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.
- India's Sensex carved out another all-time high overnight - not surprising given the optimism for reform surrounding newly-elected PM Narendra Modi - but HSBC remains cautious. The issue, says the team, are high valuations and mutual funds very overweight India, combined with the chance of higher interest rates.
- "[We] continue to believe that there is a risk of Indian rates rising, or staying higher for longer than what the market is willing to accept ... At 16.1x forward PE, the Indian market is now trading above its long-term average valuation of 15x. This makes it the second most expensive market (after the Philippines) among the Asia ex-Japan countries.”
- ETFs: EPI, SCIF, INDY, PIN, INDL, INP, INXX, INDA, SCIN, SMIN, INCO
- Honda's (HMC -0.2%) top exec in the U.S warns that automobile sales in the U.S. may have peaked even as manufacturers pull out some of their tricks from the frothy 2006-2008 period.
- John Mendel thinks the reliance on subprime loans and extended financing by peers could end up being damaging to the industry.
- Honda has lost 60 bps of market share this year in the U.S. (9.1% from 9.7%) due in part to its cautious approach.
11:41 AM| Comment!
- Reversing a big YTD trend, U.S. investors pulled nearly $4B out of Europe-focused ETFs over the past week. Among the reasons, suggests Markit's Simon Colvin: Europe is seen as more exposed to Russian sanctions, anemic European growth, and a strengthening U.S. dollar. "The only certainty is that a growing portion of American investors think that their assets are better invested outside of Europe, something which wasn't the case six weeks ago."
- Interestingly, it's the "core" Eurozone countries like Germany (NYSEARCA:EWG) and France (NYSEARCA:EWQ) with which U.S. investors are least interested, while Italy (NYSEARCA:EWI) and Spain (NYSEARCA:EWP) have seen net inflows over the past three months.
- Europe equity ETFs: VGK, FEZ, IEV, HEDJ, EPV, EZU, FEU, FEP, UPV, ADRU, FEEU, EURL, EURZ, DBEU, IEUR, FIEU
- July inflation slowed to 1.6% from June's 1.9% and against forecasts for 1.8%, according to the Office for National Statistics. Retail-price inflation - the gauge used as a basis for inflation-linked bonds - slowed to 2.5% in July from 2.6%.
- The pound tumbled about 60 pips on the news and is now off 0.5% on the session at $1.6640.
- ETFs: FXB, GBB
- After announcing the creation of its new global metals and mining company, BHP Billiton (NYSE:BHP) says it is now in talks with potential buyers for all, or part, of its Nickel West division in Australia, which was excluded from the company's major restructuring.
- "We continue to talk to interested parties," says CEO Andrew Mackenzie. "This is a matter of commercial discussions with several potential buyers."
- President Barack Obama says that the U.S. will continue "limited" airstrikes against Islamic State militants, which have helped Iraqi and Kurdish forces retake the Mosul dam and halted the advance of IS on the city of Erbil.
- News of the recaptured dam helped push oil prices down with Brent for October settlement sliding 1.9%, to $101.60 a barrel on the London-based ICE Futures Europe exchange yesterday, resulting in its lowest close since June 26, 2013.
- ETFs: GULF, MES
- BHP Billiton (NYSE:BHP) has announced its plans to form a new global metals and mining company based around its aluminium, coal, manganese, nickel and silver assets. The new company will be listed on the Australian stock exchange, with a secondary listing in South Africa.
- "With a simpler portfolio, we are targeting sustainable, productivity-led gains of at least $3.5B per annum by the end of the 2017 financial year," says CEO Andrew Mackenzie.
- The demerger will leave BHP Billiton focused on its long-life iron ore, copper, coal, petroleum and potash basins.
- Telecom Italia (NYSE:TI) will hold a board meeting next week to discuss its offer to acquire Vivendi's (OTCPK:VIVHY) Brazilian broadband unit GVT. The meeting will likely be held on Aug. 27.
- "Certainly nothing will happen this week," says a source.
- Previously: Telefonica upping GVT offer by bundling content deal
- PetroChina (NYSE:PTR) is re-evaluating its multi-billion-dollar push for LNG production, due to the rising cost of the gas and China's slower growth rate that has reduced demand.
- An anti-corruption probe of PetroChina's top executives also adds to the uncertainty of the company's business strategy.
- PetroChina shut two loss-making gas liquefaction plants in the past month, with neither plant having a clear restart date.