Monday, June 29, 2015
- Investors may think they have things figured out by buying dollars amid macro jitters, but that strategy had to be faded today. The dollar (UUP -0.6%) closed lower across the board, including a 0.3% decline vs. the euro (NYSEARCA:FXE) after having been about 1.5% higher in knee-jerk action reaction to Greece last night.
- The dollar also lost 1.1% vs. the yen (NYSEARCA:FXY), 0.3% vs. the pound (NYSEARCA:FXB) and 0.6% vs the aussie (NYSEARCA:FXA).
- ETFs: UUP, UDN, FORX, USDU
- "The EU treaties make no provision for euro exit and we refuse to accept it," says Finance Minister Yanis Varoufakis. "Our membership is not negotiable ... The Greek government will make use of all our legal rights."
- His comments come as Europe's leaders threaten to force Greece out of EMU if citizens vote "no" in Sunday's referendum. Varoufakis says the country has enough money to keep going until Sunday, but capital controls and the bank closures are making things difficult.
- While European leaders express confidence Greece is "ring-fenced," British and U.S. authorities don't necessarily share those feelings.
- European Commission President Jean-Claude Juncker injects himself into Greece's internal politics, warning voters not to "commit suicide" with a "no" vote. He denies the troika is demanding pension cuts as part of a deal, a claim called a "preposterous lie" by one Greek official.
- Source: Ambrose Evans-Pritchard
- GREK is at session lows, down 20%. NBG -24%, [[CCHGY]] -3.7%
- In other news, S&P downgrades Greece from CCC to CCC-, putting the odds of a Grexit at 50%.
- Yandex (NASDAQ:YNDX) and QIWI are posting large declines as European indices post 3%+ drops amid fears Greece is nearing default, and the dollar rises 1.4% against the ruble to 55.5. Russia's MICEX Index fell a modest 0.6%; the Nasdaq is down 1.5%.
- Yandex is now barely a dollar above a March low of $13.90, after having rallied as high as $21.36 in April (before its Q1 numbers came out). Qiwi, aided by a Q1 beat and a well-received acquisition, remains up 49% from a February low of $18.70.
- Greece owes the IMF a $1.7B debt payment due by the close of business tomorrow, and - in no surprise - a government official says the country will not be paying this tranche, reports the WSJ.
- As Bloomberg points out, missing a payment to the IMF is not the same as missing one to a bank. The IMF would consider Greece to be in "arrears" rather than default, and the three major credit agencies have said failure to pay wouldn't constitute a formal default. IMF boss Christine Lagarde reminds that the agency cannot disburse any aid to a country in arrears.
- Nokia (NOK -4.1%) and merger partner Alcatel-Lucent (ALU -3.7%) aren't being spared as European equities post steep declines amid expectations Greece will soon default. France's CAC-40 has fallen 3.6%, Germany's DAX 3.4%, and the Euro Stoxx 50 4.2%. With Switzerland's help, the euro is nearly flat.
- It was only a week ago that Nokia and Alcatel joined a European rally fueled by hopes of a pending Greek deal.
- Separately, activist Elliott Management has disclosed a 1.3% Alcatel-Lucent stake obtained via equity swaps, a move that could be a precursor to a call for Nokia to up its buyout offer price. #2 Alcatel shareholder Odey Asset Management has already called deal terms "unacceptable."
- An FT source states Alcatel hasn't yet heard from Elliott. The paper notes a deal could be tough to derail, given only 50% of Alcatel shares need to be tendered and only Nokia shareholders get to vote on the transaction.
- Turkcell (TKC -2.7%) has wrapped a buyout of the rest of its Ukrainian unit, Astelit.
- The company's paid $100M to buy out partner System Capital Management, who held 45% of Astelit through its Netherlands venture partner Euroasia Telecommunications Holding. Astelite operates in Ukraine under the brand "Life:)."
- Turkcell is also settling Astelit's debts with SCM and guaranteeing up to $66M in credit.
- It marks Turkcell's first major move across borders, and the company says it will use Ukraine as a pilot for further regional expansion.
