1 52 points 0 17 while the NASDAQ had moved to 1546 46 with a gain of 7 67 points 0 50 Bonds were bought after Bernanke said the Fed could decide to purchase government debt with the yield on the 2 year note falling 1 2 basis points to 0 742 while yield on the benchmark 10 year note fell 3 7 basis points to 2 989 The dollar looked like it was trading in risk aversion mode with gains of 1 25 on the euro 2 17 on the pound and 2 66 against Australia s dollar as it fell 0 07 to the yen Crude oil for February delivery was recently trading up 95 cents 2 53 to 38 54 per barrel Gold for February delivery was recently trading up 1 70 0 21 to 822 00 per ounce
In breaking news CNBC is reporting that Citigroup and Morgan Stanley boards have approved the brokerage joint venture which paves the way for Morgan to take a 51 stake in Citi s Smith Barney unit The move by Citi which is under governmental pressure to raise capital is the first step toward a breakup of the financial supermarket model the bank has followed since its former CEO Sandy Weil convinced lawmakers to strike down the Glass Steagall Act with the help of Clinton Treasury Secretary Robert Rubin which was put in place during the depression to keep savings banks and investment banks separate Provisions of the act which prohibited a bank holding company from owning other financial companies were repealed in Nov 1999
Meanwhile the WSJ is reporting Citi is preparing to unveil a major reorganization that will mark a further step toward dismantling the financial conglomerate |
MS | DAVOS UPDATE 4 Confidence melts Trichet says system fragile | China rejects U S yuan criticism ahead of Wen speech
Trichet says financial system too fragile at present
Putin to speak after missiles olive branch
Annual CEO survey shows confidence nosedives to new low
By Mike Dolan and Jason Subler
DAVOS Switzerland Jan 28 Reuters Confidence among the
world s top bosses meeting in Davos has evaporated and European
Central Bank chief Jean Claude Trichet said on Wednesday a too
fragile financial system needed reform
But a brewing currency row between the United States and
China cast doubt on the political will to act in concert
Chinese Premier Wen Jiabao and Russian Prime Minister
Vladimir Putin will both address business and political leaders
in the Alpine ski resort later on Wednesday to offer their
remedies for the worst economic crisis in 80 years
Business chiefs and policymakers here for the four day World
Economic Forum said there was no easy solution to the credit
crisis that has torpedoed global growth and major government
programmes are needed
Crisis hit bankers are thin on the ground at the
snow covered mountain town leaving policymakers to work behind
the scenes on ways to fix the financial system ahead of a
summit of the G20 group of big and emerging countries in April
and a G8 summit in July
Trichet told Reuters the G20 was doing good work on
policies to drag the financial system back into health but that
profound reforms were needed
Everybody can see the present system is too fragile and we
have to reintroduce an element of resilience and we need to
do that without any consideration of any kind of vested
interest he said
Corporate chiefs are still reeling
There are no silver bullets My sense is 18 to 24 months of
a very tough economic environment Maria Ramos chief executive
of Transnet South Africa s rail and logistics company told
Reuters
Forty percent of the world s wealth was destroyed in the
last five quarters It is an almost incomprehensible number
said Stephen Schwarzman chairman of the leading private equity
company Blackstone Group Business will be very different
CURRENCY ROW
Ahead of Wen s speech a row intensified over Beijing s
exchange rate policy after new U S Treasury Secretary Timothy
Geithner branded China a currency manipulator last week using a
term the previous administration avoided for years
A Chinese diplomat said on Wednesday Washington had enough
evidence to know China does not manipulate its exchange rate
I don t think it s fair all of a sudden to change the
position of the U S government the diplomat said in London
one of a number of European capitals Wen will visit after Davos
Putin will meet privately with Wen in Davos to share ideas
on how the powers can cooperate on addressing economic problems
No top officials from the new Obama administration are here
Russia s stance will also be closely scrutinised Putin s
spokesman said he would reach out to investors who have been
shaken by the crisis gripping Russia s economy but he has
previously blamed the United States for infecting others
However Moscow offered Washington an olive branch on
Wednesday halting a plan to counter a proposed U S missile
defence shield by stationing its own missiles near Europe s
borders the military was quoted as saying
DOOM AND GLOOM
A PricewaterhouseCoopers poll of more than 1 100 CEOs set a
grim backdrop to the annual gathering Just 21 percent of CEOs
said they were very confident of growing revenue in the next 12
months down from 50 percent a year ago
Hopes for a short V shaped recession appear to have
evaporated with most business leaders expecting no more than a
slow and gradual recovery over the next three years
The three year view is a bit better but the bad news is it
is not that much better said Tony Poulter global head of
consulting at PwC
Delegates in Davos were united in the view that an economic
upturn was some way off
Stephen Roach Morgan Stanley s Asia chairman agreed the
next three years would be tough
The concept of a vigorous V shaped recovery is for
business cycles of the past but not for this post bubble
post crisis business cycle It is going to be a long slog in
2010 in 2011 he told Reuters
The International Monetary Fund forecast the world economy
would slow to a near standstill this year warning that
deflation risks were rising
That grim scenario has left sovereign fund Dubai
International Capital wary of making big long term investments
even though it sees asset prices at reasonable levels
We re still very nervous about making some big bets we
see the financial crisis getting worse There s not going to be
a magic wand solution to the problem Chief Executive Sameer
al Ansari told Reuters
For full coverage blogs and TV from Davos go to
Reporting by Ben Hirschler Writing by Mike Peacock Editing
by Richard Hubbard and Erica Billingham |
MS | EXCLUSIVE UPDATE 2 China s CIC eyes CITIC Capital stake sources | Adds quotes cooperation plan and background
By George Chen and Samuel Shen
HONG KONG SHANGHAI Feb 4 Reuters China Investment Corp
CIC a 200 billion sovereign wealth fund is in talks to buy
up to half of CITIC Capital Holdings Ltd an investment firm
described by local media as China s Blackstone two sources
