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04 октября, 12:18

Шорт-лист кандидатов для ФРС: кого выберет Трамп?

Советники Трампа составили окончательный список кандидатов на пост главы ФРС и, похоже, остановили поиск. И, несмотря на то что окончательный список имен знает лишь "небольшая горстка" советников президента, это не помешало тому, что произошла утечка.

08 сентября, 14:05

Crashing Dollar Sends European Stocks, US Futures Reeling; Yuan Has Best Week On Record

European stocks dropped, Asian and EM market rose, and S&P were lower by 0.3% as investors assessed the latest overnight carnage in the USD which plunged to the lowest level since the start of 2015, sending the USDJPY tumbling to 107, the euro extending gains to just shy of $1.21 and a slowdown in China’s export growth which however did not prevent the Yuan from posting its best weekly gain on record. It was all about the seemingly huge currency moves overnight as the dollar plunged for the 7th day in a row, the biggest 7 day drop in 4 months, amid doubts about further Federal Reserve tightening, North Korea tensions and as Hurricane Irma threatens South Florida.  The Yen rose to the strongest level against the dollar since Nov. amid nervousness about possible provocation from North Korea ahead of its foundation day on Saturday; yen surged past 108 per dollar as options barriers gave way, triggering a series of stop-losses. The Yuan rallied toward 6.45/USD in both onshore and offshore markets as traders speculate PBOC will tolerate a stronger currency after it rose past the psychological 6.50 mark Thursday. The Australian dollar surged to the highest in more than two years on the back of dollar weakness while the cherry on top was the 10Y TSY yield touching a YTD low of 2.014% before rebounding to ~2.035%. Meanwhile, natural disasters were aplenty, including the most powerful earthquake this century to shake Mexico, while Hurricane Irma is projected to hit Florida Sunday, and North Korea is widely expected to launch an ICBM on its September 9 holiday. As reported last night, the big overnight story was the dramatic plunge in the dollar in Asian trading.... ... which also pushed the EURUSD to the highest level since January 2015, a move that was not helped by this morning's Reuters "trial balloon" according to which the ECB was considering 4 QE reducing scenarios. “At its current level, the Euro is not a threat for the Eurozone,” Philippe Ithurbide, global head of research at Amundi Asset Management, said in a report. “If the euro stabilizes, or continues a gradual appreciation path as in our base scenario, the ECB could announce -- maybe in October -- a reduction, starting in January 2018, of the quantitative easing program. Should the euro continue to appreciate rapidly, the ECB could become more dovish and postpone its tapering.” This morning, the USD has attempted to stabilize after said heavy selling in Asian session, which has seen the DXY hit a fresh YTD low. Meanwhile, the USD/CNH has bounced from levels last seen in Dec. 2015 after reports of Chinese concerns on yuan strength. The Yuan was set for its best weekly gain since records began in 2007. The onshore yuan headed for the third weekly advance in a row, with a gauge of the dollar tumbling toward the biggest decline since May. The CNY climbed 0.48% to 6.4543 per dollar as of 5:11 p.m. in Shanghai on Friday; extending the weekly advance to 1.6%, the most since Bloomberg began compiling CFETS data in 2007.  On Friday morning, the PBOC strengthened the daily reference rate by 0.36% to 6.5032 per dollar, extending the 10-day run of increases to 2.4%.  The Bloomberg replica of CFETS index, which tracks the yuan against 24 currencies, climbs 0.10% to 95.16 The Yuan’s recent appreciation has been bigger than expected - and it’s also more than what can be explained by the dollar’s moves - which is likely driven by strong corporate dollar selling and positive market sentiment, UBS economist Wang Tao writes in report sent Friday. "Allowing the yuan to gain versus the basket is a step toward convincing the market of increased two-way flexibility; not expecting it to embark on a multi-year appreciation path in effective term" Wang adeded.  