Friday September 16 Daily Market Primer
Happy
Friday. Stocks bounced back on the latest upswing of the roller coaster
market on Thursday,
with the Dow and S&P up about 1% and the NASDAQ up 1.5%. Sometimes we
forget that stock indices are made up of…actual stocks. I was reminded of this
yesterday when I read this paragraph in a Reuters story explaining that
Apple had single handedly propped up the market indices this week. ”Apple
has been entirely responsible for this week's gains in the Dow Jones industrial
average. If Apple had been unchanged this week from last Friday's close, the
Dow on Thursday would be down 0.1 percent, instead of the 0.3 percent gain it
has recorded.” S&P futures are pointing to a down opening :(
LAST
|
CHANGE
|
% CHG
|
|
18212.48
|
177.71
|
0.99%
|
|
5249.69
|
75.92
|
1.47%
|
|
2147.26
|
21.49
|
1.01%
|
|
1227.02
|
15.43
|
1.27%
|
|
2410.75
|
-7.27
|
-0.30%
|
|
16519.29
|
114.28
|
0.70%
|
|
338.05
|
-2.29
|
-0.67%
|
|
6705.65
|
-24.65
|
-0.37%
|
|
16.56
|
0.26
|
1.60%
|
|
5296.7
|
56.8
|
1.08%
|
|
3002.85
|
-20.66
|
-0.68%
|
|
23335.59
|
144.95
|
0.63%
|
|
28599.03
|
186.14
|
0.66%
|
|
2827.45
|
21.93
|
0.78%
|
|
4332.67
|
-40.55
|
-0.93%
|
|
10306.39
|
-124.81
|
-1.20%
|
|
16261.71
|
-333.72
|
-2.01%
|
|
8638.1
|
-82.4
|
-0.94%
|
|
0.287
|
0/32
|
||
0.75
|
-1/32
|
||
1.189
|
-1/32
|
||
1.684
|
2/32
|
||
2.431
|
23/32
|
||
-0.651
|
1/32
|
||
-0.005
|
13/32
|
||
345.45
|
-2.75
|
-0.79%
|
|
2133
|
-5
|
-0.23%
|
The
odds of a September rate hike have fallen to 18%, and if the Fed moved in
September it would be the longest time between Fed rate hikes in 60 years.
Brad Dorchinecz also gave an update on the private equity
landscape and an update on PE funds VI and VII, which include an increasing
allocation to secondaries and co-investments, which have been very successful
in past funds.
Deutsche
Bank is getting hit with a fine from US regulators as big as Apple’s EU
tax penalty a couple of weeks ago, of $14 billion related to mortgage
back securities. This fine, along with the $185 million fine for Wells
Fargo sales practices, is complicating the big banks ability to push back
against ever increasing regulation in Europe and the United States.
DB has promised to fight the decision. Enterprise database bellwether
Oracle is down 4% this morning on an earnings miss. Even so, revenue
from cloud computing grew 59%, as more and more computing power and data
continues to move to the cloud. The German 10 year bond yield has
slipped back below zero, so much for the bond selloff.
Here’s
the news:
Deutsche Bank fine
Shares in Deutsche Bank AG had slumped 7.2 percent by 5:45 a.m. ET,
after reports emerged about the size of a U.S. Justice
Department claim for the settlement of an investigation into the firm's
mortgage-backed security sales. The bank says it is unwilling to pay anywhere
near the $14 billion demanded — coincidentally a
similar size to the tax bill the EU recently presented to Apple Inc. While
Deutsche Bank's fights its own battles, other banks in Europe are finding that having too much cash can also cause
problems.
European summit
Leaders of the European Union’s 27 nations — minus the U.K. —
are meeting in the Slovak capital Bratislava as leaders try to fight
a surging wave a populism across the union.
German Chancellor Angela Merkel warned that Europe is not at all in a good state in a speech
ahead of the meeting, which will also likely be dominated by the fallout
from the Brexit vote. The one place the summit is expected to provide
agreement is on climate change, with a target for ratification of the Paris
Climate Accord anticipated as early as next month.
Commodity slump
Crude oil remains in the doldrums, with a barrel of West Texas
Intermediate for October delivery trading at $43.37 at 6:09 a.m. ET. The
problems in commodities are by no means exclusive to oil, as the Bloomberg
Commodity Index is heading for a third-quarter slump after gaining in this
first half of the year. In base metals, copper is the out-performer in the last
week after lagging far behind its peers this year,
while zinc prices slipped. Gold was also lower.
