Today - Monday, March 10, 2014
4:40 AM| Comment!
- Japan has revised down its Q4 GDP growth calculation to 0.2% from an initial 0.3%, with the economy held back by weaker-than-estimated capex and consumer spending.
- Annualized GDP was +0.7% vs +1%. (PR)
- The current-account deficit increased to a record ¥1.59T ($15.4B) in January from ¥638.6B in December. (PR)
- "Capital spending remains weak and exports are not coming back to strengthen the recovery, and without support in these areas, Japan's economy is going to contract significantly in the second quarter," says economist Yoshimasa Maruyama. "The negative effect from the (upcoming) sales tax rise could be worse than the BOJ and government expect."
- The Nikkei is -0.9%, while the USJ-JPY is -0.1% to ¥103.12.
- ETFs: DXJ, EWJ, FXY, YCS, JGBS, JGBD, DFJ, JYN, NKY, DBJP, EZJ, EWV, YCL, SCJ, DXJS, JPNL, ITF, JSC, JGBL, JPP, JGBT, JPNS, HEWJ, JGBB, FJP
Sunday, March 9, 2014
- Chinese exports dropped 18.1% on year in February vs growth of 10.6% in January and consensus of +6.8%.
- However, the trend may have been distorted by the Lunar New Year holiday and fake invoicing that boosted the data a year earlier, while the severe winter weather in the U.S. may also have had an effect.
- Imports +10.1% vs +10% and +8%.
- China swung to a trade deficit of $22.98B last month from a surplus of $31.86B in January and vs forecasts of $14.50B.
- "We will probably have to wait for next month's data to get a true picture of the export situation, but we shouldn't worry too much," says UBS economist Wang Tao.
- As expected, inflation eased to a 13-month low of 2% on year in February from 2.5% in January. The figure is below the government's 2014 target of 3.5%.
- On month, CPI +0.5% vs +1% previously and consensus of +0.8%.
- PPI declined for the 24th consecutive month, sinking 2% vs -1.6% and -1.9%. "The risk of deflation is rising in the near term," say ANZ economists Liu Li-Gang and Zhou Hao.
- The factors that could be dragging on producer prices include weak consumer demand and the excess capacity of some raw material-industries such cement as glass and steel.
- ETFs: FXI, PGJ, GXC, FXP, YINN, CYB, HAO, KWEB, CNY, ASHR, CHIQ, DSUM, TAO, CHIX, YANG, CQQQ, MCHI, PEK, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, YXI, ECNS, CHIM, CHIE, KFYP, FCA, TCHI, CHLC, CHNA, KBA
Saturday, March 8, 2014
- EFC's estimated book value of $23.65 per share as of February 28 slips from $24.45 at the end of January, but a dividend of $0.77 was paid. Book value was essentially stable after adding back the payout.
- Press release
- Friday's close of $24.14 puts the stock at 1.02x book. Mortgage REITs (EFC is actually a partnership) near or above book were a rare sight at the start of the year, but the species is making a comeback.
- Yesterday: 3 mREITs lose Buy ratings for valuation reasons; trading above book value, Javelin Mortgage is punished after earnings
- Related ETFs: REM, MORT, MORL
Friday, March 7, 2014
- Sportsman's Wearhouse, owner of 47 outdoor sporting goods stores across 18 states, has filed for a $201.3M IPO under the symbol SPWH. The underwriters: Credit Suisse, Goldman, Baird, William Blair, Piper, Wells Fargo, and D.A. Davidson.
- Sportsman's is being taken public by P-E firm Seidler Equity Partners (82.8% stake). During the 39 weeks ending Nov. 2, the company had revenue of $467.4M (+38% Y/Y), and net income of $14.4M.
- Sportsman's store count grew by 14 over this period, and same-store sales rose 7.2%.
- Mortgage REIT fans will be interested in this transcript of a roundtable yesterday led by JPMorgan analyst Matt Jozoff, and including executives from Apollo Residential (AMTG -1.9%), Annaly (NLY -2.4%), MFA Financial, Invesco (IVR -2.5%), and Two Harbors (TWO -1.6%). At a minimum, it makes clear - for those who would lump the sector together - the significant differences in investment approaches and assets held.
- As tipped off during his company's earnings call a few days back, David Finkelstein - head of agency MBS trading at Annaly - sounds the most bullish: "Technicals over the near-term are relatively supportive of MBS, and we also believe that even beyond the Fed’s departure from being a - or from adding to their portfolio, we think that the landscape will still be favorable to MBS due to relatively low volatility the fact that we will not have a significant portion of the MBS market actively hedging their portfolio, which should reduce volatility day to day."
