Today - Wednesday, June 3, 2015
- A hot hand at least on his Twitter feed, Bill Gross updates on his German Bund short of a lifetime: "It's happening," he says.
- Up another 17 basis points today, the German 10-year Bund yield is at 0.89% vs. 0.07% just six weeks ago (around the time Gross made his call).
- Next up (but not just yet), says Gross, is China's Shenzhen Index which has about tripled over the past year, the result of a combination of a previous bear market, monetary ease, and Beijing's encouraging both domestic and international punters to invest.
- ETFs: FXI, ASHR, CAF, YINN, KWEB, PGJ, GXC, FXP, YANG, CHN, PEK, CQQQ, MCHI, TDF, QQQC, XPP, YAO, GCH, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, BUNL, KBA, JFC, GGOV, BUNT, AFTY, CHAU
- The SPDR Gold Shares ETF (NYSEARCA:GLD) saw $902M in withdrawals last month, bringing AUM to $27.4B. At its peak in 2011, the fund had $77.7B in assets and at one point was the industry's largest ETF (and the yellow metal threatened $2K per ounce). Now - with the price of gold flirting with $1K an ounce - it's no longer in the top 10.
- Source: Barron's
- “A clear separation has emerged between the biggest brokers and the rest of the market,” says Jay Bennett of Greenwich Associates. A survey by his firm finds the top four U.S. equity brokers - Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), and Morgan Stanley (NYSE:MS) - are widening their market share lead over the rest of the industry.
- According to Greenwich, all had more than an 8% share of trading, with number five Credit Suisse (NYSE:CS) at 6.9%.
- Bennett calls it a segmented market composed of the big four, the rest of the bulge bracket, and a long tail of competitors with relatively smaller shares.
- ETFs: IAI, KCE, KBWC
- "The long bond wants the Fed to tighten," Jeff Gundlach tells CNBC, and if the central bank doesn't raise rates, it would be bad for the long end of the curve. On the other hand, equity markets would surely cheer a continuation of ZIRP.
- Gundlach's prediction of no rate hikes this year isn't as off the wall as it first seems. It wasn't long ago, when the consensus thought a June hike or September at latest was inevitable. Now a June hike has been ruled out and markets are only pricing in a small chance of a September move.
- What's more, two FOMC voters this week explicitly said the data thus far do not support tightening monetary policy.
- Previously: Fed's Rosengren: Growth too slow to justify rate hike (June 1)
- Previously: Newish Fed Governor sounds dovish signal (June 2)
- ETFs: IEF, PST, IEI, TYO, DTYS, UST, PLW, STPP, VGIT, GOVT, FLAT, TBX, FTT, SCHR, GSY, TYD, DTYL, ITE, EGF, DFVL, FIVZ, TBZ, TAPR, DFVS, TYNS, SYTL
- EIA Petroleum Inventories:
- Crude -1.9M barrels vs. -1.7M consensus, -2.8M last week.
- Gasoline -0.3M barrels vs. +0.5M consensus, -3.3M last week.
- Distillates +3.8M barrels vs. +1.1M consensus, +1.1M last week.
- Futures -0.3% to $61.05.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, OLEM
- There's a bit of a selling panic going on in fixed income, with the 10-year Treasury yield up another nine basis points on this session to 2.35%, and now up 25 bps this week. The carnage across the pond is worse.
- The IYR is lower by 0.9%.
- Individual equity REITs: Realty Income (O -1.2%), Ventas (VTR -2.5%), Omega Healthcare (OHI -0.9%), HCP (HCP -1.5%), Equity Residential (EQR -2.1%), AvalonBay (AVB -1.8%), Simon Property (SPG -1.3%), General Growth (GGP -1.5%), Kimco (KIM -1.2%), Public Storage (PSA -1%), Boston Properties (BXP -1.1%), Hospitality Properties (HPT -1.2%), Liberty Property (LPT -1%), Campus Crest (CCG -2.2%).
- Mortgage REITs: Annaly (NLY -1.2%), American Capital Agency (AGNC -0.9%), Invesco (IVR -1.1%), Hatteras (HTS -1%), Ellington Residential (EARN -1%).
- ETFs: IYR, VNQ, MORL, REM, MORT, DRN, URE, RQI, SCHH, ICF, SRS, RWR, RNP, JRS, KBWY, RFI, NRO, DRV, RIT, REK, RIF, FRI, FTY, PSR, DRA, FREL, WREI, LMBS, IARAX
- London-based ICAP is raising the idea of circuit breakers for what's become a highly volatile Treasury market (mostly to the downside of late). No small player, ICAP handles about 60% of Treasurys trading between banks and high-speed trading firms.
- Circuit breakers are now the norm in stocks, but would be new to what once was considered the deepest, most liquid market around.
