Today - Monday, August 31, 2015
- Another massive explosion has been reported in China in the Shandong province in a chemical-industrial area. Details are still coming in on the scope of the incident.
- A large explosion at the Tianjin port a few weeks ago killed over 150 people and disrupted the automobile industry.
- Previously: Automakers impacted by Tianjin explosions (Aug. 17 2015)
- Previously: Tianjin blast insurance claims pile up (Aug. 18 2015)
- Previously: Toyota looks to restart production after Tianjin disaster (Aug. 26 2015)
- The latest from the high-level corruption scandal has the U.K Rolls-Royce being dragged in, with the company saying it's cooperating with investigators over bribery in Brazil's state oil business.
- The Bovespa's 1.9% decline today is being led by banks Itau Unibanco (ITUB -5.2%), Banco Bradesco (BBD -5.9%), and Banco Santander Brasil (BSBR -3.2%).
- Petrobas (PBR +1%) and Vale (VALE +1.2%) are actually hanging in there this session.
- The iShares MSCI Brazil Index ETF (EWZ -3.3%)
- ETFs: EWZ, BRF, BRZU, EWZS, BRXX, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
- Against the backdrop of Brazilian recession, Telefonica (NYSE:TEF) is looking to its growing broadband footprint in the country to help it weather that storm, and COO Jose Maria Alvarez-Pallete is upbeat: "The economy won't help, but the company is improving."
- “We won’t change our plans," he told reporters in Spain. "The current momentum will continue. We are optimistic toward the medium term."
- Telefonica is integrating broadband operator GVT, which it acquired from Vivendi for about $9.8B and began folding into Telefonica Brasil (NYSE:VIV) to forge the leading integrated telecom in the country, blending GVT's wide-reaching fiber-optic network with Vivo's large 3G/4G networks.
- Brazil -- Telefonica's second-largest market -- is in the midst of its longest recession since the 1930s and is dealing with a weaker currency, as depreciation in the real has accelerated over the past six weeks. (First-half currency effect "hasn't been bad," Pallete says.)
- Previously: Telefonica -0.3% after Q2 sales beat, raised full-year guidance (Jul. 30 2015)
- Previously: Telefónica closes on €7.5B purchase of GVT (May. 29 2015)
- Fiat Chrysler Automobiles (NYSE:FCAU) CEO Sergio Marchionne rekindled talk about a merger with General Motors (NYSE:GM) in a new interview with Automotive News.
- Marchionne said the numbers on a Fiat-GM consolidation are just too good to ignore.
- "We're talking about cataclysmic changes in performance, just huge," exclaims the CEO. His target of $30B in EBITDA is backed by Evercore ISI as realistic.
- GM is firmly on the record as saying it won't pursue talks with Fiat, going as far as to call the concept a "bailout" of the automaker.
- Automobile exports in Japan rose 0.4% to 415,735 vehicles in July, according to data from the Japan Automobile Manufacturers Association.
- Exports to North America were up 12.9% during the month, while cars sent to Asia fell 10.6% off weak demand in China.
- Domestic sales fell 7.6% to 425,093 vehicles during the month.
- Total production was down 5.9% to 841,812 units.
- Japanese automakers: (OTCPK:NSANY, TM, HMC, OTCPK:MZDAY, OTCPK:SZKMY, OTCPK:FUJHY, OTCPK:MMTOF)
- Japan -1.28%.
- Hong Kong +0.27%.
- China -0.82%.
- India -0.41%.
- London +0.90%.
- Paris -0.70%.
- Frankfurt -0.62%.
- The eurozone's inflation rate held steady in August, highlighting the challenge European Central Bank policymakers face as they seek to revive consumer-price growth.
- Annual inflation came in at 0.2%, exceeding the median forecast for a reading of 0.1%, while core inflation held at 1%.
- The latest figures are a far cry from the 2% target set by the ECB and are likely to provide further impetus for the bank to continue its €1T ($1.1T) asset purchasing program.
- Euro +0.2% to $1.1206, while European shares are on track for their worst month in four years: Paris -0.8%; Frankfurt -0.7%; Euro Stoxx 50 -0.7%
- .ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- For traders worried about the health of the emerging markets, India's growth data for April-June should supply some cheer today - the country is expected to remain the fastest growing major economy for a second straight quarter.