close to the situation said on Wednesday
One of the sources said the deal could be worth several
hundred million dollars
CIC is expected to buy the stake from steel to property
conglomerate CITIC Pacific which currently holds 50 percent of
Hong Kong based CITIC Capital the sources said
CITIC Capital currently manages over 1 6 billion of assets
and often teams up with foreign funds for joint buyout deals
Senior officials of CIC CITIC Pacific and its parent CITIC
Group have been discussing a deal for months though no
financial details have been fixed said the two sources who
declined to be identified due to the sensitive nature of the
issue
CITIC International Financial Holdings Ltd whose parent is
also CITIC Group holds the other 50 percent of CITIC Capital
and has no plan to sell its stake said the sources
Officials at CITIC Capital in Hong Kong and China declined
to comment CIC could not be immediately reached for comment
A PERFECT MARRIAGE
CITIC Pacific stunned markets in October when it warned of
a potential 2 billion loss which later rose to HK 18 6
billion 2 4 billion from wrong way bets on the Australian
dollar
It had to turn to its Beijing parent CITIC Group which is
directly led by the State Council China s cabinet for a 1 5
billion bailout
CITIC Pacific may need to sell some assets to repay debts
following its losses in currency trading while CITIC Capital s
business is not highly correlated with its core businesses
said Paul Lee a Hong Kong based analyst at Tai Fook
Securities
CIC has plenty of cash and after making heavy losses
investing in Western financial institutions it s seeking
investment opportunities in Asian markets including
China focused firms he added
CIC has attracted criticism at home over its investments in
U S financial institutions that have been battered by the
global financial crisis Its stakes in U S private equity
house Blackstone Group and Wall Street bank Morgan Stanley have
nosedived
CITIC Capital is also eager to attract money from CIC
which may hire CITIC Capital as one of its asset managers to
help it improve investment performance the sources said
This can be a perfect marriage CITIC Capital can get a
new and strong shareholder and CIC gets to tap CITIC Capital s
expertise and resources said one of the sources adding
CITIC Capital can also be a unique platform for CIC to tap
domestic deals
Japan also will be an investment focus this year for CITIC
Capital which runs a 70 million global hedge fund and some
Asia focused real estate funds said the sources
CIC is unwilling to bail out troubled Western financial
firms because of unfair restrictions on its investment a
deputy general manager of the fund said in December
1 7 754 Hong Kong Dollar
Editing by Ken Wills Ian Geoghegan |
MS | UPDATE 5 ECB signals March rate cut markets bet on 50 bps | Adds detail market pricing
By Krista Hughes and Marc Jones
FRANKFURT Feb 5 Reuters The European Central Bank
signalled on Thursday that it will probably cut interest rates
again in March after a pause this month bolstering expectations
that euro zone rates are headed for a record low of 1 5 percent
ECB President Jean Claude Trichet said he did not exclude the
the Governing Council lowering rates from the current 2 0
percent at its next policy meeting when policymakers will have
new data and staff forecasts on the troubled euro zone economy
We confirm that 2 percent is not the lowest level he told
a news conference after the ECB kept rates unchanged at its
February policy meeting following four cuts since October I
don t exclude that we could decrease rates at our next meeting
Quizzed repeatedly about the size of the next cut Trichet
told reporters that he had absolutely nothing to say
But he noted that financial markets were already betting on
a further 50 basis point easing which some saw as a hint the
ECB will keep cutting at a steady pace rather than slowing the
pace as rates head into uncharted territory
Asked about the chances of a 50 or a 25 point cut in March
Trichet said We are not embarking on qualifying the amplitude
but I have noted that what is at the moment as we speak
present in the market would probably be more the first figure
that you have mentioned But I don t qualify that what is
presently embedded in the market
The ECB also dropped a reference to inflation risks being
broadly balanced and said signs of stabilisation in the
economy s decline needed further confirmation a downbeat view
which pushed the euro to session lows against the dollar
Analysts said the comments were in line with expectations
for rates to drop to 1 5 percent in March and 1 percent later in
the year
The U S Federal Reserve the Swiss National Bank and the
Bank of Japan have already reduced credit costs below 1 percent
while the Bank of England cut British rates to 1 0 percent
earlier on Thursday
While Mr Trichet was careful not to signal too directly
that a magnitude of the policy rate reduction he did note that
a 50 bp cut was embedded in the market suggesting that a
50bp cut is likely Barclays Capital economist Julian Callow
said
Still Morgan Stanley s Elga Bartsch said Trichet had failed
to give any clear indication on the size of the likely March
cut although she also expected a half point reduction
NON STANDARD MOVES
The ECB has never cut rates below 2 percent in its 10 year
history but has embarked on its most aggressive easing cycle
ever in the last four months slashing benchmark credit costs by
225 basis points from October s peak of 4 25 percent
For graph right click on and select related
graph
Trichet said that zero interest rates were not appropriate
at this stage but that the ECB was open to other steps to
boost the economy further Still he stopped short of signalling
the ECB would follow other central banks into direct asset
purchases ID nL4210695
The ECB s lending of unlimited funds at fixed interest rates
to commercial banks in the last few months was already a
non standard measure he said and this would continue for as
long as needed
Again we are not in the same universe as the other central
banks We each do what we judge appropriate he said I do not
exclude other possible non standard measures
Trichet also noted that although Thursday s decision was
unanimous that did not mean that the ECB s 22 policymakers
always had the same view
Policymakers including Yves Mersch and George Provopoulos
have cautioned against very low euro zone rates but Cyprus
central bank governor Athanasios Orphanides said it was a
fallacy that policy becomes ineffective when rates hit zero
Central banks should not be shy of cutting rates aggressively to
stave off economic shocks he said ID nLT3422
UniCredit economist Marco Annunziata said the ECB s stance
on zero rates and unconventional measures seemed to be
softening An announcement could come as soon as March
