Friday, October 24, 2014
- After near 30% YTD gains in the major market averages, India's P/E premium to the world of about 20% is near a 3-year high, according to Credit Suisse.
- "If the global readjustment stays orderly, India should be able to outperform," says the Credit Suisse team of Neelkanth Mishra and Ravi Shankar, but 56% of Nifty Fifty (INDY +0.4%) revenues are not in rupees, and the remaining 44% includes banks exposed to the globally-dependent names.
- Sectors especially susceptible to a global growth hiccup are energy, metals, and the banks exposed to them, but consumption (INCO +0.7%), low-interest rate beneficiaries, and telecom and cement producers are better-insulated.
- ETFs: EPI, SCIF, INDY, PIN, INDL, INP, INXX, INDA, SCIN, SMIN, INCO
- An outlier of a poll shows opposition candidate Aecio Neves with a sizable (though shrinking) lead over President Dilma Rousseff. Other polls have consistently shown Rousseff with a lead of six to eight percentage points. Still to come is big debate between the two contenders tonight. The election is on Sunday.
- The credibility of opinion polling is somewhat suspect in Brazil, with different surveys showing wildly different results, not to mention all the major pollsters failing to capture the extent of Neves' support ahead of the first round of elections earlier this month.
- The Bovespa is up 3.6%. EWZ +5.3%
- Petrobas (PBR +6.3%), Vale (VALE +4.4%), Itau Unibanco (ITUB +6.1%), Banco Bradesco (BBD +5.5%), Gol Linhas (GOL +6.6%)
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, BRZS, DBBR, FBZ
- The iShares S&P Latin America 40 (ILF +3%)
- Broad South American ETFs: ILF, LBJ, GML, EEML, FLN
- The results of the ECB stress tests aren't to be made public until this weekend, but an early leak from Bloomberg suggests 25 of the 150 or so lenders tested have failed - roughly inline with what was expected (and those failing are likely smaller names). Ten lenders, says Bloomberg, are in talks with regulators regarding capital shortfalls.
- Previously: European bank stress test results due today
- EUFN flat premarket
- There's some speculation in the automobile sector that BMW (OTCPK:BAMXY) purchased the stake in Tesla Motors (NASDAQ:TSLA) unloaded by Daimler (OTCPK:DDAIF).
- The two automakers have long been linked as potential partners due to their complimentary strengths.
- Previous: Daimler unloads Tesla stake, Toyota sells Tesla shares.
- TSLA trades flat in premarket action.
- Russia's top bank Sberbank (OTCPK:SBRCY) says it has launched a legal challenge in the European Court of Justice over Western sanctions imposed on the bank over the Ukrainian crisis.
- The EU imposed sanctions on Sberbank over the summer, restricting its access to international capital.
- The state-controlled bank is an important lender to Russia's $2T economy but is grappling with a weakening economic outlook exacerbated by the sanctions.
- Mali has confirmed its first case of Ebola, becoming the sixth West African country to report a case of the virus.
- The patient, a 2-year-old girl who had come from neighboring Guinea, was brought to a hospital in the Malian town of Kayes.
- Mali is Africa’s third-largest gold producer.
- Related gold stocks: GOLD -2.3% premarket; AU
- Ebola Small-cap Index: HEB, TKMR, NLNK, NNVC, INO, OTCQB:GOVX, SRPT, CMRX, PLX, NSPH, BCRX, LAKE, APT, VSR, SMED.
- China's $50B Asian Infrastructure Investment Bank launched today, as the U.S. said it had concerns about the new rival to Western-dominated multilateral lenders, such as the World Bank.
- The new infrastructure bank aims to give project loans to developing nations.
- "We have concerns about the ambiguous nature of the AIIB proposal as it currently stands, that we have also expressed publicly," says State Department spokeswoman Jen Psaki.
Thursday, October 23, 2014
- Crude oil prices sprint higher as Saudi Arabia is said to have cut supply last month, according to a source familiar with the country’s oil policy.
- The Saudis cut supply by 328K bbl/day to 9.36M bbl/day in September, from 9.69M in August, according to the source; total Saudi output in September was 9.7M bbl/day, up from 9.6M in August.
- WTI +1% to $81.30/bbl, Brent +1.2% to $85.77.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, ERY, DIG, BNO, DTO, DBO, DUG, IYE, CRUD, USL, UWTI, PXJ, FENY, DNO, DWTI, RYE, FXN, SZO, OLO, DDG, OLEM, TWTI
- Honda (NYSE:HMC) appoints Koichi Fukuo to the new position in charge of quality reform in the wake of five separate recalls for the Honda Fit model.
- The Japanese automaker will also review quality processes globally.
- Pay cuts for the top management responsible for the Honda Fit will also be enacted for three months.
- The 2nd U.S. Circuit Court of Appeals in NY has dismissed Argentina's appeal of an order directing BNY Mellon (NYSE:BK) to hold onto the $539M it deposited for its restructured bondholders.
- The $539M interest payment played a key role in the country's default, after U.S. District Judge Thomas Griesa directed the bank to retain the funds until Argentina completed negotiations over its $1.33B plus interest owed to holdout creditors.
- ETFs: ARGT
- The IMF is urging Japan to go ahead with its second tax hike next year in order to maintain credibility of its fiscal framework.
