Wednesday September 21 Daily Market Primer
US
stock markets were flat for the second day in a row yesterday, with investors not
wanting to do much before the Fed meeting, and the decision will be out today
at 11:00am Pacific time. The BOJ announced a shift in monetary policy
focus from expanding the money supply to controlling the yield curve by
sticking to long-term targets for asset purchases but fine tuning them in the
short term. By not expanding the overall size of asset purchases, the BOJ
seems to be questioning the efficacy of driving rates more negative.
Negative interest rates have been very controversial in Japan and elsewhere.
The BOJ has been buying Japanese Government Bonds (JGB), and now owns about one
third of the outstanding bond supply. Japanese stocks jumped, with
the Nikki 225 (shown here) up 1.9% and the Topix, Japan’s other main stock
market index, up 2.7%. JGB yields rose, with the 10 year turning
slightly positive for the first time since March. Stocks in Asia were
positive and European stocks are having a good day so far. US S&P
futures are pointing up ahead of the Fed.
|
LAST
|
CHANGE
|
% CHG
|
18129.96
|
9.79
|
0.05%
|
|
5241.35
|
6.33
|
0.12%
|
|
2139.76
|
0.64
|
0.03%
|
|
1228.33
|
-4.2
|
-0.34%
|
|
2436.04
|
17.57
|
0.73%
|
|
16807.62
|
315.47
|
1.91%
|
|
344.07
|
3.07
|
0.90%
|
|
6849.18
|
18.39
|
0.27%
|
|
15.23
|
-0.69
|
-4.33%
|
|
5339.6
|
36
|
0.68%
|
|
3025.87
|
2.87
|
0.10%
|
|
23669.9
|
139.04
|
0.59%
|
|
28507.42
|
-15.78
|
-0.06%
|
|
2850.74
|
-3.95
|
-0.14%
|
|
4434.61
|
46.01
|
1.05%
|
|
10504.2
|
110.34
|
1.06%
|
|
16442.63
|
235.53
|
1.45%
|
|
8787
|
100.9
|
1.16%
|
|
0.294
|
0/32
|
||
0.795
|
-1/32
|
||
1.207
|
-1/32
|
||
1.687
|
1/32
|
||
2.429
|
4/32
|
||
-0.657
|
0/32
|
||
-0.013
|
-1/32
|
||
43.85
|
0.55
|
1.27%
|
|
46.74
|
0.86
|
1.87%
|
|
3.145
|
0.036
|
1.16%
|
|
353.97
|
3.78
|
1.08%
|
|
2139
|
8
|
0.38%
|
Crude
oil turned up
as OPEC upgraded next week’s meeting to “formal” from “informal”. No
comment. Microsoft announced a “yuge” stock buyback of $40 billion,
or about 10% of outstanding shares. Other than waiting for the Fed, it’s
a slow news day, so here’s the news:
Fed decision
At 2 p.m. ET the Federal Open Markets Committee will release its
latest monetary policy decision. With
market-implied odds of an interest rate rise hovering around 20 percent,
tightening today would come as a major surprise to investors, even as some
argue that the time is right to hike. With the presidential
election looming, a decision to delay raising rates potentially comes
with political baggage. Federal Reserve Chair Janet Yellen will hold a press
conference following the decision at 2:30 p.m. ET.
Bank of Japan shift
The Bank of Japan said it is shifting the focus of its monetary policy
from expanding the money supply to controlling interest rates in a statement released overnight. While the yen
weakened in the immediate aftermath of the announcement, it has since reversed
that move to trade at 101.37 to the dollar by 6:18 a.m. ET. The
biggest move following the announcement was in Japanese bank shares, with
the 87-stock Topix Banks Index surging 7 percent by the close of
trading, while Japan's 10-year government bond yield turned positive for the first time since
March. The tweaks to policy are likely an attempt to avoid negative side
effects from quantitative easing, signaling a potential change in the way the
world views such policy.
Markets rise
The MSCI Asia Pacific Index climbed 1.4 percent overnight with Japan's
Topix index jumping 2.7 percent in the wake of the Bank
of Japan decision. In Europe, the Stoxx 600 Index was 0.9 percent higher at 6:09 a.m. ET with
banks leading the gains. S&P 500 futures gained 0.4 percent.
Oil jumps
A barrel of West Texas Intermediate for November delivery was trading higher at $45.00 at 6:10 a.m. ET
after OPEC turned next week's informal meeting in Algiers into a formal
session. A Bloomberg survey shows that oil analysts do not expect an agreement over a
production freeze to be reached given internal tensions within the group. On
the supply side, a tanker full of oil has left Libya for the first time since 2014 after fighting
there subsided.
Trump loses the high income vote
Those earnings higher incomes are more likely to vote for Democratic nominee
Hillary Clinton than Republican Donald Trump, according to a Bloomberg Politics
poll, reversing a trend among that demographic to vote GOP. Meanwhile,
Trump is coming under scrutiny over his dealings with charities and social media misfires by members of his
family.
The
Bank of Japan altered its policy. The central bank announced it would target
the shape of the yield curve; it aims to keep the 10-year
Japanese-government-bonds rate "more or less at the current level" of
about 0%.The British economy has cleared its first post-Brexit hurdle. The Office for National Statistics has released its first report of a special series titled "Assessment of the UK Post-Referendum Economy," and it concludes that the British economy has shown no major impact from the UK's vote to leave the European Union. The British pound is little changed near 1.3100 against the dollar.
Crude oil is surging. West Texas Intermediate crude oil is up 2.2% at $45.00 a barrel after the latest weekly inventory data from the American Petroleum Institute showed a draw of 7.5 million barrels versus expectations for a build of 3.4 million barrels.
Deutsche Bank is the riskiest bank in the world. That's according to the latest data from the Federal Deposit Insurance Corporation, which says the bank's leverage ratio is at 2.68%, well below the average of 5.6% for banks considered systemically important.
FedEx beat and raised its outlook. The courier giant earned $2.90 a share on revenue of $14.7 billion and said it saw full-year earnings per share in a range of $10.85 to $11.35, a bit light of analysts' estimates.
Microsoft announced a huge share-buyback program. The tech behemoth said it would buy back $40 billion worth of stock, or nearly 10% of shares outstanding, and raise its dividend quarterly divided by $0.03 a share to $0.39.
Moving to restore investor
confidence, Brazil's state-run oil company, Petroleo Brasileiro, cut planned
capital spending 25%. The company said it will go ahead with $15.1 billion in
previously announced asset sales and pledged to raise an additional $19.5 billion
between 2017 and 2018 through partnerships and divestments. Reuters (20 Sep.)
Andrew Hauser of the Bank of England said adoption of blockchain
will take years but the technology could be transformational in certain
markets. "Much more work is needed across a whole range of issues,
including speed and scalability; confidentiality protections; developing common
protocols; integrating cash and securities movements; and establishing
regulatory and legal norms," Hauser said. CoinDesk (U.K.)
Exchange-traded funds are no threat to market stability, says Bats
Global Markets' Tony Barchetto, noting that "fixed-income ETFs can be the
release valve, rather than a pain point." Financial Times (tiered subscription model) (20 Sep.)
Clients with more than $1 million to invest are happy to use
robo-advisers, but they also insist on human help on complex matters, a survey
by LinkedIn found. Responding to the preferences of high-net-worth individuals
could be important to advisory firms because 20% of affluent investors say they
plan to switch wealth managers in the next 12 months.
InvestmentNews (20 Sep.)
About 60% of wealth managers are worried they will lose business
to financial-technology competitors, but only 45% have made fintech a key part
of digital strategies, a survey by PricewaterhouseCoopers found. By comparison,
90% of banks use fintech strategies or expect to do so.
ThinkAdvisor (20 Sep.)
It took only 12 hours to crowdfund $1 million for house flipping
Inside the pipeline that transfers €2.7 billion a minute.
Blackrock says passive emerging market trade coming full
circle.
The error the polling world rarely talks about.
Why Canadians are being offered cash to abandon their homes.
Stock
markets around the world are up. Japan's Nikkei (+1.9%) led the advance in Asia, and France's CAC
(+1.2%) is out front in Europe. S&P 500 futures are higher by 8.00 points
at 2,139.00.Earnings reports trickle out. General Mills reports ahead of the opening bell, and Bed Bath & Beyond releases its quarterly results after markets close.
US economic data is light. Crude-oil
inventories will be announced at 10:30 a.m. ET.
There's a period
of calm right now between the Bank of Japan announcement and the Federal
Reserve decision this afternoon. If you have a few minutes to spare while you
twiddle your thumbs and wait, you should definitely check out this explainer
of the euro area's TARGET2 payment settlement system written
by my colleague Lorcan Roche Kelly. Back during the really rough days of the
euro crisis there was a lot of debate about growing imbalances in TARGET2,
with some suggesting that they represented an existential threat to the euro
system itself. I'm somewhat ashamed to admit that I just skipped over the
whole debate and focused on other stuff on the assumption that it wasn't that
big of a deal. Thanks to Lorcan's explainer I think I made a good decision to
not get too worried about it. But while it's not a concern per se, it's still
a really interesting aspect of the euro's plumbing and it's worth learning
about. So check out his piece and make yourself
smarter today. |
|
|
Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, FT, CoinDesk, InvestmentNews,
ThinkAdvisor
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