According to Reuters, China policy makers are increasingly worried a sharp CNY rally could hurt exports and the economy, however China is unlikely to intervene forcefully to cap the CNY due to worries of criticism from the US. Overnight, NY Fed president Bill Dudley became the latest U.S. central banker to lay out his views ahead of a policy-setting meeting later this month as expectations for an interest-rate increase have been scaled back. According to Bloomberg, Dudley reiterated the need to continue raising rates while conceding that the Fed may have to rethink its inflation model. USD/JPY holds close to overnight levels after tripping downside stops through 108.00. As noted earlier, Bund futures sell off after latest ECB sources give more details on potential tapering, curve steepens. Treasurys partially retrace overnight spike higher, precipitated by the USD weakness.  In equities, European equity markets open lower and slowly grind back to unchanged led by bank sector, Santander +2.5% after being upgraded at Morgan Stanley. Mining sector underperforms after base metals sell off  aggressively in response to China trade data. Stocks in Europe struggled for traction as the euro extended its march above $1.20, while S&P 500 index futures dropped. The most powerful earthquake this century shook Mexico, adding to investor anxiety. Asia equity markets traded mixed following similar indecisiveness in US and as the region digested a slew of economic releases including Japanese GDP and Chinese Trade data. ASX 200 and Nikkei 225 were lower as financials mirrored the underperformance in their US peers, with Japan also dampened by a weaker than expected Final Q2 GDP which showed the largest downward revision since the current accounting method began in 2010. Shanghai Comp. and Hang Seng were positive despite another OMO skip by the PBoC which resulted to a larger net weekly liquidity drain W/W, as strength in property and energy names kept sentiment upbeat while traders mulled over the release of mixed Chinese Data. China released its latest trade balance data which showed that Exports missed, but Imports surpassed expectations to suggest strong domestic demand. Exports growth for China moderated to 5.5% yoy in August from 7.2% yoy in July, below expectations, while imports growth was up to 13.3% yoy from 11.0% yoy in July, above consensus. In sequential terms, exports contracted by 0.4% mom sa, albeit less than that in July ( -2.0% mom sa). Imports increased by 2.9% mom sa, rebounding from -1.9% mom sa in July. The trade surplus moderated to US$42.0bn from US$46.7bn in July Chinese Trade Balance (CNY)(Aug) M/M 286.5B vs. Exp. 335.7B (Prev. 321.2B) Chinese Exports (CNY)(Aug) Y/Y 6.90% vs. Exp. 8.70% (Prev. 11.20%) Chinese Imports (CNY)(Aug) Y/Y 14.40% vs. Exp. 11.70% (Prev. 14.70%) Meanwhile, the threat from North Korea lingers. U.S. President Donald Trump said it’s not “inevitable” that the U.S. will wind up in a war with North Korea over its continued development of nuclear weapons, though military action remains an option. Pyongyang may test a missile this weekend to coincide with its “founding day” on Sept. 9. Ten-year Treasury yields fell toward 2 percent and gold headed for a third week of advance ahead of a potential North Korean missile launch. Copper led most industrial metals lower and crude oil dropped. The yield on 10-year Treasuries declined less than one basis point to 2.04 percent, the lowest in 10 months. Britain’s 10-year yield advanced one basis point to 0.982 percent. West Texas Intermediate crude fell 0.4 percent to $48.91 a barrel, the largest fall in more than a week. Gold gained 0.2 percent to $1,351.25 an ounce, the strongest in almost 13 months. Copper declined 1.4 percent to $6,802.00 per metric ton, the lowest in more than a week on the largest drop in more than four months. Economic data include wholesale inventories. Market Snapshot S&P 500 futures down 0.4% to 2,455.75 STOXX Europe 600 down 0.2% to 374.04 German 10Y yield fell 1.3 bps to 0.294% MSCI Asia up 0.4% to 161.82 MSCI Asia ex Japan up 0.4% to 534.48 