- MFA CEO William Gorin doesn't want any part of long-dated agency MBS: "We came into the year owning zero 30-year agency paper ... which we are happy with. When you are competing with a non economic, non profit maximizing competitor in the space [the Fed] ... we’ve decided not to be in that space."
- Related ETFs: REM, MORT, MORL
- Vanguard filed paperwork this morning with the SEC requesting permission to add active ETFs to its lineup.
- The first active ETFs could be based on the following popular mutual funds: Vanguard Wellington (VWELX), Vanguard Explorer (VEXPX) and Vanguard Wellesley Income Fund (VWINX); the filing also included a number of muni-bond funds.
- Active ETFs seem to an emerging trend, as a number of firms have recently filed for SEC permission to offer these funds to investors.
- Vanguard's most popular ETFs: VTI, VWQ, VNQ, VEW, VIG, BND
- Copper futures slumped to their biggest loss in more than two years as investors worried about slowing growth in China, which accounts for 40% of the world's copper demand.
- Traders were spooked by China's first default on a bond traded in the mainland, which comes amid broader fears about the impact of China's economic slowdown on demand for industrial metals.
- Copper prices have lost 9.2% YTD as signs of faltering growth in China have raised the outlook for a surplus.
- Top publicly traded producer Freeport McMoRan (FCX) -4.8%.
- ETFs: JJC, CPER, CUPM
- Alpha Natural Resources (ANR -9.4%) is hit hard after Goldman Sachs last night cut its rating on the shares to Sell and lowered its price estimates for coal; other sector names are following suit.
- Goldman also cut its price estimate for met coal this year to $141/metric ton from $150 and lowered projections for next year and 2016 following increased Australian output, an expected slowdown in the growth of Chinese imports, and “limited U.S. supply rationalization."
- The firm maintains a Neutral rating on Walter Energy (WLT -5.6%) but cuts its price target to $10 from $12.
- Also: BTU -4.2%, ACI -4%, CNX -1.5%, OXF -1.6%, JRCC -1.5%, CLD -0.7%, KOL -2.1%.
- A disruption of natural gas supplies to Europe by an escalation of Russia’s military action in Ukraine may boost LNG demand and prices in Asia and South America, analysts say.
- Russia, which provides Europe with a quarter of its natural gas mainly though Ukraine, has cut supplies twice since 2006; while the current crisis hasn’t interrupted exports, LNG prices will “move through the roof” if flows transiting Ukraine are stopped, Societe Generale says.
- Any potential supply curbs could cause traders to stop selling LNG cargoes out of storage and instead hold them for domestic use, triggering competition for the fuel in South America and Asia.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, KOLD, UNL, NAGS, DCNG
- A check of asset markets following what's currently being interpreted as a strong nonfarm payroll report (175K jobs added vs. 154K expected; UE rate up to 6.7%): Flat ahead of the number, stock index futures are up by 0.5%; gold is down 1.1%, silver down 3.2%, copper off 2.9%; the dollar is up a bit, but mostly against the loonie after a weak jobs number in Canada.
- DIA +0.5%, GLD -1%, SLV -2.9%, JJC -3%, UUP +0.15%
- Previously: Treasury yields fly higher after payroll report.
- Related ETFs: GLD, SLV, DIA, AGQ, IAU, PHYS, UUP, SIVR, USLV, ZSL, SGOL, UDN, UGL, DGP, DOG, GLL, DXD, JJC, DZZ, UDOW, UGLD, SDOW, DSLV, DDM, DGL, DBS, GLDI, DGZ, DBV, AGOL, DGLD, SLVO, FORX, TBAR, UDNT, UUPT, USV, UBG, CPER, GLDE, GYEN, CUPM, GEUR, USDU, GGBP
- The BLS notes severe winter weather occurring in much of the country during the February survey period. Bad weather - says the agency - is more likely to show up in average weekly hours than in the headline payroll number, and this month's report has the average workweek declining by 0.1 hours to 34.2 hours.
- Previous: Jobs +175K vs. +154K expected
- Maybe most surprising in today's report is the 0.4% increase in average hourly earnings, the biggest gain in nearly a year.
- The labor force participation rate is flat at 63% - it was 63.5% a year ago. The employment-to-population ratio is flat at 58.8% - it was 58.6% a year ago.
- Expiring unemployment benefits didn't put a dent in long-term unemployed which rose 203K.