Wells Fargo and the bonus battle Wells Fargo & Co., the
world's most valuable bank up until this week, may have given a gift to
those in Washington who are trying to boost Wall Street regulation.
The timing of the scandal over fake accounts, opened to meet bonus targets,
means that banks' arguments against a proposed pay rule meant to limit risky
behavior are unlikely to receive a welcoming ear on Capitol Hill.
Fed rate
hike odds keep sliding. The market is pricing in just an 18% chance the US Federal
Reserve will raise rates at its September meeting, according to data compiled
by Bloomberg. Additionally, the market sees just a 49.7% probability of a Fed
rate hike before the end of 2016. Germany's 10-year is back below zero. A solid bid has pushed the yield on 10-year German bunds down 5 basis points to -2.1 bps, dropping it back below zero for the first time in a week. The benchmark yield set a record low -19 bps in the wake of the United Kingdom's decision to leave the European Union.
Russia's central bank cut rates. The Central Bank of Russia lowered its benchmark interest rate 50 basis points to 10.00%, as expected. According to the CBR, "Inflation has demonstrated a noticeable decline in line with the Bank of Russia’s baseline forecast." The Russian ruble is weaker by 0.5% at 65.0630 per dollar.
The US is going after Deutsche Bank. The US Department of Justice has asked Deutsche Bank to pay $14 billion to settle a probe into the bank's dealings in mortgage securities between 2005 and 2007, the Wall Street Journal reports. Shares of Deutsche Bank are down 8% on the news.
The world's largest hedge fund is planing layoffs. Ray Dalio's Bridgewater Associates sent out a letter to clients saying it is "bloated" and will "improve efficiencies" of its non-investment teams.
Oracle posts an earnings miss. The company missed on both the top and bottom lines, earning $0.55 per share on revenue of $8.6 billion.
The iPhone 7 hits stores on Friday. Apple stores will open at 8 a.m., earlier than usual, for the occasion.
Trivago is getting ready to go public. Expedia has chosen JP Morgan, Goldman Sachs and Morgan Stanley to coordinate is Nasdaq-based initial public offering for its travel search site, Trivago, Reuters reports.
Stock markets around the world are mixed. Australia's ASX (+1.1%) led a quiet session in Asia as China's Shanghai Composite and Hong Kong's Hang Seng were closed in observance of Mid-Autumn Festival. In Europe, Spain's IBEX (-0.8%) paces the decline. S&P 500 futures are down 9.75 points at 2,128.25.
US economic data flows. CPI will
be released at 8:30 a.m. ET and University of Michigan consumer confidence will
cross the wires at 10 a.m. ET. Then, at 1 p.m. ET, the Baker Hughes rig count
will be announced. The US 10-year yield is down 2 bps at 1.67%.
Cut Both Ways
Donald Trump offered an expanded economic blueprint and
outlined an overhaul of his tax plan on Thursday. Skeptics in both
parties questioned his promise to offset steep tax cuts with significantly
stronger economic growth. The new plan includes proposals such as collapsing
the seven individual tax brackets into three and lowering the corporate tax
rate to 15% from 35%. Mr. Trump pointed to proposals to ramp up energy
production and to slash environmental and consumer-protection regulations to
defray the revenue lost from his tax cuts. Meanwhile, Hillary Clinton returned to campaigning after illness
and a pair of high-profile missteps took her presidential quest off message and
off the road for the better part of a week. We also examine how working-class
neighborhoods are throwing their support behind Mr. Trump as crumbling social institutions fuel a political backlash.
Flawed Experiment
The world’s leading attempt at monetary easing is floundering, and its engineers are divided over how to get it on track. The Bank of Japan has tried radical measures for 3½ years to reflate the country’s sagging economy, resorting this year to negative interest rates, but growth and inflation remain elusive. Now the bank’s board, while still in favor of easing, has some members wanting to revise the methods for doing so—likely sparking uncertainty for economy-watchers. We report that Japan’s financial regulator, big banks, insurers and advisers to Prime Minister Shinzo Abe have all piled into the fray with policy prescriptions. The ferment, which comes less than a week before the BOJ meets to decide its next move, reflects a larger unease as doubt about where central banks are headed ripples through global markets.