- Previously: Turkcell in talks to buy out Ukrainian partners (Jun. 19 2015)
- Previously: Turkcell down 5.3%; launches Ukraine 3G (Jun. 08 2015)
- An attempted bounce coinciding with the open of markets in the U.S. failed, and the Stoxx 50 closes down by 4.25%, lead by Italy's 5.3% decline. Spain shed 4.6%, France 3.7%, and Germany 3.6%, The U.K. declined 2%.
- Nearing noontime, U.S. averages are at their lows of the day, with the S&P 500 down 1.2% and the Nasdaq down 1.4%.
- Previously: Europe sinks 4% as Greece imposes capital controls (June 29)
- Hyundai (OTC:HYMLF) announces a new four-year sponsorship deal with the NFL.
- The South Korean automaker will replace GM as the preferred marketing partner of the football league.
- Financial terms of the deal weren't disclosed. GM is estimated to have spent over $150M a year on the NFL when marketing and advertising costs are combined.
- Hyundai sales in the U.S. are up 2% Y/Y through May to trail the industry average.
- BMW (OTCPK:BAMXY) and Toyota (NYSE:TM) have shifted up a gear on their project to develop a midsize sports car together.
- The alliance between the two automakers dates back to 2013 and includes a separate initiative to share research on fuel cell technology.
- An increase in shared platforms between major automakers has been a major theme this year of Fiat Chrysler CEO Sergio Marchionne.
- The euro (NYSEARCA:FXE) knee-jerked lower by 1.5% on Sunday night after Greece shut its banks and stock market, and imposed capital controls, but has now recouped nearly all of that decline.
- Other asset markets - namely stocks and interest rates - are showing no such reversal.
- Behind the move in the euro is the Swiss National Bank intervening to prevent appreciation of the franc (NYSEARCA:FXF), which is now just marginally higher on the session.
- “It is currently a very difficult situation and we are observing developments very closely,” says SNB cheif Thomas Jordon, speaking at a conference. He declined to give details about the size of the bank's intervention, the first such move since the SNB in January threw in the towel on its floor on euro/franc.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- GREK -17% premarket, National Bank of Greece (NYSE:NBG) -30%
- Previously: Europe sinks 4% as Greece imposes capital controls (June 29)
- The Stoxx 50 (NYSEARCA:FEZ) is near session lows, down 3.7% after Greece over the weekend shut the banks and the stock market, and imposed capital controls.
- A referendum next Sunday is likely to determine the country's fate, with a "yes" vote meaning the fall of the current government, allowing a new government to cut a deal with the country's creditors. A "no" vote likely means Grexit.
- Italy (NYSEARCA:EWI) is off 4.1%, Spain (NYSEARCA:EWP) 3.9%, France (NYSEARCA:EWQ) 3.6%, Germany (NYSEARCA:EWG) 3.3%, U.K. (NYSEARCA:EWU) 1.8%.
- Previously: Rates plunge on Greece gets ready to default (June 29)
- ETFs: VGK, FEZ, HEDJ, IEV, EPV, EZU, FEU, EEA, EURL, FEP, UPV, DBEU, ADRU, HEZU, FEEU, IEUR, FIEU, DBEZ, FEUZ, SBEU, HFEZ
- Greek banks and its stock market are closed today, with a payment due the IMF tomorrow likely to be missed. A referendum set for next Sunday is likely to determine the country's fate. A sizable "yes" vote would likely lead to the fall of the current government, allowing a new unity government to cut a deal with the troika. A "no" vote or even a close vote likely means Grexit.
- Europe's down more than 3% and U.S. index futures are lower by more than 1%.
- The U.S. 10-year yield is down 13 basis points to 2.34% and the German 10-year Bund yield is off 15 bps o 0.78%. The Italian 10-year yield is up 17 bps to 2.32% and the Spanish 10-year is up 16 bps to 2.27%.