Nikkei down 0.6% to 19,274.82 Topix down 0.3% to 1,593.54 Hang Seng Index up 0.5% to 27,668.47 Shanghai Composite down 0.01% to 3,365.24 Sensex up 0.03% to 31,671.21 Australia S&P/ASX 200 down 0.3% to 5,672.62 Kospi down 0.1% to 2,343.72 Euro up 0.2% to $1.2046 Italian 10Y yield fell 10.2 bps to 1.634% Spanish 10Y yield rose 1.6 bps to 1.511% Brent Futures up 0.5% to $54.76/bbl Gold spot up 0.4% to $1,354.10 U.S. Dollar Index down 0.4% to 91.27 Top Overnight News Reuters: ECB discussed scenarios yesterday and agreed the next step is to cut stimulus but should be done with broadest possible consensus; options included reduction to EU20b or EU40b and extension by 6 or 9 months, according to people familiar; ECB’s Liikanen: Some QE decisions will be taken in December Fed’s Dudley: Appropriate to continue to remove monetary policy accommodation gradually, low inflation may be structural; Fed’s George says it’s time to continue with Fed rate hikes President Donald Trump said it’s not “inevitable” that the U.S. will wind up in a war with North Korea over its continued development of nuclear weapons, but that military action remains an option Trump suffered another setback on his travel ban, with an appeals panel leaving in place a lower-court ruling that forces the administration to accept people with grandparents, cousins and other relatives in the U.S. Traders braced for economic damage to Florida from Hurricane Irma, set to make landfall on Sunday. The most powerful earthquake this century shook Mexico, adding to investor anxiety and sending the peso weaker Federal Reserve Bank of New York President William Dudley reiterated the need to continue raising interest rates while conceding that the U.S. central bank’s inflation model may be in for a rethink soon White House is considering at least six candidates to be the next head of the Fed; a chance Yellen will be renominated, though Cohn’s prospects have dimmed according to people familiar Chinese officials are beginning to worry about the rallying yuan due to the strain on exporters, according to people familiar: Reuters China Aug. Trade Balance: +$41.9b vs +$48.5b est; Exports 5.5% vs 6.0% est; Imports 13.3% vs 10.0% est. Delta Cancels Flights for South Florida Airports on Irma Strongest Quake in Century Hits Mexico, at Least Three Dead White House Is Said to Be Considering at Least Six for Fed Chair Equifax’s Historic Hack May Have Exposed Almost Half of U.S. U.S. Is Said to Target North Korea Violators, With ZTE’s Help BlackRock Is Said to Be in Talks for Calpers’s Buyout Business ECB Is Said to Study QE Options That Don’t Need Rule Tweaks Apple-Backed Billionaire Makes Case to Buy Toshiba Chip Unit China’s Export Engine Slows as Imports Maintain Steady Gains Asia equity markets traded mixed following similar indecisiveness in US and as the region digested a slew of economic releases including Japanese GDP and Chinese Trade data. ASX 200 and Nikkei 225 were lower as financials mirrored the underperformance in their US peers, with Japan also dampened by a weaker than expected Final Q2 GDP which showed the largest downward revision since the current accounting method began in 2010. Shanghai Comp. and Hang Seng were positive despite another OMO skip by the PBoC which resulted to a larger net weekly liquidity drain W/W, as strength in property and energy names kept sentiment upbeat while participants also mulled over the release of mixed Chinese Data where Trade Balance and Exports missed, but Imports surpassed expectations to suggest strong domestic demand. 10yr JGBs gained amid the risk averse sentiment in Japan and as yields tracked the declines seen in their US counterparts, while the BoJ were also present in the market for a total of JPY 880bln of JGBs across the curve.  