The debate within Council is lively he said
We still think that the ECB will go all the way to 1
percent The news today is that risks to our call has shifted
from being slightly on the upside to leaning to the downside
because evidence will likely point in that direction and they
seem more open than ever to rates in the proximity of zero |
MS | EARNINGS POLL H M Jan sales seen up 8 3 pct yr yr | H M Jan sales
Due at 0700 GMT on Feb 16
Like for like sales seen 2 7 percent yr yr
STOCKHOLM Feb 10 Reuters Swedish fashion giant Hennes
Mauritz is expected to post an 8 3 percent year on year rise in
total January sales the average of a Reuters poll showed on
Tuesday
Estimates in the poll of 12 analysts ranged from an 8 9
percent rise with a median forecast for an 8 percent rise In
its report for the fourth quarter on January 29 Hennes
Mauritz said it expected January sales to increase by 8 percent
Sales in stores open for more than a year were seen down 2 7
percent according to the average forecast with a range between
minus 4 percent and minus 1 percent
Germany H M s largest market saw January apparel sales
fall 1 percent according to industry journal Textilwirtschaft
In Sweden H M s third biggest market the HUI Stil index for
clothing sales was down 1 4 percent
In December H M total sales rose 3 percent from the
previous year while like for like sales fell 7 percent
H M is due to publish the January figures at 0700 GMT on
Feb 16 It does not release absolute sales figures only the
percentage change in local currencies Figures are in whole
numbers
Analysts from ABG Sundal Collier Carnegie Cheuvreux
Deutsche Bank Evli Bank Handelsbanken Capital Markets HQ
Bank Kaupthing Morgan Stanley Nordea SEB Enskilda and Ohman
Fondkommission took part in the poll
Reporting by Sven Nordenstam editing by Elaine Hardcastle |
JPM | European stocks open mixed German GDP disappoints DAX down 0 10 | Investing com European stocks were mixed on Tuesday as market sentiment remained globally positive following the election of Donald Trump as president of the United States last week while disappointing German third quarter growth weighed
During European morning trade the EURO STOXX 50 slid 0 32 France s CAC 40 rose 0 24 while Germany s DAX 30 slipped 0 10
Market sentiment remained broadly supported by hopes that increased fiscal spending and tax cuts under a Trump administration will bolster economic growth and inflation
However expectations for higher U S interest rates also remained intact amid optimism that a pick up in growth will allow the Federal Reserve to tighten borrowing costs
Earlier Tuesday preliminary data showed that German gross domestic product rose 2 in the third quarter disappointing expectations for an incease of 0 3 and down from a growth rate of 0 4 in the previous quarter
Financial stocks were broadly lower as French lenders Societe Generale PA SOGN and BNP Paribas PA BNPP lost 0 50 and 2 17 while Germany s Commerzbank DE CBKG and Deutsche Bank DE DBKGn tumbled 0 63 and 1 06
Among peripheral lenders Italy s Intesa Sanpaolo MI ISP and Unicredit MI CRDI plummeted 2 45 and 3 50 respectively while Spanish banks BBVA MC BBVA and Banco Santander MC SAN declined 0 40 and 0 72
On the upside E ON SE DE EONGn saw shares after analysts at JPMorgan Chase NYSE JPM reiterated their buy rating on the stock
RWE AG DE RWEG added to gains with shares up 2 90 as the German power producer recovered after reporting disappointing third quarter results on Monday
In London FTSE 100 gained 0 59 supported by Pearson LON PSON Plc whose shares surged 5 32 after analysts at Societe Generale upgraded their rating on the stock from hold to buy on Monday
Land Securities Group Plc LON LAND was also on the upside with shares jumping 4 16 even after the developper reported a fall in its mid year net assets per share on Tuesday and warned of further weakness in demand for offices and retail space due to the Brexit vote
Meanwhile financial stocks were mixed Shares in HSBC Holdings LON HSBA edged up 0 16 and Lloyds Banking LON LLOY gained 0 36 while Barclays LON BARC dropped 0 93 and the Royal Bank of Scotland LON RBS tumbled 1 47
Mining stocks were broadly lower on the commodity heavy index Rio Tinto LON RIO lost 3 74 and Anglo American LON AAL tumbled 4 34 while rivals Glencore LON GLEN and Antofagasta LON ANTO plunged 4 31 and 5 74 respectively
In the U S equity markets pointed to a higher open The Dow Jones Industrial Average futures pointed to a 0 09 gain S P 500 futures showed a 0 24 rise while the Nasdaq 100 futures indicated a 0 20 increase |
JPM | Wall St mixed as bond yields retreat Dec hike bets strengthen | Investing com U S stocks were mixed early Tuesday as bond yield jump abates The DJI was down 0 20 at 10 15 ET while the S P 500 added 0 27 The tech heavy Nasdaq composite gained 0 90 The yield on the 30 year Treasury fell below 3 The two year yield above 1 Dec rate hike chances rise after strong retail sales Banks lower on profit taking JPMorgan NYSE JPM was down 1 84 at 78 05 |
JPM | EU readying fines big bank fines | EU antitrust regulators are set to fine HSBC JPMorgan NYSE JPM and Credit Agricole OTCPK CRARY by the end of the year for rigging financial benchmarks linked to the euro Reuters reports Charges were levied in May 2014 against the three banks which denied wrongdoing Deutsche Bank DE DBKGn RBS LON RBS and Societe Generale PA SOGN admitted guilt in December 2013 while Barclays LON BARC avoided a fine because it alerted the European Commission |
JPM | Reuters JPMorgan to pay 200M to settle probe into China hiring practices | JPMorgan Chase NYSE JPM will pay more than 200M to settle allegations that it had hired children of Chinese decision makers to win business according to a Reuters report JPM reportedly would pay 130M to the SEC which had opened an investigation into the bank in 2013 over the hiring practices plus 70M to the Justice Department with no individual prosecutions at this time JPM 0 2 AH following an earlier Fox Business report that Jamie Dimon likely would be named the new Treasury Secretary |
JPM | JPMorgan to settle U S government probe of China hiring source | By Noeleen Walder Reuters JPMorgan Chase Co N JPM will pay more than 250 million to settle allegations by the U S government that it had hired children of Chinese decision makers to win business a source familiar with the matter told Reuters The bank will pay roughly 200 million combined to the Securities and Exchange Commission and the Justice Department and more than 50 million to the Federal Reserve the source said There will not be any individual prosecution at this time the source said The SEC opened an investigation into JPMorgan in 2013 over the hiring The Justice Department opened a parallel investigation around the same time Investment banks have a long history of employing the children of China s politically connected While close ties to top government officials are a boon to any banking franchise across the world they are especially beneficial in China where relationships and personal connections play a critical role in business decisions The SEC JPMorgan and the Justice Department all declined to comment The settlement was first reported by Bloomberg It will end a probe into whether the bank s hires violated U S anti bribery laws Bloomberg said |