- The broader U-6 unemployment rate slips to 12.6% from 12.7% - it was 14.9% a year ago.
- Bond traders are seeing a strong report, with the 10-year Treasury yield shooting up to 2.81% from 2.72% before the release. TLT -0.8%, TBT +1.7%.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, TLH, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, UBT, VGIT, VGSH, TBX, TLO, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYD, TYBS, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
- It's a streak not seen since at least 1998, according to Bespoke Investment (as far back as its research goes). Going back to 2012, stocks have rallied on 14 of the last 15 jobs report days.
- Trying to explain the unexplainable, Wells Fargo CIO Dean Junkans speculates it's a bad news is good news, good news is good news kind of thing. Weak prints mean the Fed is going to stay looser for longer and strong reports suggest the underlying economy is doing decently.
- Citi's Stephen Englander suggests a reason for the streak to end today: Investors have largely ignored a string of Fed officials touting the growing strength of the recovery and setting the stage for serious rate hike talk. A strong print this morning might force a quick recalibration of attitudes.
- S&P 500 ETFs: SPY, IVE, SH, SSO, SDS, IVV, VOO, SPXU, UPRO, RSP, RWL, EPS, IVW, SPYG, RPG, RPV, SPYV, BXUB, VOOG, VOOV, TRND, SFLA, BXUC, BXDB, FTA
- Biomet has filed to raise up to $100M in an IPO seven years after being taken private for $11.4B. The final size of the offering will probably be higher, with Reuters previously reporting that the firm could look to raise over $1B.
- The medical-device maker didn't say how many shares it would sell, nor the exchange it would list on, although it did say it would trade under the ticker symbol BMET.
- The company's products include dental implants and artificial hip joints, and it competes with Smith & Nephew and Stryker.
- Biomet's main owners are Blackstone (BX), KKR (KKR), Goldman Sach's (GS) P-E arm, and TPG Capital.
- ETF: IPO
- Keep an eye on the hot mortgage REIT sector today as Deutsche cashes in its chips on three bullish calls.
- New York Mortgage Trust's (NYMT) cut to Hold is a valuation call, with analyst Stephen Laws acknowledging solid Q4 results and good prospects going forward, but noting the stock price is already near his raised price target of $7.75 (from $7). NYMT is the rare mREIT at the moment trading above book value.
- Neither CYS Investments (CYS), nor American Capital Mortgage (MTGE) are at book, but both have moved a lot closer to it this year, and Laws cuts both to Hold, believing dividends, not capital appreciation will drive any returns from current levels. "Given investor concerns of higher interest rates, we believe it is unlikely that shares of agency MBS managers will trade at or above book value in 2014."
- Deutsche, he says, currently forecasts the 10-year Treasury yield to hit 4% before year-end, likely keeping a lid on price-to-book ratios for the agency players.
- Related ETFs: MORT, MORL, REM
- Stock index futures are marginally higher ahead of this morning's non-farm payroll report. Consensus estimates are for a gain of 154K jobs and no change to the unemployment rate at 6.6%.
- Europe is off moderately and Asia was mixed overnight - though the Nikkei continued a big rally, up 0.9% and bringing its gain over the last 5 sessions to about 5%.
- The 10-year Treasury yield is down one basis point to 2.73% and gold is off $3 to $1,349 per ounce.
- Index ETFs: SPY, QQQ, IVE, SH, DIA, SSO, SDS, PSQ, IVV, VOO, SPXU, UPRO, TQQQ, QID, RSP, DOG, SQQQ, QLD, DXD, RWL, EPS, UDOW, SDOW, IVW, SPYG, DDM, RPG, RPV, SPYV, BXUB, VOOG, QQEW, QQQE, VOOV, TRND, SFLA, BXUC, QQXT, BXDB, FTA, TNDQ
- Bill Gross has accused departing Pimco (BOND) CEO Mohamed El-Erian of "trying to undermine" him, telling Reuters that he has evidence that El-Erian "wrote" a recent WSJ article that described the breakdown in the men's relationship and didn't portray Gross in a particularly flattering light.
- When asked what the evidence was, Gross replied: "You're on his side. Great, he's got you, too, wrapped around his charming right finger."
- Gross also indicated that he has monitored El-Erian's phone calls.
- A Pimco spokesman later denied that Gross made the comments that Reuters attributes to him, while the WSJ hotly refuted that El-Erian "wrote" the article.
- Pimco's parent company is Allianz (AZSEY).
- Pimco funds: AUD, BABZ, BUND, CAD, CORP, DI, FIVZ, FORX, GOVY