China policy makers worry a sharp CNY rally could hurt exports and the economy; China unlikely to intervene forcefully to cap the CNY due to worries of criticism from the US, according to sources. Top Asian News Tencent’s Giant Rally Is a Problem for Some China Investors SpiceJet Shows Long-Haul Intent With Boeing-Airbus Contest Japan’s GDP Growth Revised Down on Softer Capital Expenditure Citi Sees Pressure on Yuan, Philippines Peso Amid Reserves Trend China No. 4 Developer Seeks to Repay Overdue Debt at Lower Rate Topix Has Worst Week Since April on N. Korea, Natural Disasters Yuan Surge Feeds Speculation Policy Makers to Loosen Control Soft risk off tone has highlighted this lacklustre Friday morning, as much of the price action was seen yesterday. Equity markets opened marginally lower and have traded around these levels from the open with 8/10 Euro Stoxx sectors trading in the red. The stronger EUR has supported the mild risk-off tone following yesterday’s ECB meeting and the EUR continuing to ramp. Stock specific sees basic resources struggling, being affected by the pressure of copper prices, elsewhere the finance sector is one to trade in the marginal green, buoyed by Morgan Stanley’s upgrade of Santander. Peripheral bonds are seeing slight downward pressure, likely due to profit taking following yesterday’s outperformance amid the ECB press conference. Price action across European curves has been quiet, as the EU AAAs all trade around levels seen in the open. Top European News U.K. Manufacturing Jumps, Construction Falls as Quarter Starts Akzo Nobel Warns on 2017 Profit as Paintmaker Replaces CFO Nordea Move Has Riksbank Chief Warning of Dangerous Fallout Swedish Government Backs Away From Plan to Cut Riksbank Reserves Overlooked in Cancer, Glaxo and Sanofi Look to Get Into the Race Greene King Shares Slump on Trading Update, Dragging Pubs Lower Mercedes Fields Buzz Aldrin to Take on BMW While Fiat Stays Home Trinity Mirror Starts Talks to Buy Desmond’s U.K. Tabloids Germany’s Facebook Case Tackles Crucial Digital Issues: Mundt FX markets have seen subdued trade following yesterday’s volatility being followed by an attack on the greenback overnight. Much anticipation was on the UK Manufacturing and Industrial Production data, the formers slight beat vs. expected sparked little sterling buying, with the data causing no real price action. USD/JPY broke through the 108 handle during the Asia/European crossover, knocking through option barriers on the way through. The week’s aggressive buying between 108.00/108.50 has aided with the bearish pressure, as stops were triggered through the 108.00 level, now firmly through April’s low. July 16, 2016 high has paved some support for the pair, however, a break through 107.50 is likely to see a 105 print. In commodities, the US storms remain a concern to energy traders, the catastrophic events are likely to lead to refiners and recovery projects competing for the same labour, in turn driving up costs or causing labour shortages. Brent futures have flipped back into its pre-hurricane backwardation after fears of a significant drop in crude demand failed to leak into markets. Copper has been the noticeable laggard in metal markets, as the precious metals all perform well amid the risk-off tone. Looking at the day ahead, there is the final reading for wholesale inventories along with consumer credit data. Away from the data, the Philadelphia Fed President Harker will speak on consumer behaviour in credit. US Event Calendar 8:45am: Fed’s Harker Speaks on Consumer Finance in Philadelphia 10am: Wholesale Inventories MoM, est. 0.4%, prior 0.4%; Wholesale Trade Sales MoM, est. 0.5%, prior 0.7% 3pm: Consumer Credit, est. $15.0b, prior $12.4b DB's Jim Reid concludes the overnight wrap So unsurprisingly the talk of the town over the past 24 hours has been the ECB and President Draghi. As expected there was no change to policy but that was never going to be the talking point. Draghi did however more or less confirm that a decision on tapering will likely be taken at the October meeting. A “very, very preliminary discussion” was said to have taken place within the governing council yesterday but the “bulk of decisions” will be made in October for beyond 2017 according to the President. The biggest focus going into the meeting though was on what sort of rhetoric we would get from Draghi around the recent strength in the currency. While questioned and addressed at least half a dozen times, the general feeling was that Draghi felt relatively comfortable