C | U S futures edge higher eyes on data Dow Jones up 0 11 | Investing com U S stock futures pointed to a moderately higher open on Wednesday as markets eyed the release of U S economic reports later in the day amid ongoing expectations for the Federal Reserve to scale back its stimulus program in the near future Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 11 rise S P 500 futures signaled a 0 05 gain while the Nasdaq 100 futures indicated a 0 13 increase Speculation over the future of the Fed s stimulus program persisted after the Institute for Supply Management said Monday that manufacturing activity in the U S expanded at the fastest rate since April 2011 in November fuelling optimism over the economic recovery Retailers were expected to be in focus after J C Penney said sales at stores open at least a year rose 10 sending shares surging 4 35 in pre market trade Financial stocks were also likely to be active as the European Commission imposed a EUR1 71 billion fine on some of the world s largest banks for interest rate rigging by traders The banks to be fined are Citigroup Deutsche Bank Royal Bank of Scotland JPMorgan and Societe Generale In the tech sector Apple was up 0 36 in early trading after UBS AG recommended purchasing its shares Separately Microsoft said it s selling every Xbox One player it can make after introducing the new game console on November 22 Shares were still down 0 10 pre market Across the Atlantic European stock markets were lower The EURO STOXX 50 slid 0 30 France s CAC 40 edged down 0 12 Germany s DAX eased 0 01 while Britain s FTSE 100 fell 0 20 During the Asian trading session Hong Kong s Hang Seng Index declined 0 76 while Japan s Nikkei 225 Index plummeted 2 17 Later in the day the U S was to release the ADP report on private sector job creation as well as data on new home sales and the trade balance In addition the Institute of Supply Management was to release its services PMI |
C | European stocks turn lower despite service sector data Dax down 0 02 | Investing com European stocks turned broadly lower on Wednesday despite positive euro zone service sector data as concerns the Federal Reserve will soon begin tapering its monthly asset purchases weighed During European afternoon trade the EURO STOXX 50 slipped 0 27 France s CAC 40 edged down 0 12 while Germany s DAX 30 inched 0 02 lower Markit research group said that the euro zone s final services purchasing managers index inched up to 51 2 in November up from a preliminary reading of 50 9 and compared to 51 6 in October Germany s services PMI rose to 55 7 in November up from a preliminary reading of 54 5 and compared to 52 9 in October A separate report showed that retail sales in the euro zone fell 0 2 in October confounding expectations for a 0 3 rise after a 0 6 decline the previous month Meanwhile speculation over the future of the Fed s stimulus program persisted after the Institute for Supply Management said Monday that manufacturing activity in the U S expanded at the fastest rate since April 2011 in November fuelling optimism over the economic recovery Financial stocks were mixed after the European Commission imposed a EUR1 71 billion fine on some of the world s largest banks for interest rate rigging by traders The banks to be fined are Citigroup Deutsche Bank Royal Bank of Scotland JPMorgan and Societe Generale French lenders BNP Paribas and Societe Generale declined 0 68 and 1 07 while Germany s Deutsche Bank dipped 0 03 Among peripheral lenders BBVA slid 0 37 and Banco Santander added 0 18 Spain while Italy s Intesa Sanpaolo and Unicredit gained 0 61 and 0 63 respectively Elsewhere Elekta plummeted 4 09 after the maker of radiation surgery equipment posted quarterly profit that missed forecasts In London FTSE 100 fell 0 18 after data showed that the U K service sector expanded at a slower pace than expected last month U K lenders tracked their European counterparts lower as Lloyds Banking slipped 0 28 and HSBC Holdings tumbled 1 23 while Barclays lost 1 32 The Royal Bank of Scotland overperformed however up 0 35 Tesco erased earlier gains and dropped 0 70 after the supermarket chain said U K same store sales fell 1 5 in the fiscal third quarter matching analysts estimates In the U S equity markets pointed to a moderately higher open The Dow Jones Industrial Average futures pointed to a 0 08 rise S P 500 futures signaled a 0 01 gain while the Nasdaq 100 futures indicated a 0 11 increase Later in the day the U S was to release the ADP report on private sector job creation as well as data on new home sales and the trade balance In addition the Institute of Supply Management was to release its services PMI |
C | U S stocks open lower on Fed taper speculation Dow Jones down 0 29 | Investing com U S stocks opened lower on Wednesday as upbeat U S employment data strengthened expectations that the Federal Reserve will begin tapering its stimulus program in the coming months During early U S trade the Dow Jones Industrial Average slipped 0 29 the S P 500 index shed 0 35 while the Nasdaq Composite index fell 0 26 Data showed that U S non farm private employment rose at the strongest pace in nine months in November fuelling optimism over the U S labor market Payroll processing firm ADP said non farm private employment rose by a seasonally adjusted 215 000 last month blowing past expectations for an increase of 173 000 The previous month s figure was revised up to a gain of 184 000 from a previously reported increase of 130 000 A separate report showed that the U S trade deficit narrowed to a seasonally adjusted USD40 6 billion in October from a deficit of USD43 0 billion in September whose figure was revised from a previously reported deficit of USD41 8 billion Analysts had expected the U S trade deficit to narrow to USD40 billion in October J C Penney saw shares plunge 2 87 even after the retailer said sales at stores open at least a year rose 10 Financial stocks added to losses after the European Commission imposed a EUR1 71 billion fine on some of the world s largest banks for interest rate rigging by traders The banks to be fined are Citigroup Deutsche Bank Royal Bank of Scotland JPMorgan Chase and Societe Generale Citigroup and JPMorgan shares tumbled 1 67 and 0 70 respectively at the open of the U S trading session In the tech sector Microsoft slipped 0 16 although the company said it is selling every Xbox One player it can make after introducing the new game console on November 22 Across the Atlantic European stock markets were sharply lower The EURO STOXX 50 tumbled 1 26 France s CAC 40 retreated 0 94 Germany s DAX lost 1 11 while Britain s FTSE 100 declined 0 51 During the Asian trading session Hong Kong s Hang Seng Index declined 0 76 while Japan s Nikkei 225 Index plummeted 2 17 Later in the day the Institute of Supply Management was to release its services PMI |
C | U S stocks open sharply higher after jobs data Dow Jones up 0 83 | Investing com U S stocks opened sharply higher on Friday after the release of upbeat U S employment data although the report fuelled further expectations for the Federal Reserve to soon begin tapering its stimulus program During early U S trade the Dow Jones Industrial Average gained 0 83 the S P 500 index advanced 0 89 while the Nasdaq Composite index climbed 0 69 In a report the Department of Labor said the U S economy added 203 000 jobs in November exceeding expectations for a 180 000 increase after a downwardly revised 200 000 rise the previous month In the private sector 196 000 jobs were added last month compared to expectations for a 180 000 rise after an increase of 214 000 in October The report also said the U S unemployment rate fell to 7 0 in November from 7 3 in October beating expectations for a downtick to 7 2 J C Penney plunged 5 31 after the retailer disclosed that the U S Securities and Exchange Commission asked for information about its finances including a stock sale in September that it s using to fund an attempted turnaround In the financial sector Citigroup and Wells Fargo were accused of discriminatory mortgage lending by the city of Los Angeles which seeks damages for reduced property tax revenue and the costs of maintaining foreclosed properties Shares in the two lenders still rallied 1 25 and 0 97 respectively at the open of the U S trading session In similar news Goldman Sachs up 0 76 was sued by Singaporean wealth management client Oei Hong Leong over a USD34 3 million loss on Brazilian real yen options trades he claimed the bank misled him into making Elsewhere Twitter shares edged down 0 09 as co founder Jack Dorsey reportedly sparked a price war over Japanese credit card transactions with SoftBank s Masayoshi Son Across the Atlantic European stock markets were higher The EURO STOXX 50 climbed 0 71 France s CAC 40 advanced 0 78 Germany s DAX jumped 0 99 while Britain s FTSE 100 gained 0 71 During the Asian trading session Hong Kong s Hang Seng Index edged up 0 13 while Japan s Nikkei 225 Index climbed 0 81 Later in the day the University of Michigan was to produce the preliminary reading of its consumer sentiment index |
C | U S futures steady in cautious trade Dow Jones down 0 03 | Investing com U S stock futures pointed to a steady open on Monday as investors remained cautious after Friday s strong U S jobs data fuelled further expectations that the Federal Reserve could soon begin tapering its stimulus program Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 03 dip S P 500 futures signaled a 0 04 gain while the Nasdaq 100 futures indicated a 0 15 increase Friday s U S nonfarm payrolls report showed that the economy added 203 000 jobs in November well above expectations for jobs growth of 180 000 The unemployment rate fell to a five year low of 7 0 The data bolstered optimism over the outlook for the economic recovery and reinforced expectations that the Fed will start reducing its USD85 billion a month stimulus program at one of its next few meetings The biotech sector was likely to be in focus after Gilead Sciences got approval for a hepatitis C pill that may generate more than USD6 billion in annual sales The news sent the company s shares up 3 93 in pre market trade Financial stocks were also expected to be active following reports Goldman Sachs was sued by Singaporean wealth management client Oei Hong Leong over a USD34 3 million loss on Brazilian real yen options trades he claimed the bank misled him into making Separately Citigroup and Wells Fargo were accused last week of discriminatory mortgage lending by the city of Los Angeles which seeks damages for reduced property tax revenue and the costs of maintaining foreclosed properties Elsewhere eight prominent technology companies suffering by revelations of government spying on their customers were reportedly mounting a public campaign to urge President Obama and Congress to set new limits on government surveillance Shares in Google and Microsoft who were said to be leading the group rose 0 29 and 0 10 in early trading Across the Atlantic European stock markets were mixed to lower The EURO STOXX 50 slipped 0 18 France s CAC 40 shed 0 36 Germany s DAX inched 0 06 higher while Britain s FTSE 100 fell 0 17 During the Asian trading session Hong Kong s Hang Seng Index edged up 0 29 while Japan s Nikkei 225 Index surged 2 29 |
C | U S regulators set to vote on Volcker Rule | Investing com U S federal regulators are set to approve the so called Volcker rule to curb risky trading activity by banks later Tuesday as part of a far reaching overhaul of financial regulation in the wake of the 2008 financial crisis The Volcker rule named after Paul Volcker a former Federal Reserve Chairman and an advisor to President Barack Obama will bar banks from trading for their own profit a practice known as proprietary trading The rule also set limits on banks ability to invest in certain trading vehicles such as private equity and hedge funds Five federal agencies including the Federal Reserve the Commodity Futures Trading Commission and the Securities and Exchange Commission are expected to vote to approve the rule later Tuesday If the rule is rubber stamped it will be implemented as part of the 2010 Dodd Frank Wall Street Reform Act which is aimed at ending tax funded bailouts of large investment banks U S Treasury Secretary Jacob Lew said last week that the Volcker rule will help the Obama administration to strengthen financial oversight It prohibits risky proprietary trading while protecting economically essential activities like market making Lew said Regulators have worked hard to find the right balance that protects our economy and taxpayers while also leaving room for well functioning financial markets Supporters of the rule believe it will prevent risky trading practices by banks which led to J P Morgan Chase s USD6 2 billion loss in the London Whale derivatives trade last year However banks have argued that the rule will push down profits and make it more difficult to hedge against market risks Many Wall Street banks including Morgan Stanley Goldman Sachs and Citigroup have already shut down their proprietary trading operations ahead of the ruling |