The world’s leading attempt at monetary easing is floundering, and its engineers are divided over how to get it on track. The Bank of Japan has tried radical measures for 3½ years to reflate the country’s sagging economy, resorting this year to negative interest rates, but growth and inflation remain elusive. Now the bank’s board, while still in favor of easing, has some members wanting to revise the methods for doing so—likely sparking uncertainty for economy-watchers. We report that Japan’s financial regulator, big banks, insurers and advisers to Prime Minister Shinzo Abe have all piled into the fray with policy prescriptions. The ferment, which comes less than a week before the BOJ meets to decide its next move, reflects a larger unease as doubt about where central banks are headed ripples through global markets.
Phone Home
The Consumer Product Safety Commission on Thursday announced a formal recall of the Galaxy Note 7 phone, which has sparked fires and a global crisis for Samsung. Faced with exploding batteries in some of its top-selling phones, Samsung already had been pursuing a global recall effort of its own, but exacerbated the situation in the way it communicated with regulators and consumers. The effort has been dogged by conflicting consumer information and Samsung’s failure at the outset to coordinate efforts with U.S. safety authorities. That led to delays in providing replacement devices and resolving the problem for customers in the U.S., where Samsung has sold 1 million of the devices and is trying to expand to narrow the gap with Apple. The CPSC said users can request a Galaxy Note 7 with a different battery, a refund or a new replacement device.
The Consumer Product Safety Commission on Thursday announced a formal recall of the Galaxy Note 7 phone, which has sparked fires and a global crisis for Samsung. Faced with exploding batteries in some of its top-selling phones, Samsung already had been pursuing a global recall effort of its own, but exacerbated the situation in the way it communicated with regulators and consumers. The effort has been dogged by conflicting consumer information and Samsung’s failure at the outset to coordinate efforts with U.S. safety authorities. That led to delays in providing replacement devices and resolving the problem for customers in the U.S., where Samsung has sold 1 million of the devices and is trying to expand to narrow the gap with Apple. The CPSC said users can request a Galaxy Note 7 with a different battery, a refund or a new replacement device.
The Chinese National Development and
Reform Commission has approved 1,233 projects, costing 2.14 trillion yuan, to
stimulate the economy. The projects are public-private partnerships.
Xinhuanet.com (China) (14 Sep.)
This is the wrong time to soften
capital requirements for banks, Comptroller of the Currency Thomas Curry says.
"The high standards here in the US have made our banks stronger in
absolute terms and in comparative terms," Curry said.
Reuters (15 Sep.)
Apple shares have surged 21% this
quarter, but many institutional investors had expected a decline. Since June,
the number of institutional shareholders has fallen 1.3%, and 295 firms closed
out their positions, according to data compiled by Bloomberg from regulatory
filings.
Bloomberg (15 Sep.)
Nuveen Investments has entered the
exchange-traded fund market with the launch of an aggregate-bond fund on NYSE
Arca. The NuShares Enhanced Yield US Aggregate Bond ETF seeks to deliver the
performance of the BofA Merrill Lynch Enhanced Yield US Broad Bond Index.
ETF.com (15 Sep.)
Wall Street's 0.01 percent: The guru who only talks to the
hedge fund elite.
This is why mutual funds have seen $422 billion fly out the door.
Japan wants to double its foreign workforce.
Mark Carney says Mark Carney's doing a great job.
Political paralysis is the biggest threat to U.S. competitiveness.
Twitter finally did something right.
A Wall Street rock star's
$5 trillion comeback.
In a serious
case of ironic timing, the DOJ has asked Deutsche Bank to pay $14 billion to settle claims over the
way it issued and underwrote mortgage-backed securities before the crisis on
the same day that Bloomberg reports that European banks are
intensifying their lobbying efforts against tougher Basel rules. These Basel
proposals — and news of the DOJ action — might incentivize bank management to
beef up capital buffers to guard against so-called operational risks of the
kind Deutsche's presently battling. You don't need to hear the bank's heated
rebuttal of the DOJ claim to know that critics of the Basel agenda remain in
full force. One latest example comes from former U.S. Treasury Secretary
Larry Summers who in a paper, and on
Bloomberg TV, yesterday lashed out at regulators' claims that
banks are safer now than in the pre-crisis era. He argues supervisors need to
dilute their focus on book values and risk-adjusted measures to determine
whether lenders are adequately capitalized, and instead look at leverage
ratios and market measures of risk. One day
after the eighth anniversary of Lehman's collapse policy makers are still
working to finalize the post-crisis regulatory framework, while lenders are
still bearing the wounds inflicted in the boom years. |
|
|
Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Reuters, Xinhuanet.com, ETF.com
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