Today - Thursday, August 21, 2014
- "Relative to the norm," the market is overexposed to the greenback and to U.S. stocks, says Saxo Bank CIO Steen Jakobsen, expecting the dollar to "significantly weaken" beginning in mid-Q3.
- Behind his call is his disagreement with the conventional wisdom that U.S. growth is set to accelerate. While Q3 may be decent, he says, "the real damage will come in Q4."
- The dollar index hit its highest level in nearly a year this week, showing particular strength over the past few weeks against the euro, the pound, and the loonie.
- Dollar ETFs: UUP, UDN, FORX, UDNT, UUPT, USDU
- Norway's $880B sovereign wealth fund has been boosting investments in emerging markets since the government in 2012 approved a plan to cut holdings in Europe to 41% from 54% of the portfolio. "We are gradually picking up some new markets, but at a less rapid pace than we did at the beginning of the year," says Yngve Slyngstad, the fund's CEO.
- China, however, remains a key target, says Slyngstad, noting the fund's investment relative to the size of that country's economy is "miniscule."
- The fund - which owns 1.3% of the world's stocks - has missed its 4% real return target since its inception in the late 90s. It reported a 3.3% return in Q2, in part because of a strong rally in emerging markets.
- ETFs: EEM, VWO, EDC, EDZ, SCHE, IEMG, EEV, ADRE, EET, EUM, GMM, EEME, DBEM, EMCR, FEM, EWEM, EMLB, EMSA, EMFT, EMDR
- Petrovietnam has entered talks with banks to secure financing for a seven-year loan of up to $1.8B for its bid to buy a stake in Murphy Oil's (NYSE:MUR) Malaysian oil and gas assets.
- The $1.8B offer tops a $1.5B bid previously made by India's Oil & Natural Gas and Oil India. Mitsubishi (OTCPK:MSBHY) is also bidding on the assets.
- In response to the NY Department of Financial Services' proposed "BitLicense", three of the biggest Bitcoin (COIN, OTCQB:BTCS) exchanges in China (BTCChina, Huobi and OKCoin) have released a joint letter addressed to NY regulators which warns of far-reaching consequences due to their pending legislation.
- On July 17, the Department of Financial Services proposed issuing a BitLicense which would protect consumers, prevent money laundering and enforce cyber security, but the exchanges see too many restrictions in the proposed license.
- At issue are enhanced customer checks and that restrictions in NY could lead to limitations in other jurisdictions.
- Chinese antitrust officials have reached out to South Korea's regulatory commission in order to talk over Qualcomm's (NASDAQ:QCOM) violations of a 2008 anti-monopoly law.
- South Korea previously fined Qualcomm more than $200M in 2009 for abusing its dominant market position and China is looking for ways to handle the violations back home.
- China's anti-trust regulator can issue a fine of as much as a tenth of a company's annual revenue, which was $25B for Qualcomm this past year.
- In yet another decision to tighten foreign currency sales, Ukraine's central bank has announced that it is now mandatory for companies to sell all of their foreign currency income on the domestic market.
- The new move is aimed at offsetting the pressure of a pro-Russian separatist revolt on the Ukrainian currency and requires banks to sell their foreign currency earnings the day after receiving the funds from companies.
- The rule will apply until Nov. 21, but the central bank has extended similar regulations in the past.
- ETFs: RSX, RUSL, RSXJ, ERUS, RUSS, RBL, RUDR
- After a year-long blockade, Libya has restarted oil exports from its largest port, resolving some mistrust between rebel leaders and the government.
- Despite the ongoing clashes and violence still raging in main cities, the OPEC member's oil production has risen in the past few weeks to around 560K barrels a day.
- The new production is well above the 100K bpd seen earlier this year, but still short of the 1.4M bpd a year ago.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DWTI, DNO, SZO, OLO, OLEM, TWTI
- Toyota (NYSE:TM) is now the latest automaker to cut its auto parts prices in China, reducing parts on its Lexus models by an average of 26%.
- In recent months, many foreign automakers have lowered price tags due to the ongoing anti-trust investigation in the country's auto sector.
- Toyota's price cuts come just one day after China's anti-monopoly regulator issued a $201M fine on 12 Japanese companies over price manipulation.
- TM -0.4% AH
- Russia's food safety regulator Rospotrebnadzor says it is now conducting spot checks at McDonald's (NYSE:MCD) restaurants in the Sverdlovsk region of the country.
- Yesterday, Russia temporarily closed four McDonald's restaurants in Moscow, stating possible sanitary violations.
- The closures come amid tensions between Russia and the West, and an extensive ban on agricultural imports in retaliation over U.S. sanctions.
- Thailand's military junta General Prayuth Chan-ocha has been nominated prime minister by a legislature he hand-picked, nearly three months after he seized power in a coup d'état.
- Political analysts say the army is now likely to create a much more limited form of democracy before allowing elections, which Prayuth has planned for the end of 2015.
- ETFs: THD
Wednesday, August 20, 2014
- For the second time in three weeks, the Central Bank of Brazil injects billions into the banking system as the government grasps for ways to boost the slumping economy ahead of October elections.