- Japan's national sales tax rose to 8% from 5% in April and the government is due to decide by year-end whether to proceed with a second tax increase to 10%.
- The IMF expects Japan's economy to grow by an annualized 3.4% in July-September, rebounding from its deepest slump since the 2009 global financial crisis last quarter following April's tax hike.
- ETFs: DXJ, EWJ, DFJ, NKY, DBJP, EZJ, EWV, DXJS, SCJ, JPNL, JSC, ITF, JPP, JPNS, HEWJ, FJP, QJPN, JPMV, DXJT, DXJH, DXJR, DXJF, DXJC
Wednesday, October 22, 2014
- The HSBC Flash China Manufacturing PMI for October rises to a three-month high of 50.4 from 50.2 in September (which was also the median economist estimate). The final read from HSBC is due on November 3, but this "flash" print is typically based on about 85-90% of total responses.
- The manufacturing output subindex in October slipped to a 5-month low of 50.7 from 51.3.
- HSBC's Hongbin Qu: "Domestic as well as external demand showed some signs of slowing ... Disinflationary pressures intensified, as both the input and output price indices declined further ... The economy continues to show signs of insufficient demand. This warrants further policy easing."
- Shanghai is lower by 0.25% in early action, and the Hang Seng is down about the same.
- ETFs: FXI, EWH, PGJ, GXC, YINN, FXP, YANG, MCHI, XPP, YAO, YXI, CHXF, FCA, CN, FCHI, FHK
- The loonie (NYSEARCA:FXC) has reversed earlier retail sales-related losses and turned slightly higher vs. the greenback after the Bank of Canada stays on hold, but warns over bubbly housing markets in Ontario, Alberta, and British Columbia.
- “Housing activity has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year," says the bank. "Sales of existing homes have picked up noticeable since the beginning of the year, to a four-year high … This is contributing to sizable increases in house prices."
- In other news, the bank has canceled its post-meeting press conference as the Canadian parliament goes on lockdown after a shooting at the National War Memorial. This video shows police exchanging gunfire inside a Parliament Hill building.
- The TSX Composite is lower by 0.8%. EWC -0.6%
- Previously: Disappointing Canadian retail sales sends loonie even lower
- A top Toyota (TM -0.2%) exec says the automaker will stick with Takata, despite the airbag supplier becoming the scourge of safety regulators over malfunctioning parts.
- Toyota had more cars recalled in the U.S. due to the airbag issue than any other automaker other than Honda.
- Shares of Takata have fallen over 20% this week in Tokyo trading as the recalls continue to pile up.
- Pulled down by lower gasoline prices, and sales of new cars and food, Canadian retail sales fell 0.3% in August vs. a forecast of no change. It's the 2nd consecutive monthly drop in retail sales.
- After removing the effect of price changes - particularly for gasoline - retail sales in volume terms slipped 0.1%.
- Time to book that trip to Whistler? The news sends the loonie (NYSEARCA:FXC) lower by 60 basis points, now off 0.6% on the session and buying just $0.8861.
- ETFs: EWC, CNDA, EWCS, FCAN, QCAN
- Following the submission of euro zone countries' budgets to Brussels for review last week, France and Italy will likely hear back today that their budget plans risk breaching EU rules, FT reports.
- France is required to get its deficit back under the EU ceiling of 3% of economic output by next year but its plan ignored that commitment.
- Italy must modify its structural budget into balance by 2015, as its public debt currently sits at 135% of GDP, far above the EU ceiling of 60%.
- ETFs: EWI, EWQ
Tuesday, October 21, 2014
- Speaking at the Robin Hood Investors Conference, David Tepper says he's short the euro (FXE -0.6%).
- The hedge funder has been expecting the ECB to go full QE at some point, and is no doubt pleased at this morning's floating of the idea of the central bank adding secondary market purchases of corporate bonds to its just-in-place program of buying ABS.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- The key risks to the Chinese growth story are a continued sharp slowdown in property investment, higher-than-expected inflation, and weak export demand, says Deutsche now expecting 7.3% GDP growth this year and 7% in 2015, down from a previously estimated 7.8% and 8%, respectively.
- Last night: China Q3 GDP slows to 7.3%
- Also factored into the analysis is Deutsche's belief that Beijing may be more willing to accept a hard-landing scenario rather than launching further stimulus.
- Yesterday: Conference Board: China growth to drastically slow
- ETFs: FXI, EWH, PGJ, GXC, YINN, FXP, ASHR, YANG, MCHI, PEK, XPP, YAO, YXI, CHXF, FCA, CN, FCHI, CHNA, KBA, FHK
- Pushing Europe to a sizable rally and sending the euro lower, Reuters says the ECB could decide as soon as this year to begin buying corporate bonds on the secondary market. The move would be an expansion of the ABS buying program launched this week.
- "The pressure in this direction is high," says Reuters' source.
- The Stoxx 50 (NYSEARCA:FEZ) is up 1.1% and the euro (NYSEARCA:FXE) lower by about 100 pips since the news, now down 0.3% at $1.2765.
- Board Europe equity ETFs: VGK, FEZ, IEV, HEDJ, EPV, EZU, FEU, FEP, UPV, ADRU, FEEU, EURL, DBEU, EURZ, IEUR, FIEU, HEZU, ESTX
- Euro ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR