Today - Thursday, December 18, 2014
- General Motors (NYSE:GM) suspends making deliveries to Russia due to the volatile situation with the ruble exchange rate.
- The company operates in the region through Opel-division GM Russia.
- Jaguar Land Rover (NYSE:TTM) and Audi (OTCQX:VLKAY) have also halted sales in the nation in reaction to the currency crisis.
- The above automakers - along with BMW (OTCPK:BAMXY), Daimler (OTCPK:DDAIF), Hyundai (OTC:HYMLF), and Renault (OTC:RNSDF) - face large hits in Q4 due to exposure to the Russian currency.
- Some estimates on ruble losses range over the $100M mark.
- Attempting to defend its CHF1.20 floor for the euro, the SNB cuts its deposit rate to negative 0.25%, and expands its target range for three-month Swiss libor to -0.75% to 0.25%. Negative rates will be imposed on balance above CHF10M.
- "The SNB reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro, and will continue to enforce it with the utmost determination."
- Against the dollar, the franc (NYSEARCA:FXF) is off 0.65% to its lowest in more than two years, and it's weaker by 0.3% vs. the euro to CHF1.2046.
- The Swiss stock market (NYSEARCA:EWL) is higher by 2%, inline with a broad European rally.
- Addressing Russia in his annual speech, Vladimir Putin said that the country's current economic difficulties could last for the next two years but the situation could improve faster.
- Putin also declared that the central bank and government were taking adequate measures to support the ruble and that Russia's current economic situation was caused by external factors, mainly from the price of oil and gas.
- The ruble is more than 2% weaker on the day at 61.72 against the dollar.
- ETFs: RSX, RUSL, RUSS, RSXJ, ERUS, RBL
- An early general election in Greece is looking more likely after the first round of a snap presidential election failed to win support for Greek Prime Minister Antonis Samaras’s candidate - Stavros Dimas.
- There is a great possibility that the left-wing, anti-austerity party Syriza could win such a vote – potentially putting the country's international bailout into jeopardy.
- Greece appears to be on track for a primary budget surplus in 2014, but the country still has an enormous debt pile of 175.5% of GDP.
- ETFs: GREK
- Japanese shares rallied today following the Fed's upbeat assessment on the U.S. economy and report that the country will spend up to $30B in stimulus.
- Prime Minister Shinzo Abe plans to finalize the stimulus package on Dec. 27, as part of efforts to lift the economy out of a recession caused by the hit from a sales tax hike in April.
- Pulling away from a 6-1/2-week low, Japan's Nikkei share average jumped 2.3%, ending up 17,210.
- ETFs: DXJ, EWJ, DFJ, NKY, DBJP, EZJ, EWV, JPNL, DXJS, SCJ, JSC, ITF, JPP, HEWJ, FJP, QJPN, JPMV, DXJT, DXJR, DXJH, DXJC, DXJF
Wednesday, December 17, 2014
- While travel to Cuba strictly for tourism purposes remains prohibited for now, the U.S. is now allowing visits for a long list of other reasons, including family visits, journalistic activity, professional research, and educational and recreational activities.
- Also as part of the deal, American travelers will be allowed to import $400 worth of Cuban goods, including up to $100 of tobacco products. The products will not be allowed to be resold.
- This two-year-old profile of Thomas Herzfeld and his Caribbean Basin Fund (CUBA +35.8%) will be of interest. At the time of the article the fund held stakes in a number of companies who would likely see brisk additional business from an opening to Cuba, along with a number of securities - currently valued at zero thanks to the Castro's confiscations - which could rise from the ashes.
- One sector of interest is cruise ship operators: Royal Caribbean (RCL +3.4%), Carnival (CCL +2.7%), Norwegian Cruise (NCLH +1.6%).
- Other holdings of CUBA at the time of the article: Seaboard (SEB +0.7%) and Watsco (WSO +0.6%).
- Previously: U.S. and Cuba move to normalize diplomatic relations (Dec. 17, 2014)
- Both the WisdomTree Japan Hedged ETF (NYSEARCA:DXJ) and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA:DBJP) hedge their natural long yen exposure by shorting the currency, leading to profits when it depreciates.
- The yen's big decline normally wouldn't be an issue, but the quickness of the slide and the timing late in the year gave neither fund the necessary time to "wash" out those gains.
- DXJ is estimated to pay out more than $4 per share in short- and long-term capital gains (about 8% of NAV) on December 26, while DBJP's should be about $3.60 per share in ordinary income (about 9% of NAV).
- Holders of both funds are likely going to face a tax bill, but their outperformance relative to the unhedged iShares MSCI Japan ETF (NYSEARCA:EWJ) - in the area of 1K-1.2K basis points - will provide nice consolation.
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- Macau casino names are down sharply after reports break of a major crackdown by Beijing on monitoring funds coming into casinos in the gambling mecca.
- The government says the Ministry's Economic Crimes Investigation Bureau will have broader electronic access to fund transfer information.
- Previously: Major funds crackdown imminent in Macau
- Decliners: MGM Resorts (NYSE:MGM) -4.7%, Melco Crown (NASDAQ:MPEL) -3.3%, Las Vegas Sands (NYSE:LVS) -2.8%, Wynn Resorts (NASDAQ:WYNN) -2.9%, Galaxy Entertainment (OTCPK:GXYEF) -7.3%.
- Beijing is set to launch a major crackdown on tracking the sources of money flowing into Macau casinos, according to the South China Sea Post.
- Electronic monitoring of all money transfers made through the China UnionPay payment system will be initiated by authorities.
- Unlike other fleeting crackdowns, this one is being called the "new normal" by casino insiders.
- Casino stocks crumbled in trading in Hong Kong earlier today.
- Macau-related stocks: MPEL, MGM, WYNN, LVS, OTCPK:GXYEF, OTCPK:SJMHF.
- The ruble has started bouncing back against the dollar, following the the Russian Finance Ministry's move to begin selling its leftover foreign-currency stock.
- Russia's central bank has conducted over $80B in forex market interventions this year to defend the ruble, which has been hammered by sliding oil prices, western sanctions and the geopolitical tension over Ukraine.
- The ruble is up 0.8% against the dollar at 68.32.
- ETFs: RSX, RUSL, RUSS, RSXJ, ERUS, RBL
- President Obama is expected to sign legislation by the end of the week implementing new sanctions on Russia over the Ukraine crisis.
- The additional sanctions will hit the Russian weapons and energy sector, hammering an economy that is already being battered by a fall in oil prices and a plunging currency.
- The ruble dropped to record lows yesterday, falling as much as 20% against the dollar despite the Russian central bank’s move to raise interest rates to 17%.
- ETFs: RSX, RUSL, RUSS, RSXJ, ERUS, RBL
Tuesday, December 16, 2014
- Not much of a surprise considering Fitch downgraded France on Friday, the agency today cuts the credit rating on the European Financial Stability Fund (EFSF) to AA from AA+. The EFSF is one of the vehicles dreamt up by Eurocrats amid the debt crisis of a couple of year ago, and France is among its guarantors.
- Previously: France credit rating cut at Fitch (Dec. 13, 2014)
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- Stocks have reversed opening losses to turn sharply higher, with the Dow (NYSEARCA:DIA) and S&P 500 (NYSEARCA:SPY) each ahead by more than 1%, and the Nasdaq (NASDAQ:QQQ) higher by 0.7%. Alongside that turnaround is oil (NYSEARCA:USO), which plunged to a $53 handle earlier in the session, but is now ahead by 1.4% to $56.70.
- Europe - which started in the green and than turned lower - turned around again to close on the highs, the Stoxx 50 (NYSEARCA:FEZ) +2.4%, with Italy (NYSEARCA:EWI) +3.2%, Germany (NYSEARCA:EWG) +2.5%, France (NYSEARCA:EWQ) +2.2%, Spain (NYSEARCA:EWP) +2.1%, U.K. (NYSEARCA:EWU) +2.5%.
- Retailers and restaurateurs are optimistic that holiday spending on adult beverages will pick up this holiday season due to the improved economic backdrop, according to research firm Technomic.
- Though consumers are likely to stick with many of their built-up cost assessment habits, strong brands could see a sales boost on some splurging.
- Spirits/beer stocks: BUD, DEO, OTCPK:CABGY, TAP, SAM, BF.A, BF.B, STZ, OTCPK:PDRDY, OTCPK:STBFY.