Fed
Chair Janet Yellen got on board with global equity investors yesterday, as she made a speech
in New York that showed moderation and restraint in the Fed’s liftoff policy.
Her comments we watched even more closely than usual (if that’s even possible)
since unusually vocal Fed governors had recently making hawkish comments in the
press, leading Fed watchers (read: everybody) to think there is discord on the
FOMC and a greater chance of a steeper interest rate ramp. There was lots
of talk in the press last week of the market mispricing the probability of
interest rate increases, but not so much today. Equity markets rallied,
first in the US (DOW +.5%, S&P +.9%, NAS +1.7%), then in Asia (China
Shanghai +2.7%,Hong Kong Heng Seng + 2.1%, but Japan Nikkei 225 down 1.6% ),
and stocks are trading up in Europe now (UK FTSE + 1.5%, French CAC +1.8,
German DAX +1.5%). US futures are pointing to an up opening of about 100
DOW points, or .6%. Talk of lower for even longer interest rates weakens
the dollar, and its headed down today (second story). In Japan, PM Abe
said he was considering a new economic stimulus package ahead of elections this
summer, http://goo.gl/mbCLYz .
What
about oil? As the he last story points out, its not getting much “dove
love”, but even so Brent crude and WTI are both heading back up toward $40
after falling for the last two days.
The
ADP jobs report came out this morning, with 200k new jobs added in March, roughly
in line with expectations, and all eyes will be on the Labor Department March
jobs report due out Friday. Remarkably, in a slow growth economy, where
almost everyone was fearing a recession just two months ago, venture
capital is having a banner fund raising year (see Nothing Ventured
below).
Here’s the news for Wednesday:
Gradual is the word of the day
Federal Reserve Chair Janet Yellen said a lot of what markets wanted to hear
at her speech to the Economic Club of New York yesterday. She emphasized that
rate hikes by the Fed would be gradual while
spelling out what she means by data dependence. Market-implied odds of a rate
rise at the April FOMC meeting fell to zero
following her speech.
Dollar weakens, markets rally
The dollar plunged as Yellen started speaking yesterday and is
now headed for its worst month
since 2010. Equity markets rallied across the globe, with the MSCI Asia
Pacific Index adding 0.9 percent overnight
while in Europe the Stoxx 600 Index is 1.2 percent higher
at 10:45 a.m. London time, despite consumer confidence in the euro-area falling to the lowest in 13
months. S&P 500 futures are 0.6 percent higher,
following yesterday's close at a 2016 high.
Japan missing out
Japanese equities are missing out on the rally, with the
Topix index dropping 1.6 percent and
automakers among the biggest losers as the yen rallied to 112.20 relative
to the U.S. dollar and industrial production data showed the largest drop
since March 2011. The slump comes despite reports from Japan's public service
broadcaster saying Prime Minister Abe is planning further stimulus
ahead of elections this summer. In a sign of how little trading
is happening in the Japanese sovereign bond market, the on-the-run 30 year bond
saw no trades in the overnight session.
EM currency party
It's been at least 18 years
since emerging market currencies have had a month as good as this March.
Malaysia's ringgit is poised for its biggest monthly gain
since the Asian financial crisis as the recent crude oil rally improves
prospects for the energy exporter. The South African rand strengthened beyond 15 to
the dollar for the first time this year while Russia's ruble is 11 percent higher
against the dollar this month.
Brazil
President Dilma Rousseff was delivered a major blow when
Brazil’s biggest political party left the governing coalition
just weeks ahead of impeachment proceedings against her are due to begin. The
move further weakens the government and increases the chances Rousseff will lose
the impeachment vote. Brazil's Ibovespa extended
its best monthly advance since
1999 on the news.
Tied Up
The post-Scalia era burst forth at the Supreme Court yesterday in a pair of developments that reveal the new dynamic of an eight-member panel equally divided between conservatives and liberals. The justices in one action deadlocked 4-4 over a lawsuit involving government-employee unions, dismissing with a single sentence a case that many had expected to deliver a debilitating blow to a key segment of the Democratic Party base. In a separate order, the justices took the extraordinary step of framing their own compromise to a dispute between religious organizations opposed to contraception and the Obama administration, which seeks to ensure female employees receive insurance coverage under the Affordable Care Act. Meanwhile, Sen. Mark Kirk yesterday became the first Senate Republican to meet with President Obama’s Supreme Court nominee, giving an endorsement of Judge Merrick Garland.
The post-Scalia era burst forth at the Supreme Court yesterday in a pair of developments that reveal the new dynamic of an eight-member panel equally divided between conservatives and liberals. The justices in one action deadlocked 4-4 over a lawsuit involving government-employee unions, dismissing with a single sentence a case that many had expected to deliver a debilitating blow to a key segment of the Democratic Party base. In a separate order, the justices took the extraordinary step of framing their own compromise to a dispute between religious organizations opposed to contraception and the Obama administration, which seeks to ensure female employees receive insurance coverage under the Affordable Care Act. Meanwhile, Sen. Mark Kirk yesterday became the first Senate Republican to meet with President Obama’s Supreme Court nominee, giving an endorsement of Judge Merrick Garland.
Nothing Ventured ...