- Economists put India's gross domestic product at 7.4% in Q2, just below 7.5% in January-March.
- If the number is that high, it will be a boost for Prime Minister Narendra Modi, who has taken a beating after struggling to pass his legislative agenda.
- The GDP data will be released at 9:30 a.m. ET.
- Sensex -0.3% to 26,323.
- ETFs: EPI, INDY, SCIF, INDL, PIN, INDA, INP, IIF, INXX, INCO, SCIN, SMIN
- The Shanghai Composite took a dive during the session, closing out August down 12.5%, following reports that Beijing scrapped large-scale share purchases as a method of propping up markets.
- Meanwhile, more concerns over the world's second largest economy prompted Goldman Sachs to slash its forecasts for Chinese growth over the next three years to 6.4% (2016), 6.1% (2017) and 5.8% (2018).
- China's also on the hunt for confessions: Nearly 200 journalists, traders and officials have been punished in what police call a "special campaign" to root out those accused of market destabilizing activities.
- ETFs: FXI, ASHR, EWH, CAF, YINN, KWEB, PGJ, GXC, FXP, HAO, YANG, TAO, CHIX, CHN, PEK, CHIQ, CQQQ, MCHI, TDF, QQQC, XPP, YAO, GCH, ASHS, YXI, CN, CHXF, FCA, CHNA, CNXT, CHII, ECNS, CHIE, EWHS, CHIM, KBA, KFYP, FCHI, JFC, FHK, AFTY, CHAU
- Another U.S. Senator has given his support for the recent Iranian nuclear accord, moving President Obama a step closer to having sufficient backing to ensure the pact stands.
- The boost from Oregon's Jeff Merkley brings to 31 the number of senators publicly favoring the deal.
- Should sanctions be lifted, Iran would double its oil exports to 2.3M barrels a day, multiplying tensions in the world's sensitive oil markets.
- Crude futures -2.2% to $44.22/bbl.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
- Snapping a three-day winning streak, Japan's Nikkei is heading toward its biggest monthly decline since Jan. 2014 (-8.2%), hurt by soft industrial production data.
- Output fell 0.6% in July from the previous month, worse than economists' estimates of a 0.1% gain and following a 1.1% increase in June.
- "Weak demand from China is expected to continue to weigh on Japan's production going forward so China worries may persist," said Amundi Japan's Masaru Hamasaki.
- Nikkei -1.4% to 18,876.
- ETFs: DXJ, EWJ, DFJ, DBJP, NKY, JOF, EZJ, JEQ, JPNL, DXJS, EWV, SCJ, HEWJ, JSC, ITF, JPP, QJPN, FJP, DXJT, JPMV, DXJR, DXJC, DXJH, JHDG, DXJF, JPN, JDG, HGJP
Sunday, August 30, 2015
- A form of debt restructuring rather than outright forgiveness should enable Greece to handle its "unviable" debt burden, IMF Managing Director Christine Lagarde told Switzerland's Le Temps.
- "We are talking about extending maturities, reducing rates, (making) exemptions for a certain period of time. We are not speaking about cancelling debt," she added.
- However, the interview made no mention of whether the IMF will take part in the new €86B bailout. Lagarde previously said the fund would make its decision by October.
- ETFs: GREK
- Previously: Merkel: IMF likely to take part in Greek bailout (Aug. 17 2015)
- Previously: IMF drops bombshell on Greece (Jul. 31 2015)
- Thousands of protesters gathered in Malaysia's capital for a second day on Sunday demanding the resignation of Prime Minister Najib Razak despite police warnings stating the rally was illegal.
- Najib has been fighting for political survival after leaked documents in July showed he received some $700M in his private accounts from entities linked to indebted state fund 1MDB.
- The financial scandal has spurred an exodus of capital from Southeast Asia's third-largest economy and has partly contributed to the ringgit's plunge to a 17-year low earlier this month.
- ETFs: EWM
Saturday, August 29, 2015
- The sharp rally from Monday's panicky bottom is typical, says Felix Zulauf in a Barron's interview, and these recoveries tend to last for a few days to a few weeks, before the lows eventually get retested. Thanks to the continuing collapse of the Chinese bubble, it's Zulauf's hunch stocks will take out new lows in the next wave of selling.
