Today - Wednesday, August 20, 2014
- The 10-year Treasury yield adds another basis point following the FOMC minutes, now ahead 2.5% bps on the session to 2.43%. Looking at a rate more sensitive to Fed policy, the 5-year note yield jumps 4.5 bps to 1.625%.
- The minutes show many committee members believing the labor market is improving faster than anticipated across a whole range of indicators, and the time is getting near for when it can no longer be described as underutilized.
- TLT -0.4%, TBT +0.8%
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, DLBS, TYO, VGLT, BIL, UST, STPP, UBT, PLW, SHV, VGIT, TLO, GOVT, FLAT, VGSH, TBX, SCHO, GSY, TENZ, SCHR, DTYL, LBND, ITE, TYD, DTUS, TYBS, SST, TUZ, DTUL, DLBL, TBZ, FIVZ, DFVL, DFVS, TYNS, TAPR
- Nigeria's health ministry says that doctors in Lagos are assessing five new suspected cases of Ebola. The patients were admitted to a hospital yesterday and are being kept in an isolation ward.
- Yesterday, Health Minister Onyebuchi Chukwu said that Nigeria had only two known cases of Ebola and the county would be free of the disease within a week.
- The outbreak has sickened 2,240 people to date with 1,229 fatalities.
- ETFs: IBB, BIB, IRY, IXJ, BIS
- The ProShares MSCI EAFE Dividend Growers ETF (Pending:EFAD) will select companies from the MSCI EAFE Index that have increased their dividend payments steadily for at least a decade.
- The EAFE has seen some volatility in the last three months, but dividend holding may add some stability for EFAD.
- Other global dividend ETFs: IDV, SDIV, DWX, PID, DTN, LVL, FGD, DOO, DOL, IDOG, DEW, DNL, WDIV, FIEG
- Germany today raised just over €4B of two-year money, with the notes priced to yield 0.00%. Demand was strong, totaling nearly €8.3B.
- The sale comes amid geopolitical risk and the slowdown in the European economy, bringing forth the possibility of further stimulus from the ECB.
- This isn't the first time two-year borrowing costs have fallen so far. Amid the debt crisis two years ago, investors paid Germany to lend it money, accepting a negative 0.06% yield at an auction.
- The euro is down 0.25% to $1.3288, it lowest level in about a year.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- Futures are little-changed with FOMC minutes on tap for 2 ET, and as markets look further ahead to Janet Yellen's keynote speech at Jackson Hole in two days time.
- Europe's mixed and Asia was little-changed overnight.
- The 10-year Treasury yield is up one basis point at 2.41% and gold is down $2 per ounce to $1,295.
- ETFs: SPY, QQQ, SH, DIA, SSO, SDS, VOO, PSQ, IVV, SPXU, UPRO, TQQQ, SPXL, QID, RSP, SQQQ, DOG, QLD, DXD, RWL, EPS, UDOW, SDOW, DDM, BXUB, QQEW, QQQE, SPLX, SFLA, QQXT, BXUC, SPUU
- The latest cease-fire in the Gaza Strip has collapsed, after Palestinian rocket fire resumed nearly eight hours before the cease-fire was due to expire.
- Israel responded with airstrikes, and ordered its delegates back from Cairo saying it will not negotiate under fire.
- Egyptian mediators have been struggling to end the 5-week-old conflict with several temporary cease-fires, but no permanent truce has yet emerged.
- ETFs: EIS, ISRA
- Vladimir Putin is set to meet face-to-face with his Ukrainian counterpart, Petro Poroshenko, in Belarus on Aug. 26 to discuss stabilizing the situation in Ukraine and the latter's energy concerns.
- Ukraine's energy sector is crumbling with estimates that coal supplies to electricity producers can run out within the next 40 days, due to damaged rail lines by Russian separatists.
- ETFs: RSX, RUSL, RSXJ, ERUS, RUSS, RBL, RUDR
- Argentina is looking to push bondholders to swap defaulted debt for new notes, in order to dodge a U.S. ruling that prevents the government from paying creditors.
- Argentina's last interest payment of $539M was blocked by a NY court, resulting in the country's sovereign default on July 30.
- President Christina Fernandez has continued to argue that Argentina is not in default, and has called for a new bond swap as a result of the ruling.
- ETFs: ARGT
- The International Swaps and Derivatives Association has delayed Argentina's CDS auction until September.
- An issue arose yesterday regarding the addition of two Japanese-law restructured notes to be included at the auction, and needs to be resolved before the sale can take place.
- The auction, run by Creditex and Markit, will establish the payout that holders of protection on Argentine bonds will receive as a result of the country's recent default.
- ETFs: ARGT
- Previously: Argentina CDS auction set for Aug. 21
- Overstock (NASDAQ:OSTK) is preparing to accept Bitcoins (COIN, OTCQB:BTCS) for its international sales as of Sept. 1, transforming the company into the biggest online merchant to extend the payment option beyond the U.S.
- Since January, several established retailers, including Expedia and Dell, have started accepting Bitcoin for domestic sales, although the new move by Overstock suggests a more widespread adoption of the virtual currency to the international space.
- CEO Patrick Byrne says he expects the company to record $6M-$8M in domestic Bitcoin sales this year and was optimistic that it could pull in an additional $2M internationally.
Tuesday, August 19, 2014
- Among Warren Buffett's (BRK.A, BRK.B) Q2 moves was a pullback in oil company investments, selling off the vast majority of his stake in ConocoPhillips (NYSE:COP) and dumping some of his holdings in Phillips 66 (NYSE:PSX) and National Oilwell Varco (NYSE:NOV).
- The move looks prescient, as U.S. crude prices have dropped from ~$107/bll in mid-June to less than $95 today, and energy stocks went from being among the best performers on Wall Street to the middle of the pack.
- West Texas crude for September delivery fell $1.93 to $94.48/bbl, the lowest settlement for a front-month contract since Jan. 17, and Brent crude traded near 14-month lows.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DWTI, DNO, SZO, OLO, OLEM
- India's Sensex carved out another all-time high overnight - not surprising given the optimism for reform surrounding newly-elected PM Narendra Modi - but HSBC remains cautious. The issue, says the team, are high valuations and mutual funds very overweight India, combined with the chance of higher interest rates.
- "[We] continue to believe that there is a risk of Indian rates rising, or staying higher for longer than what the market is willing to accept ... At 16.1x forward PE, the Indian market is now trading above its long-term average valuation of 15x. This makes it the second most expensive market (after the Philippines) among the Asia ex-Japan countries.”
- ETFs: EPI, SCIF, INDY, PIN, INDL, INP, INXX, INDA, SCIN, SMIN, INCO
- "Based on our checks, we estimate the probability of [trade settlement] success is now ~30-40% vs. prior expectations of 5-10%," writes Roth. "The narrative for Chinese solar stocks, in our view, has shifted to a more positive tone."
- Roth's remarks follow a letter from a law firm representing the Chinese government to the U.S. Commerce Department proposing talks for a solar tariff suspension agreement. Last week, Beijing retaliated against U.S. solar module tariffs by closing a loophole for U.S. and Korean polysilicon imports.
- Though admitting many Chinese suspension offers have been rejected over the years, Roth thinks "the Chinese government would not have made an offer without believing it would have a decent probability of success as it does not want to be rejected by the US government publicly."
- Notable gainers: YGE +3.9%. TSL +3.9%. JASO +3.3%. SOL +3.9% CSUN +6%. HSOL +4.3%.
- Solar ETFs: TAN, KWT
- Earnings beats and solid guidance from a trio of heavyweight retailers this morning showed that a collapse in store traffic and margins isn't pervasive across the sector.
- Retail analysts think the common theme between Dick's, Home Depot, and TJX Companies is the solid execution by management and a focused selling message.
- ETFs: XLY, XRT, VCR, RTH, RETL, FXD, FDIS, PMR, RCD
- Reversing a big YTD trend, U.S. investors pulled nearly $4B out of Europe-focused ETFs over the past week. Among the reasons, suggests Markit's Simon Colvin: Europe is seen as more exposed to Russian sanctions, anemic European growth, and a strengthening U.S. dollar. "The only certainty is that a growing portion of American investors think that their assets are better invested outside of Europe, something which wasn't the case six weeks ago."
- Interestingly, it's the "core" Eurozone countries like Germany (NYSEARCA:EWG) and France (NYSEARCA:EWQ) with which U.S. investors are least interested, while Italy (NYSEARCA:EWI) and Spain (NYSEARCA:EWP) have seen net inflows over the past three months.
- Europe equity ETFs: VGK, FEZ, IEV, HEDJ, EPV, EZU, FEU, FEP, UPV, ADRU, FEEU, EURL, EURZ, DBEU, IEUR, FIEU
- The blowout July housing starts print has Treasury prices giving up just a hair of their premarket gains, with TLT +0.4% and the 10-year yield still lower by two basis points at 2.37%.
- Perhaps helping is July's core CPI number coming in with a rise of just 0.1% vs. 0.2% expected.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, DLBS, VGLT, UBT, TLO, TENZ, LBND, TYBS, DLBL
- Housing starts in July of 1.093M were 15.7% above the revised June estimate of 945K and 21.7 above the year-ago level. Single-family starts of 656K were 8.3% above June's revised level of 606K.
- Building permits of 1.052M were up 8.1% M/M and 7.7% Y/Y. Single-family permits of 640K gained 0.9% from June.
- Full report
- The homebuilder ETFs are on the move, with ITB +1.3% and XHB +1.6% premarket.