Venture-capital firms are raising money at the highest rate in more than 15 years, even as the values of some once-hot startups have begun to cool. With the quarter nearly over, U.S. venture funds have collected about $13 billion, which would be the largest total since the dot-com boom in 2000. The influx of capital comes as many venture firms have reined in investing in recent months and pushed back on rich valuations. The vote of confidence from limited partners—the endowments, pension funds and other institutions that back venture funds—could extend the life of some struggling startups but also prevent a shakeout that some say is necessary after valuations inflated to unsustainable levels in recent years. Investors have stayed excited about venture capital because it offers higher growth in a low-return environment.
Venture-capital firms are raising money at the highest rate in more than 15 years, even as the values of some once-hot startups have begun to cool. With the quarter nearly over, U.S. venture funds have collected about $13 billion, which would be the largest total since the dot-com boom in 2000. The influx of capital comes as many venture firms have reined in investing in recent months and pushed back on rich valuations. The vote of confidence from limited partners—the endowments, pension funds and other institutions that back venture funds—could extend the life of some struggling startups but also prevent a shakeout that some say is necessary after valuations inflated to unsustainable levels in recent years. Investors have stayed excited about venture capital because it offers higher growth in a low-return environment.
Bank Shots
The monitor overseeing HSBC’s compliance with a landmark anti-money-laundering settlement has uncovered a range of potential lapses including loans to companies that exported miniskirts to Iran and candy to Syria, and the opening of an account by a man in Mexico who had thousands of dollars of cash in a bag, according to a person familiar with the monitor’s findings. In 2012, HSBC Holdings agreed to pay a then-record $1.9 billion to the U.S. Justice Department to settle allegations it failed to spot the laundered proceeds of drug trafficking in Mexico and failed to flag transactions with countries subject to economic sanctions. The settlement included a five-year deferred-prosecution agreement and a demand that the London-based bank bring its compliance up to U.S. standards and hire a monitor to check its efforts. After that point, the Justice Department will decide whether a prosecution of the bank should proceed.
The monitor overseeing HSBC’s compliance with a landmark anti-money-laundering settlement has uncovered a range of potential lapses including loans to companies that exported miniskirts to Iran and candy to Syria, and the opening of an account by a man in Mexico who had thousands of dollars of cash in a bag, according to a person familiar with the monitor’s findings. In 2012, HSBC Holdings agreed to pay a then-record $1.9 billion to the U.S. Justice Department to settle allegations it failed to spot the laundered proceeds of drug trafficking in Mexico and failed to flag transactions with countries subject to economic sanctions. The settlement included a five-year deferred-prosecution agreement and a demand that the London-based bank bring its compliance up to U.S. standards and hire a monitor to check its efforts. After that point, the Justice Department will decide whether a prosecution of the bank should proceed.
Flex Points
Flexible workplace policies now enable more of us to leave the office early, put the kids to bed and log on from home to finish our work. Some celebrate the option as a freedom. For others, it feels like an intrusion on their home life. Differences of approach can cause tension and misunderstandings. Researchers have identified three styles: “Integrators” allow work and home life to bleed together, while “separators” prefer a clear line between work and personal life. For the latter, the act of shifting gears saps energy they prefer to devote to relationships, family responsibilities or other pursuits. A third group, known as “cyclers,” volley back and forth between integrating and separating work and home for a few days, weeks or months at a time.
Flexible workplace policies now enable more of us to leave the office early, put the kids to bed and log on from home to finish our work. Some celebrate the option as a freedom. For others, it feels like an intrusion on their home life. Differences of approach can cause tension and misunderstandings. Researchers have identified three styles: “Integrators” allow work and home life to bleed together, while “separators” prefer a clear line between work and personal life. For the latter, the act of shifting gears saps energy they prefer to devote to relationships, family responsibilities or other pursuits. A third group, known as “cyclers,” volley back and forth between integrating and separating work and home for a few days, weeks or months at a time.
The rise and fall of Tim Leissner,
Goldman's big man in Malaysia.
Europe's bond shortage means Draghi is about to shock the market
Foxconn takes control of Sharp
in reduced buyout.
All 'Brexit' polls are wrong, but some are more wrong than others.
Hollywood deals in spotlight as EU builds antitrust case.
Hedge
funds establish near-record bullish bet on rising oil prices http://goo.gl/b4dNn1
Missile maker adapts guidance system
for self-driving cars.
 A dovish
Janet Yellen has sparked a rally in stocks, credit, and
emerging markets but there’s one risk asset that has yet to feel the full
embrace of the Fed chair’s ‘dove love.’ That asset is oil, which fell
from $40.19 a barrel to $39.14 yesterday, though it has recovered somewhat to
$39.62 early this morning. Indeed, black gold has been morphing into
something of a black sheep of late, as economists, analysts, and investors
recognize the scale of the commodity
complex's financialization and the bubble-like characteristics
of the recent hump in the price of crude. Where once people praised the
benefits of low oil prices as they boost consumption, very cheap oil is now
recognized as a major headwind for economic growth. Here, for instance, is
Yellen talking
oil yesterday: “In the event oil prices were to fall again,
either development could have adverse spillover effects to the rest of the
global economy.” Contrast that with what she
said a year ago, when crude was hovering around $60 a barrel:
“The recent decline in world oil prices could boost overall global economic
growth more than we expect.” Whoops. |
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Source:
Bloomberg, BI, WSJ, Reuters
Labels: DailyMarketPrimer, Fed, Investments, Markets, News, Oil
posted by Rich Barnett @ 7:11 AM
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