Today - Thursday, March 13, 2014
- ETFs are primarily passively-managed - with only 84 actively managed funds out of a total of 1,570 U.S. listings - but several are holding their own, writes Cinthia Murphy, and a few are beating their indexed counterparts YTD. The five best this year:
- The Pimco Build America Bonds Strategy (BABZ +0.6%) is up 4.4% vs. 5% for the indexed PowerShares Build America Bond ETF (BAB +0.5%). Pimco's offering is pricey - 45 basis points - but it's the wide bid-ask spread averaging 28 basis points investors should most be aware of.
- The First Trust Preferred Securities and Income ETF (FPE +0.1%) is ahead 4.61% YTD, about inline with the PowerShares Financial Preferred ETF (PGF).
- The Columbia Select Large Cap Growth ETF (RWG -1%) is up 6.76% YTD, but has only gathered $16M in assets over four years in existence. The combined 80 bp expense ratio and wide bid-ask spread leads to a rough cost of about 113 bps. Indexed offerings in the same category like IWF and VUG are up less than 3% this year.
- The PowerShares Active U.S. Real Estate ETF (PSR -1.2%) is up 6.77% YTD vs. indexed competitors IYR and VNQ up 7.88% and 9%, respectively.
- Leading the way is the First Trust Global Tactical Commodity Strategy ETF (FTGC) up 15.14% - it's the only actively managed commodity ETF.
- It's first bond auction since September 2010, Ireland sold 10-year notes priced to yield 2.967%, the lowest on record for 10-year paper. Ten-year U.S. Treasury notes at 2.66% yield only 30 basis points less!
- The country's National Treasury Management Agency did raise 10-year money in January, but that was through banks, rather than an auction.
- ETFs: EIRL
- Stocks are only down moderately - the S&P 500 (SPY -0.5%) - but Treasurys are trading as if something bad is on the way, with the 10-year yield diving a full ten basis points over the past couple of hours and now yielding 2.66%.
- A credit bust-up or economic slowdown in China always makes for a good excuse and it's notable that the fall in yield came alongside about a $0.04 decline in copper to a new 4-year low of $2.93 per pound.
- TLT +1%, TBT -1.9%.
- Related ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, SBND, ZROZ, TLH, DLBS, VGLT, UBT, TLO, LBND, TENZ, TYBS, DLBL
- "We can't tell them something we don't know ourselves," Bank of England Governor Mark Carney recently told the WSJ when asked about the timing of rate hikes. "We're not going to raise interest rates until the economy can really sustain it."
- Short Sterling futures have priced in the first nudge higher in rates in spring 2015, just ahead of a U.K. election, and the BOE has done little to dissuade that notion. The U.K. economy has performed much better than Carney expected, the unemployment rate falling to 7.2% by 2013's end, within 20 basis points of where Carney and team didn't expect it to fall to until 2016. "We are now in Monty Python Territory," said one parliament member recently to Carney as the central bank chief tried to explain the BOE's forward guidance and market reaction to it.
- U.K. ETFs: EWU, EWUS, FKU, DXPS, DBUK
- Moody's notes retail sales in February were strongest in less discretionary categories like food while the underlying shift to online shopping by consumers continues.
- The research firm expects that it's unlikely that all the lost sales in February due to weather will be recovered and thinks Q1 results will trail current forecasts.
- Retail sales were only up 1.3% in February from a year ago. That sluggish mark of forward progress has many retail analysts siding with Moody's that there is more than just a bad stretch of weather going on in the U.S.
- Related ETFs: XLY, XRT, VCR, RTH, RETL, FXD, FDIS, PMR, RCD, PEZ, PSCD
10:47 AM| Comment!
- "To us, the year started slow," says Deutsche Bank (DB -0.9%) CFO Stefan Krause. "Obviously through political uncertainty we started to have market uncertainty again and a slowdown in business."
- Krause's warnings of a continued slowdown in investment banking business echo those of Citigroup and JPMorgan over the last couple of weeks.
- Fixed income revenue has been slowing since May, with some banks (notably Goldman) insisting the fall is temporary, but others say boosted capital requirements has squeezed margins and left overcapacity, meaning more job cuts as banks shrink and restructure.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, PFI, KBWB, FNCL, FINU, RWW, RYF, PSCF, FINZ
- A nice bull move in fixed-income wasn't a help for Pimco, which saw $2.5B in outflows in February, making it the only one among the top 10 asset management firms to see an exodus of cash. The Gross/El-Erian soap opera isn't helping, but neither is weak performance. Notably losing money was Pimco's High Yield Fund which saw $510M leave while its competitors racked up gains.
- Bill Gross' Total Return Fund (ETF equivalent: BOND) saw $1.6B in outflows in February to add to $3.5B in January, not to mention last year's big exits.
- Pimco is owned by Allianz (AZSEY +0.5%).
- ECB members keep trying to talk down the currency, but the euro keeps moving ahead, up 0.4% this morning and buying $1.3956 - the most since October 2011.
- Yesterday, George Soros - launching his new book "The Tragedy of the European Union" - compared the stagnation in the EU to that of Japan. He no doubt sees the strength of the euro in the face of economic weakness as similar to that of the yen during Japan's malaise - a failure of policymakers to come to grips and deal with what confronts them.
- Euro ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- The U.S. could suffer a nationwide blackout if just nine of the country's 55,000 electric-transmission substations were knocked out on a particularly hot day, the WSJ reports, citing a study from the Federal Energy Regulatory Commission.
