Today - Monday, April 20, 2015
- "The markets still appear to be anticipating some sort of last-minute deal or accounting tricks to rescue Greece,” says Capital Economics' Julian Jessop. However, he says, it would be a mistake to believe the country is a "special case" and that others might not follow Greece out of EMU.
- Even if Greece doesn't leave the euro, a "further escalation of the crisis" will support the yellow metal.
- Gold is lower by 0.85% today to $1,193 per ounce.
- ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, AGOL, TBAR, GEUR, UBG, GYEN, BAR
- Commercial real estate may be getting perky and the industrial names are outliers to the upside in the REIT sector today after Prologis' $5.9B purchase of KTR Capital Partners, announced over the weekend.
- First Industrial Realty (FR +1.5%), DCT Industrial Trust (DCT +1.6%), Eastgroup Properties (EGP +1.2%), Chambers Street (CSG +1.4%).
- ETFs: IYR, VNQ, DRN, URE, SCHH, ICF, SRS, RWR, KBWY, DRV, REK, FRI, FTY, PSR, FREL, WREI
- Previously: Prologis inks $5.9B portfolio purchase deal (April 19)
- Nobody really talks about it much, says Jeff Gundlach, but the junk-bond market's entire life has been spent in a time of secularly declining interest rates. Exactly how with these assets react once that move ends?
- There's no need to sell today, says Gundlach, as the crisis he envisions is at least a couple of years away, when increasing interest rates collide with a wave of maturing paper needing to be refinanced. For now, stick with the "carry trade" of owning high-yield bonds.
- ETFs: HYG, JNK, HYLD, HYS, SJNK, SJB, BSJF, ANGL, BSJG, HYHG, BSJI, HYLS, UJB, WYDE, XOVR, BSJH, HYZD, THHY, QLTC, SHYG, BSJJ, HYND, HYGH, BSJK, TYTE, BSJM, BSJL
- Responding to weak Q1 economic data, the PBOC cut the required reserve ratio by 100 basis points to 18.5% over the weekend. It's the second RRR cut since November, notes BBVA, which expects a "tremendous" liquidity injection of ¥1.35T into the financial sector.
- The team also takes note of the 100 basis point cut vs. the PBOC's typically moving in 50 basis point increments. Expect more easing, says BBVA - mainly in interest rates which could see 75 basis points in cuts in coming months.
- Shanghai fell 1.6% overnight, with the Hang Seng lower by 2%.
- ETFs: FXI, ASHR, EWH, CAF, YINN, PGJ, GXC, FXP, YANG, CHIX, PEK, MCHI, XPP, YAO, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, EWHS, KBA, FCHI, FHK, AFTY
- Oil prices eased from early highs this morning after Saudi Oil Minister Ali al-Naimi said production in the world's biggest crude exporter would stay near record peaks of around 10M bpd in April.
- "I have said many times we will always be happy to supply to our customers with what they want. Now they want 10 million," Naimi told Reuters.
- Brent crude fell to $63.79 a barrel, down from an intraday peak of $64.34, while U.S. crude dropped to $56.09/bbl, from an earlier high of $56.65.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
Sunday, April 19, 2015
- ECB president Mario Draghi said Saturday that Europe is rooting for Greece to resolve its problems, but the Hellenic Republic is the only party that can save itself.
- Draghi also referred to a comment he made in August 2012 - when pressed by reporters about a Grexit - affirming that the euro "cannot be reversed."
- Ongoing talks between Athens and its creditors have been going painfully slow, with the latter insisting on a set of detailed structural reforms to approve €7.2B in aid for the cash-strapped country.
- As a result, Eurogroup ministers set an April 20 deadline last week for Greece's next reform proposal.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- Following the country's soft GDP data last week, China's central bank cut the reserve requirement ratio for all banks by 100 bps to 18.5% on Sunday, adding more liquidity to the world's second-largest economy to combat slowing growth.
- Even with the additional stimulus, China's GDP is expected to tumble to a quarter-century low of around 7% this year from 7.4% in 2014.