suggesting that he and the council view Euro strength as a sign of improving economic fundamentals. That gave the green light for the single currency to rally another +0.89% yesterday and so close above 1.200 for the first time since January 2015. This morning it’s up further, at 1.2070 as we go to print. The President did yesterday highlight up front that “the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring” along with making various other references. However Draghi also played up growth and failed to really downplay inflation. Draghi called growth “robust” and “broad based” and signalled that the ECB had upgraded this year’s growth forecast to 2.2% from 1.9%. 2018 and 2019 forecasts were left unchanged. On inflation the impact of the recent currency move was to only shade one-tenth off the 2018 and 2019 headline forecasts, and leave 2017 as is at 1.5%. That said core inflation expectations were revised down in 2019 by twotenths. Overall though it felt a bit like every time Draghi tried to downplay the currency he ended up caveating it with a positive. Away from that, another notable snippet from the press conference included Draghi saying that the ECB “haven’t really discussed the scarcity issue (for bond buying) because so far we’ve consistently shown that we’ve been able to cope with this issue quite successfully”. DB’s Mark Wall summed up in his report by saying that his baseline expectation is a “slow and extend” decision on QE at the October meeting, extending until mid-2018 at the slower rate of EUR40bn per month. He expects a dovish tightening and notes that the ECB could achieve this by justifying slower QE on the basis of partial normalisation of core while saying that full normalisation is susceptible to FX appreciation, and also maintaining the QE guidance by saying that the Bank is prepared to do more if necessary. The failure to temper the move in the currency resulted in an interesting market dynamic as it essentially cleared the path for European bonds to rally. 10y Bund yields closed -4.1bps lower at 0.302% and the lowest since late June. France and Netherlands were -5.0bps and -4.5bps lower respectively while the periphery outperformed with yields in Italy, Spain and Portugal -11.1bps, -7.3bps and -10.5bps respectively. The Stoxx 600 also rebounded from an early fall to close +0.27%. Meanwhile across the pond, 10y Treasuries plunged to a new YTD low during the day of 2.032% and are continuing to flirt with that 1% handle. They eventually closed just off that at 2.040% which is where they are this morning. That move for Treasuries appeared to be more European led but clearly the threat of Hurricane Irma (and two other Hurricanes) inching closer to Florida and reports per Bloomberg about another possible missile test by North Korea is keeping the bond market propped up. The cloud hanging over the Fed now with the all the antics in Washington and an uncertain Fed Board composition is clearly not helping too. The S&P 500 closed virtually flat (-0.02%), but within the sectors, health care rose but banks (-1.76%) and insurers (-1.90%) were hit given the potential drags from lower bond yields and Hurricane  Irma respectively. Elsewhere, the US dollar index fell -0.68%, Gold rose +1.12% to a new one-year high but WTI Oil was little changed. On the topic of uncertainty, the feeling was that it might be a two-horse race between Janet Yellen and Gary Cohn to be the next Fed Chair, but Bloomberg reported last night that Trump may be considering six more possible candidates for the top job. The list is fairly broad and includes: Kevin Warsh (former Fed governor), Glenn Hubbard (professor at Columbia Uni.), John Taylor (professor at Stanford Uni.), Lawrence Lindsey (former economic advisor to President Bush), Richard Davis (former US Bancorp CEO) and John Allison (former CEO of BB&T). With the various other departures on the Board, Trump is going to have a rare opportunity to handpick and reshape the composition of the Federal Reserve. However as we’ve been saying in recent days, this very much keeps the clouds of uncertainty from dissipating over the Fed for a while. On a related note, following up from the Fed’s Vice-Chair Stanley Fischer’s early resignation the other day, our US team took a closer look at the potential implications. They argue that the FOMC has lost one of its more hawkish members  and with the December FOMC decision already on a course to be contentious, it is possible that there could be at least three dissents to a rate hike decision.  