- CME Group recently implemented circuit breakers for Treasury futures, but the bonds themselves are a different animal - they don't trade on exchanges, and not all platforms coordinate on how to handle big price swings.
- Source: WSJ
- Speaking of volatility, bond prices are quickly headed south again today, with a 10 basis point jump in the German 10-year Bund yield to 0.82% leading a eight basis point gain in the U.S. 10-year yield to 2.34% - right around its high for the year. TLT -1.1%, TBT +2.2%
- Apparently they've got whisper numbers at the ECB as Mario Draghi says Europe's economic recovery is on track with the bank's projections, but that the bank was hoping for something stronger than its forecasts.
- As for the recent strong read on core CPI, Draghi says the ECB is more concerned with trends and will look through near-term fluctuations. The bank did hike its 2015 inflation forecast to 0.3% from flat, but 2016 is unchanged at 1.5% and 2017 is unchanged at 1.8%.
- The GDP growth outlook for 2015 and 2016 is unchanged at 1.5% and 1.9%, respectively, while 2017 is trimmed to 2% from 2.1% (there's that economist sense of humor).
- The euro (NYSEARCA:FXE) is active, but currently lower by just 0.2% to $1.1135.
- European stocks (NYSEARCA:FEZ) have added to earlier gains, with Germany (NYSEARCA:EWG) and France (NYSEARCA:EWQ) leading the way, both ahead by 1.35%.
- Previously: ECB leaves policy on hold (June 3)
- ETFs: FXE, VGK, EUO, FEZ, HEDJ, ERO, IEV, EPV, EZU, DRR, FEU, EEA, EUFX, EURL, ULE, FEP, UPV, DBEU, URR, ADRU, HEZU, FEEU, IEUR, FIEU, DBEZ, FEUZ, SBEU
- Used to a long string of disappointing economic numbers, the 10-year Treasury yield knee-jerked up to 2.30% following just an inline 201K jobs gained in May, according to ADP. It's since retreated back to 2.27%, up one basis point on the session.
- Alongside May's print were small downward revisions to April, March, and February, and a small upward revision to January. The average monthly job gain for 2015 is 192.4K vs. a 248K average in the last six months of 2014.
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, TLH, SBND, VGLT, IEI, TYO, UBT, DLBS, DTYS, UST, TLO, VGIT, TBX, SCHR, TENZ, GSY, TYD, LBND, ITE, DTYL, DLBL, TYBS, DFVL, FIVZ, VUSTX, TBZ, DFVS, TYNS, SYTL
- S&P 500 and DJIA futures are ahead by 0.25%, and Nasdaq 100 futures by 0.4%, with an ECB policy decision and press conference, and the ADP jobs number on tap. The nonfarm payroll report is a bit more than 48 hours away.
- Europe's posting moderate gains and Asia was about flat overnight.
- The 10-year Treasury yield is up two basis points to 2.28%, gold is down $4 per ounce to $1,190, and oil is down $1.32 per barrel to $59.95 as OPEC decides to leave production unchanged (as expected).
- ETFs: SPY, QQQ, DIA, SH, SSO, SDS, VOO, IVV, UPRO, PSQ, SPXU, TQQQ, SPXL, RSP, QID, SQQQ, QLD, DOG, DXD, RWL, UDOW, EPS, SDOW, DDM, VFINX, BXUB, QQEW, QQQE, SPLX, SFLA, BXUC, QQXT, SPUU, UDPIX, OTPIX, RYARX
- Greek Prime Minister Alexis Tsipras will come under intense pressure for a debt deal today as Friday's deadline for a €300M repayment to the IMF goes down to the wire.
- Yesterday, the country's international creditors reportedly drafted the broad lines of an agreement that amounts to a take-it-or-leave-it offer, following months of fruitless dialogue with the Athens government.
- Tsipras will travel to Brussels later in the day to meet with European Commission President Jean-Claude Juncker.
- ETFs: GREK
- "There is consensus among Gulf OPEC countries, and others, to keep the ceiling unchanged," a senior Gulf OPEC delegate told Reuters following an informal OPEC meeting on Tuesday. "Nobody wants to rock the boat. The meeting (on Friday) is expected to be smooth sailing."
- The statement marks a change in tone from OPEC's last meeting in November 2014, when Venezuela and others mounted an unsuccessful bid to convince Saudi Arabia and its Gulf allies to tighten the taps on supply.
- Crude futures -1% to $60.67/bbl
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
- Australia's economy expanded 2.3% in the first quarter from the year-ago period, beating forecasts and pushing up the Australian dollar 0.5% to $0.7810.
- The internals of the report were less convincing, however, with the quarterly increase driven by a jump in inventories (+0.3%) and growth in export volumes (+0.5%). Final consumption expenditure, the biggest contributor to Australian economic growth, added just 0.4% to quarterly growth.