- Previously: More monetary ease in China (Feb. 04 2015)
- ETFs: FXI, ASHR, EWH, CAF, YINN, KWEB, PGJ, GXC, FXP, HAO, YANG, TAO, CHIX, PEK, CHIQ, CQQQ, MCHI, QQQC, XPP, YAO, ASHS, YXI, CN, CHXF, FCA, CHNA, CNXT, CHII, ECNS, CHIE, EWHS, CHIM, KBA, KFYP, FCHI, FHK, AFTY
- Saudi Arabia's bourse is on the rise after the Kingdom announced it would open its $530B stock market to direct foreign investment from June 15. Final rules will be published on May 4.
- Up to now, foreigners have been restricted to buying Saudi shares indirectly through swaps or ETFs.
- Tadawul All Share Index +3.4%.
- Previously: Saudi Arabia sets date to open stock market to foreigners (Apr. 17 2015)
- ETFs: GULF, MES
Saturday, April 18, 2015
- An eventual recovery in U.S. oil drilling activity "will fall well short of reaching previous levels," because of a growing reserve of wells that have been drilled but not yet hydraulically fractured and increased activity in re-fracking wells that are running dry, Schlumberger (NYSE:SLB) CEO Paal Kibsgaard said in Friday's earnings conference call.
- At least 2,700 wells have been identified as candidates for re-fracture in North America, representing a total market value of ~$5B, says EvercoreISI's James West, adding that the Eagle Ford likely contains 1,000 of the wells while the Bakken has ~500.
- The assessment suggests the disconnect between oil rigs and the trajectory of U.S. production may get worse before it gets better; while output had been rising in tandem with the number of rigs, production has continued climbing even as the rig count has collapsed to less than half its October 2014 peak.
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, XES, IYE, IEO, IEZ, FENY, PXE, PXJ, RYE, FXN, DDG
Friday, April 17, 2015
- "[Interest spreads] are unimaginably low for those of us who have followed this area for a long time,” says Nancy Bush of NAB Research.
- While low rates have provided occasional income boosts at lenders thanks to bursts of refinancing and the related fees, that well may have run dry. Now banks must rely on the gap between what they pay for deposits and what they charge for loans, and at Wells Fargo the spread dropped below 3% for the first time in decades, and at JPMorgan, it's just 2.07% after falling another seven basis points in Q1.
- On the expense side, the low-hanging fruit of big cuts following the financial collapse is gone, with at least some of it replaced by legal costs which won't quit and regulatory costs which look here to stay.
- Mergers? One look at the 3-years-and-running battle to close Hudson CIty and M&T Bank is enough to make any management shy about pursuing large acquisitions.
- Source: Ben McLannahan and Tom Braithwaite in the FT.
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, FINU, QABA, KRU, KBWR, RWW, RYF, FINZ, KRS
- There's not much working as today's selloff is an especially broad one, with even stalwart safety sectors like utilities (XLU -0.5%) and REITs (IYR -0.7%), (REM -0.2%) in the red - though outperforming the S&P 500's 1.5% decline.
- Treasurys had spent most of the session lower as well following a stronger-than-expected inflation report, but yields have turned lower (prices higher) as the equity selloff intensified post-lunch. The 10-year Treasury yield is now off by four basis points to 1.85%. TLT +1.2%, TBT -2.4%
- The U.S. oil rig count resumes its slide, as producers idled another 26 rigs this week to 734, according to the latest survey from Baker Hughes (NYSE:BHI).
- The oil rig count is now down 55% from its peak of 1,609 in late October 2014.
- Natural gas rigs fell by eight to 217, sending the U.S. combined count of oil and gas rigs down by 34 to stand at 954.
- Texas lost 15 units to 412, down 494 since the Nov. 21 peak, Oklahoma lost six units to 118, and North Dakota shed five to 83.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
10:33 AM| 2 Comments
- The CPI rose 1.2% Y/Y in March, up from 1% in February, and against 1% expected by forecasters. Core CPI jumped to 2.4% in March vs. 2.1% previously.
- Retail sales rose 1.7% in February, after declining the previous two months.
- The loonie (NYSEARCA:FXC) popped higher to its strongest level since mid-January, but has given back some of those gains. It's currently up 0.35% to $0.8237.