This morning in Asia, markets are heading into the end of the week a bit mixed. The Nikkei (-0.38%), Kospi (-0.13%) and ASX 200 (-0.36%) are all softer but the Hang Seng (+0.50%) and Shanghai Comp (+0.24%) have edged higher. It’s worth noting that trade data in China this morning showed export growth as slowing to +5.5% yoy in Dollar terms from +7.2%. Expectations were for a slower decline to +6.0%. Imports on the other hand surged to +13.3% yoy from +11.0% after the consensus was also for a slowdown in the growth rate. It’s worth noting that this is the second month in a row that export numbers have disappointed. Back to the US debt ceiling. Now that the September deadline has been extended to December, President Trump suggested yesterday that there are “a lot of good reasons” to get rid of the debt ceiling altogether. Senate minority leader Schumer and Senate Finance Chairman Hatch along with others supports the idea, but some do not, including House Speaker Paul Ryan who said that “there is a legitimate role for the power of the purse and Article One powers”. Staying with the US, we’ve had two more Fed speakers in the last 24 hours. The usually hawkish Cleveland’s Fed President Mester said she is “comfortable” raising interest rates again this year and added that not hiking rates between now and March 2018 is not her idea of a gradual rise. Elsewhere, The NY Fed President Dudley said that “I expect the US economy will perform quite well… as this occurs, I anticipate that wage growth will firm and price inflation will gradually rise” and that “we will continue to gradually remove monetary policy accommodation”. Moving on. The latest on Brexit talks yesterday saw EU Chief Brexit negotiator David Barnier say “I’ve been very disappointed by the UK position…there is a moral dilemma here, you can’t have 27 (states) paying for what was decided by 28” and that “the UK needs to tell us what it wants and we will see what is possible”. Elsewhere, the President of the European Parliament, Antonio Tajani, said “it would seem very difficult that sufficient progress can be achieved by October”. Here in the UK, the Guardian noted that PM May has rejected an invite to address the EU Parliament to explain Britain’s position, instead preferring to discuss with leaders in closed sessions. Before we take a look at today’s calendar, a quick recap of yesterday’s economic data. In the US, the initial impact of Hurricane Harvey has seen initial jobless claims rise 62k to 298k (vs. 245k expected), with applications in Texas up 52k. Continuing claims were broadly in line at 1,940k (vs. 1,945k expected). Elsewhere, the final reading for nonfarm productivity was above market at +1.5% qoq (vs. +1.3% expected), resulting in a through-year gain of +1.3% yoy. Back in Europe, the final reading on the Eurozone’s 2Q GDP was unrevised at +0.6% qoq and +2.3% yoy (vs. 2.2% expected). In Germany, July industrial production was flat (vs. +0.5% mom expected), but annual growth is still up +4.0% yoy (vs. +4.6% expected). In the UK, the Halifax house price index was well above market at +1.1% mom (vs. +0.2% expected) and +2.6% yoy (vs. +2.1% expected). Over in France, the trade deficit widened to EUR6.0bn in July, with +4.9% yoy growth in exports outpaced by +9.2% yoy growth in imports. Looking at the day ahead, Germany’s trade balance, current account balance and export / imports stats are due this morning. For the UK and France, industrial production (+0.2% mom expected for UK; +0.5% mom for France), manufacturing production and trade balance stats are also due. Over in the US, there is the final reading for wholesale inventories along with consumer credit data. Away from the data, the Philadelphia Fed President Harker will speak on consumer behaviour in credit.