- "The outlook for business investment, both mining and non-mining remains weak," said ANZ economist Felicity Emmett.
- S&P ASX 200 -0.9%.
- ETFs: EWA, IAF, AUSE, KROO, EWAS, FAUS, QAUS
Tuesday, June 2, 2015
- Claims that Iran could increase overseas crude sales by 1M bbl/day soon after sanctions are lifted are "an illusion,” but the country could boost its oil exports by 400K bbl/day in the first months, according to Iranian economist and managing partner of management consultant Atieh International, Bijan Khajehpour.
- Returning to higher, pre-sanctions crude production levels will take ~18 months, Khajehpour says, because of the time lag for sanctions relief to be implemented and for Iran to restore its production capacity, but that means Iran could be exporting 2.5M bbl/day by early 2017.
- Iran has ~20M barrels of crude stored on tankers that it has been unable to sell due to sanctions that went into effect in mid-2012, which would allow it to rapidly add to its exports.
- Meanwhile, Iran is said to be prepared to offer much better commercial terms to foreign companies prepared to invest to help revitalize its ailing oil industry than offered during the last market opening nearly two decades ago.
- Iran is likely to test the appetite of foreign oil groups this week during a conference before the OPEC meeting in Vienna attended by the heads of oil majors Exxon (NYSE:XOM), Shell (RDS.A, RDS.B), Chevron (NYSE:CVX), BP and Total (NYSE:TOT).
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
3:45 PM| Comment!
- The averages are flat to negative this session, but yield-starved financials are digging the big jump in interest rates - the 10-year Treasury yield is up nine basis points on the session to 2.27%, and 15 bps for the week.
- Previously: Yields surge as European deflation fears abate (June 2)
- The Regional Bank ETF (KRE +1.3%) and the Bank ETF (KBE +1.2%).
- Individual names: Regions Financial (RF +1.6%), New York Community Bank (NYCB +1.3%), Huntington Bancshares (HBAN +1.3%), KeyCorp (KEY +1%), Fifth Third (FITB +1.3%). Thought of as perhaps the most asset-sensitive of the large lenders, Bank of America (BAC +1%) is leading the TBTFs higher.
- Life insurers: MetLife (MET +1.2%), Prudential (PRU +1.5%), Lincoln Financial (LNC +0.9%), Primerica (PRI +1.2%).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, BTO, KIE, IAT, SEF, IYG, IAK, FXO, FNCL, KBWB, QABA, FINU, KBWR, KRU, RWW, RYF, KBWP, KBWI, FINZ, KRS
- A rise in core European inflation to 0.9% in May from 0.7% a month earlier has set off a 2.5% rally in the euro (NYSEARCA:FXE) and soaring bond yields across the Continent.
- The German 10-year Bund yield is up 18 basis points to 0.72%, the Italian 10-year is up 17 bps to 2.12%, and the Spanish 10-year is up 14 bps to 2.05%. In the U.K., 10-year Gilts are higher by 13 bps to 2.00%.
- The action has set off a big move in the 10-year U.S. Treasury yield, up eight bps on the session to 2.26%. TLT -1.45%, TBT +2.9%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, EU, TTT, ZROZ, TLH, SBND, VGLT, UBT, DLBS, TLO, BUNL, TENZ, LBND, BUNT, GGOV, DLBL, TYBS, VUSTX
- Designed to track the Middle East's largest equity market, the MSCI Saudi Arabia Indexes will serve as benchmarks for coming ETFs. The MSCI Saudi Arabia Index will have 19 constituents, while the MSCI Saudi Arabia Small-Cap Index will have 39.
- Saudi Arabia will soon open its equity market to foreign investors, which is likely to lead to a number of Saudi Arabia-specific ETFs. Van Eck filed for such three years ago, and BlackRock and Global X have more recently done the same.
- Middle East ETFs: GULF, MES
9:13 AM| Comment!
- The Vanguard Emerging Markets Stock Index Fund (MUTF:VEIEX) and its ETF brother (NYSEARCA:VWO) will now include China A-Shares, making them the first broad-based emerging markets, market-cap-weighted index fund and ETF to include such exposure.
- The Vanguard Developed Markets Index Fund (MUTF:VDIPX) will add Canadian exposure, making it the largest developed markets index fund to offer all-cap exposure to all developed markets outside the U.S.
- The VEIEX, VDIPX, along with the Vanguard European Stock Index Fund (MUTF:VESIX) and Vanguard Pacific Stock Index Fund (MUTF:VPACX) will more from FTSE benchmarks containing large- and mid-cap stocks to broader FTSE benchmarks including small-caps as well.
- Source: Press Release
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