- TLT +2%, TBT -4%.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, EU, TTT, ZROZ, TLH, SBND, VGLT, UBT, DLBS, TLO, BUNL, TENZ, LBND, BUNT, GGOV, DLBL, TYBS, VUSTX
- Japan -2.88%
- Hong Kong -2.61%.
- China -3.34%.
- India -0.60%.
- London -1.73%.
- Paris -3.42%.
- Frankfurt -3.71%.
- The Swiss National Bank intervened in foreign exchange markets over the weekend in an effort to hold down the franc's rise amid uncertainty over Greece's future.
- "We have always said that we are active in the foreign exchange market if necessary," SNB Chairman Thomas Jordan said at a finance event in Bern, Switzerland.
- A Greek default would likely spark massive safe-haven flows into the Swiss currency and spur the SNB into action.
- Euro is -0.4% to ₣1.0387.
- ETFs: FXE, EUO, FXF, ERO, DRR, EUFX, ULE, URR
- With a Greek default on the horizon, a divergence in the direction of bond yields is at work today, with money flowing into Germany's fixed-income market, and out of Spain, Italy, Portugal and Greece.
- The turbulence is in contrast to last week, when benchmark German bunds fell and Spanish securities advanced amid optimism a deal would be reached.
- 10-year bond yields: Germany -18 bps to 0.74%; Spain +24 bps to 2.34%; Italy +24 bps to 2.39%; Portugal +30 bps to 2.99%.
- The yield on Greek 10-year securities jumped the highest since December 2012, shooting up 379 basis points to 14.63%.
- ETFs: GIM, EU, BNDX, BWX, IGOV, BUNL, BUNT, GGOV
- Despite China's weekend decision to cut interest rates, the Shanghai Composite slid 3.3% to levels more than 20% below its June 12 close of 5,180.51, meeting some investors' definition of having entered a bear market.
- On Saturday, the PBOC cut its benchmark lending rate and one-year deposit rate by 25 bps to 4.85% and 2%, respectively.
- Chinese regulators are now considering suspending initial public offerings to stabilize the country’s tumbling equity markets.
- ETFs: FXI, ASHR, EWH, CAF, YINN, KWEB, PGJ, GXC, FXP, HAO, YANG, TAO, CHIX, CHN, PEK, CHIQ, CQQQ, MCHI, TDF, QQQC, XPP, YAO, GCH, ASHS, YXI, CN, CHXF, FCA, CHNA, CNXT, CHII, ECNS, CHIE, EWHS, CHIM, KBA, KFYP, FCHI, JFC, FHK, AFTY, CHAU
- Delegates from 57 countries gathered in Beijing today to launch the Asian Infrastructure Investment Bank and finalize each member's stake in the institution.
- China, the lender's largest shareholder, will contribute $29.7B of the bank's $100B capital base, and have 26.06% of the total votes in the institution.
- In the lead-up to the launch, China vowed to operate a transparent bank and pledged to decrease the bureaucracy that slows projects at existing multilateral lenders.
- China's securities regulator faces a "massive job" to coordinate the changes needed for domestic shares to be listed in MSCI's key emerging markets index.
- "It's not a simple issue - they have to coordinate nine ministries...so don't underestimate how difficult this task is," MSCI's Chris Ryan told an investor conference in Hong Kong.
- Earlier this month, MSCI told China it must further liberalize its capital markets before it would include A-shares in its Emerging Markets Index (ETF: EEM), tracked by $1.7T of global funds.
- Previously: MSCI: China A-shares to be included in benchmark, but not just yet (Jun. 09 2015)
- Stocks are plunging across the globe as Greece looks set to default on tomorrow's debt repayment.
- With emergency aid to the country frozen, Athens has imposed capital controls to halt bank runs.
- Europe: FTSE 100 -2.3%; CAC 40 -4.2%; DAX -4.1%
- Asia: Nikkei -2.9%; Shanghai -3.3%; Hang Seng -2.7%; Sensex -1.7%
- U.S. futures are all lower by 1.3%.
- Euro -0.5% to $1.1116
- ETFs: GREK -13.9% premarket
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