- "It is hoped that the measures will improve small businesses’ access to credit and strengthen foreign trade,” says the bank.
- Analysts doubt the moves will do a whole lot as the issue, they say, isn't liquidity in the system - there's plenty of that - but that banks are unwilling to lend and borrowers are reluctant to borrow. "No one knows who is going to be president so if you are a businessman why not just wait until November," says Nomura economist Tony Volpon.
- The Bovespa is ahead 0.5% today.
- ETFs: EWZ, BRF, BRXX, EWZS, BRAQ, BRZU, BRAZ, BZQ, BRAF, UBR, BRZS, DBBR, FBZ
- Coca-Cola Amatil (OTCPK:CCLAY) is facing a serious profit squeeze in Indonesia with currency swings and higher costs significant factors.
- The company is also spending heavily in the nation in an effort to boost the Coke brand.
- YTD earnings from Amatil's Indonesia and Papua New Guinea division are off 80% YTD.
- Coca-Cola (NYSE:KO) has a 29% stake in the Australian soft drinks concern.
- Germany today raised just over €4B of two-year money, with the notes priced to yield 0.00%. Demand was strong, totaling nearly €8.3B.
- The sale comes amid geopolitical risk and the slowdown in the European economy, bringing forth the possibility of further stimulus from the ECB.
- This isn't the first time two-year borrowing costs have fallen so far. Amid the debt crisis two years ago, investors paid Germany to lend it money, accepting a negative 0.06% yield at an auction.
- The euro is down 0.25% to $1.3288, it lowest level in about a year.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- South Korea could be the next nation to crack down on foreign automakers and suppliers over pricing, warns Automotive News.
- A broad probe in China has led to fines and pricing cuts by manufacturers.
- The South Korean Fair Trade Commission has already probed BMW (OTCPK:BAMXY), Mercedes-Benz (OTCPK:DDAIF), and Volkswagen (OTCQX:VLKAY) over price fixing.
- The latest cease-fire in the Gaza Strip has collapsed, after Palestinian rocket fire resumed nearly eight hours before the cease-fire was due to expire.
- Israel responded with airstrikes, and ordered its delegates back from Cairo saying it will not negotiate under fire.
- Egyptian mediators have been struggling to end the 5-week-old conflict with several temporary cease-fires, but no permanent truce has yet emerged.
- ETFs: EIS, ISRA
- Vladimir Putin is set to meet face-to-face with his Ukrainian counterpart, Petro Poroshenko, in Belarus on Aug. 26 to discuss stabilizing the situation in Ukraine and the latter's energy concerns.
- Ukraine's energy sector is crumbling with estimates that coal supplies to electricity producers can run out within the next 40 days, due to damaged rail lines by Russian separatists.
- ETFs: RSX, RUSL, RSXJ, ERUS, RUSS, RBL, RUDR
- Argentina is looking to push bondholders to swap defaulted debt for new notes, in order to dodge a U.S. ruling that prevents the government from paying creditors.
- Argentina's last interest payment of $539M was blocked by a NY court, resulting in the country's sovereign default on July 30.
- President Christina Fernandez has continued to argue that Argentina is not in default, and has called for a new bond swap as a result of the ruling.
- ETFs: ARGT
- China's anti-monopoly regulator has issued fines against 12 Japanese companies for colluding over prices of auto parts and bearings.
- The penalties total 1.2B yuan ($201.8M) and fine companies including Hitachi (OTCPK:HTHIY), Sumitomo (OTCPK:SSUMY), Mitsubishi Electric (OTCPK:MIELY), Jtekt (OTCPK:JTEKY) and Denso (OTCPK:DNZOY).
- China has been increasing its efforts to bring companies into compliance with an anti-monopoly law enacted in 2008, and has recently taken aim at the country's auto sector.
- The International Swaps and Derivatives Association has delayed Argentina's CDS auction until September.
- An issue arose yesterday regarding the addition of two Japanese-law restructured notes to be included at the auction, and needs to be resolved before the sale can take place.
- The auction, run by Creditex and Markit, will establish the payout that holders of protection on Argentine bonds will receive as a result of the country's recent default.
- ETFs: ARGT
- Previously: Argentina CDS auction set for Aug. 21
Tuesday, August 19, 2014
- Strong Q2 earnings from the world’s largest shipping company is making some economists and investors more optimistic about the global economy.
- Strength in its container transport business prompted A.P. Møller-Maersk (OTC:AMKAF, OTCPK:AMKBY) to raise its full-year guidance - "a sign that the world economy hasn’t collapsed that Maersk can lift its outlook... marked by the fact that the container market is developing maybe a bit better than expected and that Maersk has cut costs a lot," Sydbank's Jacob Pedersen says.
- Maersk Line sees global container demand growing by 4%-5% in 2014, based on improving economic conditions, and CEO Nils Smedegaard Andersen expects shipping activity in the U.S. “will pick up in a significant way” in the last six months of the year, another sign of an improvement in global trade.