C | U S futures steady ahead of Fed meeting Dow Jones up 0 02 | Investing com U S stock futures pointed to a steady open on Tuesday as markets were jittery ahead of the Federal Reserve s highly anticipated last policy meeting of the year due to begin later in the day Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 02 gain S P 500 futures signaled a 0 04 dip while the Nasdaq 100 futures indicated a 0 05 loss Investors remained cautious ahead of the outcome of the Fed s two day policy meeting on Wednesday with some expecting the bank to announce a small reduction in the pace of its USD85 billion a month asset purchase program Markets were also eyeing U S inflation data due out later in the session amid concerns that the subdued inflation outlook could prompt the Fed to keep its stimulus program in place for longer The financial sector was likely to be in focus after Citigroup sold its Metalmark Capital private equity unit to comply with the Volcker Rule sending the U S lender s shares drop 0 37 in pre market trade According to a statement Citigroup will keep limited partner interests in the Metalmark Capital Partners II fund Separately private equity firm KKR Co agreed to buy the publicly traded credit business KKR Financial Holdings in a USD2 6 billion transaction Among pharmaceutical companies GlaxoSmithKline was expected to be active following reports it will stop paying doctors to promote its medicines after Chinese officials accused the U K drugmaker of bribing physicians a year after the company admitted to similar offenses in the U S Shares in the company were down 0 83 in early trading Elsewhere Caesars Entertainment and Starwood Hotels Resorts Worldwide reportedly decided to jointly promote their customer loyalty programs offering guests an incentive to spend more on rooms shows and meals with both companies Other stocks likely to be in focus included FactSet Sanderson Farms and Verifone scheduled to release quarterly earnings later in the day Across the Atlantic European stock markets were lower The EURO STOXX 50 declined 0 43 France s CAC 40 retreated 0 80 Germany s DAX shed 0 33 while Britain s FTSE 100 slid 0 33 During the Asian trading session Hong Kong s Hang Seng Index fell 0 20 while Japan s Nikkei 225 Index gained 0 83 |
C | U S futures steady after Fed rally Dow Jones down 0 02 | Investing com U S stock futures pointed to a steady open on Thursday after the rally caused on Wednesday by the Federal Reserve s decision to slowly begin tapering its stimulus program next month Ahead of the open the Dow Jones Industrial Average futures pointed to a 0 02 dip S P 500 futures signaled a 0 06 slip while the Nasdaq 100 futures indicated a 0 15 loss The S P 500 and Dow Jones closed at record highs after the Fed announced Wednesday that it would reduce its USD85 billion a month bond buying program by USD10 billion in January In his last press conference as Fed Chairman Ben Bernanke said the economy was continuing to make progress The U S central bank reiterated that interest rates are likely to remain low even after the unemployment rate drops below 6 5 the threshold at which the Fed has previously said it would start to consider rate increases The auto sector was likely to be in focus after Ford Motor predicted stalled revenue growth and sliding profit in 2014 sending shares down 0 13 in pre market trade McDonald s was also expected to be active as the fast food giant s Japan business said it plans to close 74 outlets in the country after the company cut its full year profit forecast by more than half in its second largest market Shares in McDonald s slipped 0 18 in extended trading Elsewhere the Financial Times reported that Citigroup chose AIA Group as its partner in a multi billion dollar distribution deal that will allow the Asian life insurer s products to be sold through the U S lender s network across the region Other stocks likely to be in focus included Nike Red Hat Darden Accenture Rite Aid Worthington Industries and Tibco Software all scheduled to release quarterly earnings later in the day Across the Atlantic European stock markets were sharply higher The EURO STOXX 50 rallied 1 66 France s CAC 40 jumped 1 36 Germany s DAX surged 1 41 while Britain s FTSE 100 advanced 0 97 During the Asian trading session Hong Kong s Hang Seng Index tumbled 1 10 while Japan s Nikkei 225 Index jumped 1 74 Later in the day the U S was to publish data on existing home sales manufacturing activity in the Philadelphia region and initial jobless claims |
C | International Week in Review Commodities Super Cycle Explained Edition | Despite recent financial turmoil no one has provided a concise explanation of the commodity super cycle one of the primary macro economic forces causing recent volatility That is until now In a September 21 speech Bank of Canada Governor Stephen Poloz offered the following explanation
Because Canada has been endowed with such a wide variety of resources we ve had to learn how to deal with large swings in their prices I don t just mean the usual high degree of volatility common among many raw materials I m also referring to the long term swings in prices that are often called super cycles What s important to remember is that these long term swings are driven by the fundamental economic laws of supply and demand as well as the continuous technological progress that can affect both output and consumption
The pattern is familiar A large and persistent increase in demand leads to sustained upward pressure on resource prices over a number of years The higher prices act as an incentive to boost supply and companies act by for example investing in new capacity and finding methods to increase efficiency While high prices can certainly spur research and development technological progress has been a constant theme in natural resource industries Such advances uncover ways to raise output and lower production costs And it s because of this progress that inflation adjusted commodity prices have generally been trending lower for 200 years
The investments that lead to increased output can take years if not decades to complete But over time the higher output generated by those investments combines with stabilizing demand to bring about a period of downward pressure on prices Faced with lower prices companies may scale back investment and production Ultimately the lower prices will encourage demand and the reduced investment will crimp future supply leading to higher prices And producers will ride the price cycle all over again
The latest cycle began in the early 2000s when Chinese raw material demand sharply increased This chart of the PowerShares DB Commodity Tracking NYSE DBC which tracks the complete commodities market shows the net impact of increased Chinese demand
By early 2008 the entire index spiked to then record highs Increased PRC demand led to massive increases in global fixed capital investment typified by the Australian economy
Australian capital spending increased 8x in a little over ten years But due to these projects immense size it takes years for the new production to come online And the project s high cost means companies are loathe to leave the capacity idle after the project is completed But Poloz also noted that just as new capacity ramps up demand begins to wane This is where we are now in the super cycle supply is increasing and demand is decreasing a confluence of events that explains why commodity prices are declining across the board This in turn means producer prices are very low eventually leading to deflationary price pressures
For the third consecutive week a leading organization downgraded its Chinese growth outlook This time it was the Asian Development Bank
In an update of its flagship annual economic publication Asian Development Outlook 2015 ADB trimmed its GDP growth forecast for PRC to 6 8 for 2015 and 6 7 in 2016 In its March report it projected growth of 7 2 for 2015 and 7 0 for 2016 The revisions reflect growth setbacks due to decelerating investment growth and weak exports
There is nothing surprising in the statement the bank s analysis falls squarely in line with that of other Asian analysts Other news from China was mixed
talk of the country s economic slowdown is greatly exaggerated This report noted services which account for over half of Chinese economic activity continue to grow more than off setting manufacturing losses Other analysts such as David Rosenberg recently made this observation
But the latest Markit Chinese manufacturing numbers were And the report s graphs paint a very ugly picture of the sector
Two other news stories highlighted potential economic problems First China continues to tap its foreign reserves at an accelerated rate While the situation is hardly dire the increased rate of consumption indicates cost of the PBOC s yuan Second the central government into a second struggling state owned equipment maker It appears China is embracing the too big to fail scenario At some point this policy could not only become costly but it could potentially prevent much needed market discipline from occurring
Mario Draghi offered the following assessment of the EU economy
Turning to the first topic let me give you an overview of the economic developments since the last hearing in June Over the summer industrial production and other indicators of economic activity showed signs of resilience At the same time the macroeconomic environment has become more challenging Our September macroeconomic projections indicated a weaker economic recovery and a slower increase in inflation rates than we had expected earlier this year The inflation rate will remain close to zero in the very near term before rising again towards the end of the year It will take somewhat longer than previously anticipated for it to converge back to and stabilise around levels that we consider sufficiently close to 2
Slowing growth in emerging market economies a stronger euro and the fall in oil prices and in commodity prices more generally are the main causes for these developments As a result renewed downside risks to the outlook for growth and inflation have emerged For many of these changes it is too early to judge with sufficient confidence whether they will cause lasting slippage from the trajectory that we initially expected inflation to follow when we decided to expand our asset purchase programme in January More time is needed to determine in particular whether the loss of growth momentum in emerging markets is of a temporary or permanent nature and to assess the driving forces behind the drop in the international price of commodities and behind the recent episodes of severe financial turbulence We will therefore monitor closely all relevant incoming information and its impact on the outlook for price stability
Draghi s comments are eerily reminiscent of the last Fed policy statement especially his focus on emerging markets Draghi spends more time discussing inflation focusing not only on weak oil prices but the potential long term impact of weak inflation on macro economic policy Like other central banks it appears the ECB s inflation model is out of sync with market reality Inflation continues to surprise ECB policy makers in a very negative way
Other EU news however was positive The latest Markit numbers were the best in four years with a 53 9 composite reading Manufacturing was 52 while services was 54 German and French numbers were also encouraging their respective composite readings were 54 3 and 51 4 And French manufacturing posted a positive 51 9 readings Finally loan growth continued to recover posting a 1 Y Y increase
The Conference Board released Australia s leading and coincident indicators The LEIs increased for the first time in five months The following table of itemized LEI components illustrates a fundamental problem
The financial LEIs interest rates stock prices and money supply mostly increased over the last six months while the industrial LEIs exports and sales inventory ratios are mostly negative Ideally the financial LEIs lead industrial For example the RBA lowers interest rates increasing money supply which then translates into more loans leading to higher business profits The above data however shows no industrial impact from better financial conditions The coincident indicators also show a concerning situation
The best retail trade contribution over the last three months was 01 while industrial production decreased for the last five consecutive months In contrast contributions from employment growth were strong in 4 of the last 6 months leading to consistent income growth Like the LEIs the CEIs contain a data disconnect higher wages aren t translating into higher consumption Overall these data points show an economy that while growing has problems
Finally Japanese CPI increased a paltry 2 Y Y
As this graph shows Japan has the same problem as other developed markets borderline deflation This increases pressure on Prime Minister Abe and the BOJ to do well something