- Like Latin America in the early 1980s, Mexico in 1994, Asia in 1997, and Russia in 1998, China has a balance-of-payments issue. The currencies involved in those instances fell 40-70%. Even if the yuan only falls 30% (it's down 10% already) - with China being the world's largest exporter - the price deflation translates into declining sales, profit margins, and profits for companies across the globe.
- "Central banks can’t solve the problem by providing more liquidity because liquidity isn’t the issue," says Zulauf. "We have plenty of liquidity; we don’t have enough borrowing capacity." What it means is lower prices, lower inflation, and lower interest rates. "The stock market will have to adjust to this new reality."
- At the start of the year, Zulauf predicted the Fed wouldn't hike rates in 2015, and he's sticking to that view. A tightening now "will probably send the wrong signal to the market, and at the wrong time."
- Yuan ETFs: CYB, CNY, FXCH
- China equity ETFs: FXI, ASHR, CAF, YINN, PGJ, GXC, FXP, YANG, CHIX, CHN, PEK, MCHI, TDF, XPP, YAO, GCH, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, KBA, JFC, AFTY, CHAU
- Broad U.S. large-cap ETFs: CRF, VV, USA, SCHX, ZF, FEX, JKD, EEH, EQL, IWL, ERW, FWDD, ZLRG, SYE, SBUS
Friday, August 28, 2015
- Primark will open its first store in the U.S. on September 10 with an opening in Boston.
- The chain is targeting teenagers and younger millennials with its low-cost lines.
- The company has shown strong growth in the U.K. and other areas of Europe.
- Primark is owned by Associated British Foods (OTCPK:ASBFF, OTCPK:ASBFY).
- Outflows from emerging market bond funds like EMB hit $4.2B in the week ending Aug. 26, the second-largest amount ever. Overall emerging market net outflows of $10.5B were the largest since early 2008.
- Turning back to bond funds alone, outflows over the last three weeks of $7.5B represent 2.9% of AUM, says Morgan Stanley.
- EMB is lower by more than 5% since a late-April high, and in stocks, EEM is off nearly 20% over the same time frame.
- Previously: Record amount pulled from stock funds (Aug. 28)
- ETFs: EEM, VWO, EDC, EMB, PCY, EDZ, TEI, SCHE, EDF, IEMG, ELD, EDD, EMLC, EMF, MSF, EEV, GHI, VWOB, ADRE, EMD, EDI, EET, EUM, MSD, GMM, SBW, DBEM, LEMB, EMAG, EEME, EBND, EMCR, FEM, XSOE, EWEM, HEEM, EMLB, EMSH, EMSA, EMFT, KEMP, FEMB, KLEM
- Vodafone (NASDAQ:VOD) has confirmed its plan to launch 4G service in India by year's end, joining a hot space after Bharti Airtel and Reliance Industries pressed their own 4G rollouts.
- Vodafone has successfully begun tests, it says, and that Mumbai, Delhi, Kolkata, Bengaluru and Kochi -- "important data markets" -- would be part of the first wave.
- With Airtel as the first mover, launching 4G service in about 300 cities and towns, and Reliance Jio to launch in December with a 1T-rupee investment ($16B), analysts warned of a round of price wars.
- JPMorgan noted that along with the effect of price cuts, Reliance's re-entry of the market is affecting capex at rivals.
- Brazil's economy shrank 1.9% in Q2, missing forecasts for negative 1.7%. Investment fell 8.1% - its eight straight quarter of decline and the longest streak since the current data series started in 1996. Household consumption dropped 2.1%, its worse decline since 2001. Government spending rose 0.7%. The year-over-year inflation rate was 9%.
- "The drop in consumption shows the crisis of confidence the economy is facing," says an economist. "This is going to be an intense and prolonged recession and I don't see a recovery this year."
- The lame economic activity could spell doom for Brazil's credit rating - currently just above junk status.
- The Bovespa is lower by 0.4%. EWZ -1.15%
- ETFs: EWZ, BRF, BRZU, EWZS, BRXX, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
- Japan +3.03%.
- Hong Kong -1.04%.
- China +4.82%.
- India +0.61%.
- London +0.08%.
- Paris -0.11%.
- Frankfurt -0.14%.
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