Today - Sunday, November 23, 2014
- China is prepared to cut interest rates again, concerned that falling prices could trigger a surge in debt defaults, business failures and job losses, reports Reuters quoting sources involved in policy-making.
- "Top leaders have changed their views," said a senior economist at a government think-tank. "Further interest rate cuts should be in the pipeline as we have entered into a rate-cut cycle and reserve requirement ratio cuts are also likely."
- In as surprise move on Friday, the People's Bank of China lowered one-year benchmark lending rates by 40 basis points to 5.6%.
- ETFs: FXI, EWH, KWEB, PGJ, YINN, GXC, FXP, ASHR, HAO, TAO, YANG, CHIQ, CQQQ, DSUM, MCHI, CHIX, QQQC, PEK, XPP, YAO, YXI, ECNS, CHXF, CHII, FCA, CN, CHIE, CHIM, EWHS, FCHI, KFYP, ASHS, CNXT, CHNA, CHLC, KBA, FHK, CBON, CHNB
Saturday, November 22, 2014
- Russia does not plan to cut oil production to support falling crude prices, Energy Minister Alexander Novak said on Rossiya 24 TV today.
- It's unclear whether Novak was replying to a remark he made Friday, when he said Russia was discussing whether to cut oil output.
- Russia, the world's biggest energy exporter, relies on oil and gas exports for about half its federal budget.
- ETFs: USO, OIL, RSX, UCO, SCO, RUSL, BNO, DTO, DBO, RUSS, ERUS, CRUD, USL, UWTI, RBL, DWTI, DNO, SZO, OLO, RUDR, OLEM
- "The construction crane isn’t necessarily a symbol of economic vitality; it can also be a symbol of an economy run amok.," writes the WSJ's Bob Davis as he exits several years of his reporting assignment in Beijing.
- China, says Davis, is less economic miracle than a debt-fueled housing bubble combined with corruption-laced spending, and he wonders how it is - in such a supposedly entrepreneurial economy with boundless potential - that so many of China's young would prefer working for the State?
- President Xi Jinping has pronounced himself an economic reformer and has the requisite 60-point plan to remake the economy and cleanse the communist party of corruption, but even the most powerful of China's leaders have trouble enforcing their will, says Davis, telling the story of how a local province - under orders from Mr. Xi to cut steel production along with emissions - staged to great fanfare essentially meaningless demolitions of blast furnaces.
- "In China, I have learned, yellow isn’t just the color of development. It is also the color of a setting sun."
- ETFs: FXI, PGJ, YINN, GXC, FXP, YANG, MCHI, XPP, YAO, YXI, CHXF, CN, FCA
Friday, November 21, 2014
- A popular short during 2013, the yen trundled along for much of 2014, with the dollar buying between ¥102 and ¥105 until about a month ago. Since, the yen has plunged, with the dollar earlier today buying as much as ¥119. Helping was the BOJ's surprise announcement of additional asset purchase and Japan's slipping back into recession.
- "Too fast," says Japanese Finance Minister Taro Aso. "There is no doubt about that."
- Even Abenomics' (of which currency devaluation is a major plank) biggest supporters don't want the yen to weaken much beyond ¥120. "¥125 would make me a bit nervous," says an Abe advisor.
- The yen did strengthen a bit on the finance minister comments, now up 0.5%, with the dollar worth ¥117.61.
- FXY +0.35%
- ETFs: FXY, YCS, JYN, YCL
- Petrobras (PBR +7.2%) and Vale (VALE +9.6%) surge higher in anticipation that Brazil may appoint a new market-friendly finance minister today, perhaps signaling a shift away from the leftist, interventionist policies blamed for Brazil's stagnant economic growth in recent years.
- One of three reported finalists for the job is University of Chicago-trained Joaquim Levy, CEO of Bradesco Asset Management, an arm of Banco Bradesco (BBD +4.9%); he is considered a fiscal hawk who helped Brazil obtain its investment credit grade in a previous stint at treasury secretary.
- The other contenders are said to be central bank president Alexandre Tombini and Nelson Barbosa.
- Also: ITUB +3.8%, BSBR +2.9%, GOL +4.6%.
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, BRZS, DBBR, FBZ
- Volkswagen (OTCQX:VLKAY) unveils a 5-year plan to invest €85.6B euros ($106B) to increase its manufacturing capacity and develop new models.
- A bulk of the capex spending will also go to creating more efficiency across production platforms to drive bottom-line gains.
- Though Toyota (NYSE:TM) wasn't called out by name by execs, capturing the title of the world's biggest seller of cars appears to be part of the Volkswagen strategy.
- "We will do what we must to raise inflation and inflation expectations as fast as possible," Mario Draghi told a banking conference, promising faster asset purchases as needed.
- The Stoxx 50 (NYSEARCA:FEZ) is higher by 2.2%, led by a 2.4% gain in Spain (NYSEARCA:EWP) and a 2.3% advance in Italy (NYSEARCA:EWI). Germany (NYSEARCA:EWG) and France (NYSEARCA:EWQ) are up 2%, and the U.K. by 1%.
- The euro (NYSEARCA:FXE) is down 0.9% and buying $1.2432.
- ETFs: VGK, FEZ, EWP, DFE, IEV, HEDJ, EWL, EPV, EZU, EWD, NORW, EIRL, EWO, FEU, EWN, EWK, EDEN, FEP, EWGS, UPV, EURL, ENOR, ADRU, FEEU, EFNL, GERJ, DBEU, EURZ, FSZ, IEUR, FIEU, QESP, SMEZ, ESTX, HEZU, FEUZ
- In response to both a slowing domestic and global economy, China has cut its benchmark interest rates for the first time in more than two years.
- The People's Bank of China lowered one-year benchmark lending rates by 40 bps to 5.6% and reduced the one-year deposit rate by 25 bps to 2.75%.
- China's economic growth slowed to a five-year low of 7.3% last quarter.
- ETFs: FXI, EWH, KWEB, PGJ, GXC, YINN, FXP, ASHR, HAO, TAO, YANG, CHIQ, CQQQ, DSUM, MCHI, CHIX, QQQC, PEK, XPP, YAO, YXI, ECNS, CHXF, CHII, FCA, CN, CHIE, CHIM, EWHS, FCHI, KFYP, ASHS, CNXT, CHNA, CHLC, KBA, FHK, CBON, CHNB
- Mario Draghi strongly outlined today that the ECB is ready to expand its asset purchase programs if inflation shows signs of staying too low for too long.
- "If on its current trajectory our policy is not effective enough...we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases," announced Draghi.
- Annual eurozone inflation was 0.4% in October, far below the central bank’s target of just below 2%.
- European stocks are up on the news: FTSE 100 +0.5%; DAX +1.2%; CAC 40 +0.9%; Euro Stoxx 50 +1%.
Thursday, November 20, 2014
- The HSBC Flash China Manufacturing PMI for November of 50 slipped from 50.4 in October.
- HSBC Chief Economist Hongbin Qu: "Disinflationary pressures remain strong and the labour market showed further signs of weakening. Weak price pressures and low capacity utilization point to insufficient demand in the economy."
- Shanghai gained 0.1% overnight.
- ETFs: FXI, PGJ, GXC, YINN, FXP, YANG, MCHI, XPP, YAO, YXI, CHXF, CN, FCA
7:23 AM| Comment!
- The Flash Eurozone Composite PMI for November falls to a 16-month low of 51.4 from 52.1 in October. For Germany, the PMI fell to its lowest since July 2013 at 50 vs. expectations of 51.5.
- Markit's Chris Williamson: "The deteriorating trend in the surveys will add to pressure for the ECB to do more to boost the economy without waiting to gauge the effectiveness of previously-announced initiatives.”
- The Stoxx 50 (NYSEARCA:FEZ) is down 1.2%, led by Spain's (NYSEARCA:EWP) 1.9% decline. Germany (NYSEARCA:EWG) is lower by 0.7%.
- ETFs: VGK, FEZ, IEV, HEDJ, EPV, EZU, FEU, FEP, UPV, EURL, ADRU, FEEU, DBEU, EURZ, IEUR, FIEU, ESTX, FEUZ, HEZU
- Volvo (OTCPK:GELYF) plans to make a major push in the U.S. with a target to become a +100K unit per year seller again,
- Sales in the U.S. are down 8% for Volvo after the first 10 months of the year.
- A complete renewal of the automaker's model lineup is part of the new strategy.
- This week, Volvo unveiled its new XC90 at the L.A. Auto Show.
- The European Commission is considering fining France as much as $5B over its failure to cut its budget deficit.
- France was granted two extra years by EU officials last June to bring its deficit below a 3% EU limit after missing an end-2013 deadline. France has now said it will miss the 2015 deadline too.
- A decision on a fine could come within the next two weeks, after the Commission announces its assessments of euro zone countries' draft 2015 budgets on Monday.
- ETFs: EWQ
Wednesday, November 19, 2014
- “The Brazilian economy is in a perilous state," says Nomura's Tony Volpon after a recent visit. Among the red flags: A weakening labor market, inflation above target, a primary government budget deficit, a trade deficit, and a corruption scandal engulfing the country's largest corporation, Petrobas. "One could conclude that the Brazilian economy is unraveling."
- Maybe more important than the political consequences of the Petrobas investigation are the economic ones, says Volpon, noting the probe is spreading to companies in the electricity and financial sector which do business with the giant. While the scandal is good for clearing out the pipes in the medium-term, in the short-term, there's the chance of "a negative supply-side exogenous shock of unknown proportions."
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, BRZS, DBBR, FBZ
- Alongside a bull market in the greenback, the WisdomTree (NASDAQ:WETF) Bloomberg U.S. Dollar Bullish Fund (NYSEARCA:USDU) has had net inflows of $118.7M YTD - 364% fund growth based on January 1 AUM of $32.6M (it launched last December).
- USDU's chief competitor, the PowerShares-DB U.S. Dollar Bullish Portfolio (NYSEARCA:UUP), has seen stronger inflows - $207.8M - but the fund is far larger, now with $943M of AUM.
- The UUP has outperformed - up 9.6% YTD vs. 6.1% for the WisdomTree offering - but it's essentially a play on the euro, which accounts for 60% of the fund's weighting. USDU tracks a basket of 10 developed and emerging currencies, and is probably more reflective of global trade, writes ETF.com's Dennis Hudachek.
- ETFs: UUP, UDN, UUPT, FORX, UDNT, USDU
- China and Russia have vowed to strengthen bilateral military co-operation and hold joint naval exercises to counter U.S. influence in the Asia-Pacific region.
- The pledge comes on the heels of yesterday's contentious remarks made by Vladimir Putin.
- "They (the U.S.) do not want to humiliate us, they want to subdue us," said Putin. "No one in history ever managed to achieve this with Russia, and no one ever will."
- ETFs: RSX, RUSL, RUSS, RSXJ, ERUS, RBL, RUDR