This is the third consecutive week where the tone of news releases speeches and analysis has turned slightly negative It started with the surprise Citigroup release three weeks ago where they argued Chinese problems increased the possibility of a global recession to over 50 Until then analysts were waiting for someone to dip their toe in the water since that announcement it seems negative sentiment has increased This shouldn t be surprising Since oil s price drop a year ago central banks have been arguing inflation will return to normal levels in their respective intermediate term Unfortunately the length of the intermediate term continues to increase This continued rejiggering of inflation projections highlights fundamental problems with central bank inflation models and potentially macro economic policy making apparatuses |
MS | All Eyes Still On The Auto Industry Bailout | Asian trade Global markets are back in the red on the same motive the auto bailout plan It looks like the world market s fate now lies on the approval of the bailout plan ignoring any other news U S markets closed yesterday lower affected by a sell off in the second part of the trading session while Asian markets are set for the first decline in the last six days Furthermore U S futures are trading back in the red territory the S P already lost 14 10 points Slowly the auto industry bailout is becoming a leitmotif for today s equity markets Leaving the bailout plan alone a report showed that the U S trade balance fell again today despite analysts expectations Exports which until now was the only thing dragging the GDP numbers higher declined to a seven month low The export industry is affected by the ongoing dollar strength and by the huge slump in consumption seen across the world Analysts forecasted a 53 5 billion deficit compared with the released number of 57 2 billion In addition to the very bad trade balance numbers a different report showed the initial jobless claims reached 573K in the week ending on December 6 This is by far the largest read seen in the last 26 years The 4 week moving average of initial claims was 540 5k an increase of 14 25k from the previous week s revised average of 526 25k The data released today is so bad that Morgan Stanley downgraded their projections for Q4 to a whopping 6 annualized term In the Asian session the Nikkei fell 110 37 points 1 27 to 8 610 18 The Australian S P Asx lost 35 30 points 0 98 to 3 562 70 Crude oil actually advanced yesterday for the first time in the last period Crude oil for January delivery rose 0 40 to 47 05 Gold posted some strong gains in the last two days helped by the weaker dollar Bullion for immediate delivery rose 2 10 to 819 90 Previous Wall Street trade Weak data on jobs and exports along with concerns regarding passage of an automaker bail out package weighed on stocks Thursday The dollar weakened against a basket of its trading partners as traders priced in a 85 probability for a 75 basis point rate cut at next week s FOMC meeting Meanwhile Senate passage of the automaker bail out package was looking more and more in doubt The effective funds rate has been around 0 25 for several weeks as the Fed expanded their balance sheet said Matthew Carniol chief currency strategist at TheLFB forex com Gold hit 832 an ounce today just 1 off the recent peak from Nov 25 With the printing presses running overtime gold may be set to make a serious run New claims for unemployment benefits were the most since November 1982 and exports slowed for a third month in October Exports prevented overall contraction in output during the first half of the year but may contribute to a 5 annualized decline in GDP during the fourth quarter with the outlook from that point decidedly negative Previous European trade In Europe the German Dax lost 83 82 points 1 74 to 4 721 06 while the U K Ftse fell 46 21 points 1 06 to 4 321 07 The major indexes in Europe and Asia are down this year by approximately 45 more than their U S counterparts |
MS | Market Lower On Failed Bailout Plan | Current Futures Dow 230 00 S P 30 50 NASDAQ 37 00 European Trade The equity markets were affected in the overnight session by the failed vote on the automakers bailout plan The Senate rejected the bill by 53 votes to 45 failing to reach the 60 vote margin required for the plan to pass The decision had immediate effects in the equity markets The Nikkei the only major spot market open at the time the announcement was made public fell 484 68 points 5 56 to 8 235 87 with the biggest declines in the car manufacturers sector With this decline the Nikkei has shed half of the gains posted in the last four days Also in the Asian session the Australian S P Asx lost 87 60 points 2 43 to 3 510 40 In Europe markets dove into negative territory from the opening bell Up to now the U K Ftse has fallen 111 33 points 2 54 to 4 277 36 while the German Dax has lost 167 48 points 3 51 In addition to the car manufacturers financial shares also declined in Europe after HBOS announced that total write downs reached 7 5 billion in 2008 The U K Government currently owns HBOS U S futures are indicating a very weak start on Wall Street after the rejected bailout plan The S P futures have already fallen 30 points while the Dow Jones futures are lower by 230 pips It looks like the GM bankruptcy might be very likely as the company is losing around 67 million per day Furthermore GM s biggest shareholder GMAC LLC is facing bankruptcy on its own after it failed to raise the necessary capital to become a bank holding company and access the Treasury s 700 billion funds Crude oil advanced yesterday for the first time in the last few periods Overnight crude oil for January delivery fell 0 20 to 46 60 Gold shed some of the gains posted one day earlier Bullion for immediate delivery fell 2 90 to 818 10 Previous Asian trade Global markets are back in the red on the same motive the auto bailout plan It looks like the world market s fate now lies on the approval of the bailout plan ignoring any other news U S markets closed yesterday lower affected by a sell off in the second part of the trading session while Asian markets are set for the first decline in the last six days Leaving the bailout plan alone a report showed that the U S trade balance fell again today despite analysts expectations Exports which until now was the only thing dragging the GDP numbers higher declined to a seven month low The export industry is affected by the ongoing dollar strength and by the huge slump in consumption seen across the world Analysts forecasted a 53 5 billion deficit compared with the released number of 57 2 billion In addition to the very bad trade balance numbers a different report showed the initial jobless claims reached 573K in the week ending on December 6 This is by far the largest read seen in the last 26 years The 4 week moving average of initial claims was 540 5k an increase of 14 25k from the previous week s revised average of 526 25k The data released today is so bad that Morgan Stanley downgraded their projections for Q4 to a whopping 6 annualized term |
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