- The U.S. could suffer darkness "for weeks, if not months," the WSJ writes.
- Utilities aren't required to protect vital substations unless they're located at nuclear facilities, although regulators are considering increasing security standards.
- Meanwhile, nearly all utilities that took part in a drill last year to assess their ability to cope with online and physical attacks admitted they weren't prepared enough, a report from the North American Electric Reliability Corp shows. Over 2,000 participants from the U.S., Canada and Mexico were involved in the exercise.
- ETFs: XLU, IDU, VPU, NLR, GRID, NUCL, RYU, PUI, UPW, FXU, SDP, FUTY, AMPS, PSCU, UTLT
- At the moment, stocks look set to open with small gains, as S&P 500 (SPY) and Nasdaq 100 (QQQ) futures are ahead by 0.2%.
- Europe is little-changed and a 1.1% gain in Shanghai led Asia higher overnight.
- The 10-year Treasury yield is up one basis point to 2.74% and gold has its sights set of $1,400, up a couple of dollars per ounce to $1,371.
- 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
4:11 AM| Comment!
- Indian consumer inflation fell for the third consecutive month, dropping to 8.1% on year in February from 8.79% in January and coming in below consensus of 8.3%.
- The decline comes as the Reserve Bank of India considers setting a CPI target after having raised interest rates three times since September.
- Meanwhile, industrial output surprisingly grew for the first time in four months, expanding 0.1% in January vs expectations for a contraction of 0.9%.
- The Sensex is +0.4% and the USD-INR is +0.1% 61.026 rupees.
- ETFs: EPI, INDY, SCIF, PIN, INP, INDL, ICN, INR, INDA, SCIN, INXX, INCO, SMIN
- The number of full-time Australian jobs has risen by the largest amount since 1991, jumping by 80,500 in February vs just 2,700 in January. The increase is also the second-largest ever and indicates that the central bank's policy of record-low interest rates is having an impact.
- The overall number of jobs increased by 47,300 vs 18,000 previously and consensus that was 18,000 also.
- The number of part-time jobs fell by 33,200 vs growth of 3,400 in January.
- As expected, the unemployment rate held stead at 6%.
- The "super strong result" should ease concerns about the labor market, says economist Savanth Sebastian. "Central bank policy makers are comfortable with the way the recovery is panning out. The housing recovery continues to gather momentum, while rising wealth levels are supporting confidence."
- The S&P/ASX 200 rose 0.5%, while the Australian dollar is +0.8% at $0.9063.
- ETFs: FXA, EWA, AUD, AUSE, CROC, AUNZ, KROO, EWAS, GDAY, FAUS
- China's industrial production growth slowed to 8.6% on year in January and February from 9.7% previously and missed consensus of 9.5%.
- Retail sales softened to +11.8% from +13.6% and vs +13.5%.
- Urban fixed-asset investment +17.9% vs +19.6% and +19.4%.
- The disappointing readings add to other data that indicate that China's economic growth is moderating, including plunging exports.
- However, Chinese Premier Li Keqiang became the latest member of the government to indicate that the leadership is prepared to accept slower growth. "The GDP growth target (for 2014) is around 7.5%," Li said. "'Around' means there is some flexibility and we have some tolerance."
- Li also reiterated the government's increased acceptance of bankruptcy, saying that some loan defaults are "hard to avoid." He added that the government needs to "enhance oversight" and ensure that there's no "systemic and regional risks."
- Meanwhile, Chinese cadres will be assessed on a range of metrics, such as the environment and improving people's lives, and not just on economic growth.
- Despite the disappointing data, the Shanghai Composite rose 0.95% amid speculation that listed firms will be permitted to offer preferred shares for the first time.
- ETFs: FXI, PGJ, GXC, FXP, CYB, YINN, KWEB, HAO, CNY, ASHR, CHIQ, DSUM, TAO, CHIX, YANG, CQQQ, MCHI, PEK, QQQC, XPP, YAO, CHXX, CHII, FXCH, CHXF, YXI, ECNS, CHIM, CHIE, KFYP, FCA, TCHI, CHLC, CHNA, KBA
Wednesday, March 12, 2014
- While steep drops in copper, iron ore and coking coal prices have spooked investors, KGHM chief Derek White says there's no need for mining executives to panic - at least not yet.
- There's no real threat to copper mining operations at a long-term copper price ~$3/lb., White says, but that could change if the price drops below $2.50 for a prolonged period.
- Iron ore prices have performed better than expected in recent years, and this week’s drop brings them closer to many forecasts; analysts believe most iron ore projects are fine at a long-term price above $100/metric ton.
- Coking coal's current $110/metric ton is still not low enough to disrupt most operations, with some exceptions; TD Securities expects Teck Resources (TCK) to defer its Quintette project in British Columbia until the market recovers.
- ETFs: XME, COPX, CU, JUNR, PICK, JJC, DBB, CPER, RJZ, BOM, BOS, JJM, BDD, CUPM, RGRI, UBM, BDG, USMI, HEVY
- The kiwi pops higher by 0.6% after the Reserve Bank of New Zealand becomes one of the first developed nations to tighten policy with a 25 basis point increase in its benchmark interest rate to 2.75%. The kiwi is currently buying $0.8518.
- "New Zealand’s economic expansion has considerable momentum, and growth is becoming more broad-based ... Inflationary pressures are increasing and are expected to continue doing so over the next two years."
- The iShares New Zealand Capped ETF (ENZL) is higher by 11% YTD.