- ETFs: EWC, CNDA, EWCS, QCAN, FCAN
- "For Fed officials, the turn of events is somewhat of a recurring nightmare," writes Jon Hilsenrath. "Economic growth has continually fallen short of their expectations in an expansion nearly six years old."
- Putting that in a picture is BAML's U.S. activity surprise index - strongly in positive territory early in 2014, but then steadily dropping throughout the year, and turning sharply negative by Q2 of 2015. BAML says the ratio of disappointing economic reports to positive ones has been greater recently than at any time since the expansion began in June 2009.
- “We just don’t seem to be getting escape velocity,” says Reserve Bank of India Governor Raghuram Rajan, speaking on the sidelines of an IMF conference in D.C. “That virtuous cycle is just not happening. Every time it seems like it is happening, you have one more quarter of terrible growth.” Veterans of the Japanese experience will be familiar with the term "escape velocity." BOJ officials were talking about it in 1995 ... 20 years later, they're still waiting for it.
- 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, DTYL, ITE, DLBL, TYBS, DFVL, FIVZ, TBZ, DFVS, TYNS, SYTL
- The BOJ held policy steady this month, apparently taking comfort in core inflation staying positive, but Credit Suisse says the rate will turn negative by November, prompting a fresh bout of QE.
- The weaker yen has helped boost inflation of late, says the team, but that effect is wearing off and further weakening is unlikely, especially now that Fed rate hike plans have been pushed off by at least a few months.
- "As such, we see a high likelihood of the BoJ deploying additional easing measures later this year, by which time the central bank will probably be forced to acknowledge that corporate price-setting behavior is being adversely impacted by the threat of the ex-energy core CPI inflation rate dropping into negative territory.”
- Source: Barron's
- ETFs: DXJ, EWJ, FXY, YCS, DBJP, NKY, JYN, EZJ, JPNL, EWV, YCL, HEWJ, ITF, JPP, FJP
- All the headlines say it's worry over Greece, but Europe was doing just fine in morning action until news hit about a big expansion in short-selling in China (after markets in China had closed for the session). Chinese futures have subsequently tumbled, and any China ETFs trading in the premarket are sharply lower despite gains in Shanghai overnight.
- Germany (NYSEARCA:EWG) -1.7%, France (NYSEARCA:EWQ) -1.2%, Italy (NYSEARCA:EWI) -1.8%, Spain (NYSEARCA:EWP) -1.8%, U.K. (NYSEARCA:EWU) -0.75%. Stocks in Athens (NYSEARCA:GREK) are lower by 0.9%.
- Previously: China allows big boost in short selling (April 17)
- ETFs: VGK, FEZ, HEDJ, IEV, EPV, EZU, FEU, EURL, FEP, UPV, DBEU, ADRU, HEZU, FEEU, IEUR, FIEU, DBEZ, FEUZ, SBEU
- Hoping to boost the supply of stocks trading in the market, China's securities regulator will allow institutional investors to lend shares for short selling and will also expand the number of stocks that can be sold short.
- The announcement comes alongside the introduction of two stock index futures which will also allow investors to place bets/hedge for lower stock prices.
- The news hit after markets closed, with Shanghai gaining another 2.2% overnight, but FXI -3.5% premarket. ASHR -4.1%
- ETFs: FXI, ASHR, EWH, CAF, YINN, PGJ, GXC, FXP, YANG, PEK, MCHI, XPP, YAO, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, EWHS, KBA, FCHI, FHK, AFTY
- DJIA and S&P 500 futures are down 0.7% and Nasdaq 100 by 0.9% as earnings pour in, Europe sells off, short-selling rules in China are eased, and Bloomberg terminals go down. Russell 2000 (NYSEARCA:IWM) futures are down 1.1%.
- Mulling the growing possibility of another Greek default and/or Grexit, Europe is lower by 2%. Shanghai gained another 2.2% overnight, but the Nikkei slid 1.2%.
- The 10-year Treasury yield is down three basis points to 1.86%, gold is up $6 per ounce to $1,205, and oil is down $0.41 per barrel to $56.29.
- 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, BXUB, QQEW, QQQE, SPLX, SFLA, BXUC, QQXT, SPUU
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