07 сентября, 22:47

White House Denies Cohn Report, Says Considering "At Least Six" For Fed Chair

Denying yesterday's WSJ report that Trump has "fired" Gary Cohn from his future role as Fed chair due to his strong opposition to Trump's handling of the Charlotteville tragedy, Bloomberg reports that the White House is considering "at least a half-dozen candidates to be the next head of the Federal Reserve, including economists, executives with banking experience and other business people" The breadth of the search goes against the narrative that has taken hold in Washington and on Wall Street that the Fed chair nomination is a two-horse race between National Economic Council Director Gary Cohn and current Fed Chair Janet Yellen, whose term expires in February. Actually, according to many, including online betting markets, the race has - for a while - been between mostly Yellen and Kevin Warsh, who as of today are both neck and neck in their online odds of being nominated Fed chair on February 4. Previously, President Donald Trump said that both Yellen and Cohn, were being considered for the top Fed job. Since then, Cohn’s prospects have grown cloudy after he publicly criticized remarks the president made in the wake of racially-charged violence in Charlottesville, Virginia. The Wall Street Journal reported Wednesday that Trump is unlikely to pick Cohn for the post, and three people close to Trump told Bloomberg that Cohn’s prospects for the Fed job have dimmed. But three people familiar with the process say Trump is not yet deeply focused on the search. It is still being conducted by staff who aren’t ready yet to present him with a short-list of vetted candidates. John DeStefano, the president’s chief personnel recruiter, is in charge of the search, one person said.   Trump’s former chief strategist Steve Bannon, who clashed with the more moderate Cohn inside the White House before his departure last month, told 60 Minutes in an interview to be broadcast Sunday that Cohn should “absolutely” resign. “It’s been glacial in filling some of these jobs, which is surprising because the president during the transition” talked a lot about “retaking control” of the central bank, said Jaret Seiberg, a Washington policy analyst for Cowen & Co. in an interview with Bloomberg Television. Acording to Bloomberg, some of the other possible contenders include former Fed Governor Kevin Warsh - a vocal opponent to the Fed's destructive groupthink - as well as Columbia University economist Glenn Hubbard and Stanford University professor John Taylor, one of the people familiar said. Bloomberg adds that Lawrence Lindsey, a former economic adviser to President George W. Bush, has been discussed. Former US Bancorp CEO Richard Davis and John Allison, the former CEO of BB&T Corp., have also been considered. Meanwhile, here is the list of most likely candidates according to PredictIt, which after yesterday's drop in Cohn odds, has Warsh back on top and the most likely next Fed chair:

28 июля, 22:50

Markets, Regulators Ignore Ticking Time Bomb Of Shadow Margin Loans

Authored by Wolf Richter via WolfStreet.com,  Magnitude unknown but huge. Brokerages push it to new heights. Stock and bond market leverage is everywhere. Some of it is transparent, such as NYSE margin debt which was $539 billion as of the June report. But the hottest form of stock and bond market leverage is opaque, offered by financial firms that usually don’t disclose the totals: securities-based loans (SBLs) — or “shadow margin” because no one knows how much of it there is. But it’s a lot. And it’s booming. These loans can be used for anything – pay for tuition, fix up that kitchen, or fund a vacation. The money is spent, the loan remains. When security prices fall, the problems begin. Finra, the regulator for brokerages, doesn’t track this shadow margin, nor does the SEC. Both, however, have been warning about the risks. No one knows the overall amount of this shadow margin, but some details have been reported: Morgan Stanley had $36 billion of these loans on its balance sheet as of the end of 2016, up 26% from 2016, and more than twice the amount in 2013. Bank of America Merrill Lynch had $40 billion in SBLs on the balance sheet at the end of 2016, up 140% from 2010; UBS and Wells Fargo “also have made billions in such loans, people familiar with those banks” told the Wall Street Journal. Raymond James, Stifel Nicolaus… they’re all doing it. Fidelity used to fund its own SBLs for its clients, but three years ago partnered with US Bancorp. Even the little ones are trying to get their slice of the pie: In April, robo-advisory startup Wealthfront, with less than $6 billion, announced that it would offer SBLs to its clients. And now Goldman Sachs, which has been offering SBLs to its 12,000 super-wealthy clients through its Private Banking unit — accounting “for more than half of the unit’s $29 billion in loans outstanding,” according to the Wall Street Journal — announced on Thursday that this wasn’t enough and that it is partnering with Fidelity Investments to spread these loans far and wide. This effort to lever up investors’ portfolios occurs after an eight-year bull run, with stock indices hopping from one all-time high to the next even as the economy has been growing at a dreadfully slow pace and even as corporate earnings have mostly gone nowhere for years. Since July 2012, the trailing 12-month “adjusted” earnings-per-share of the companies in the S&P 500 rose just 12% in total. Over the same period, the S&P 500 Index itself soared 80%. These adjusted earnings are now back where they’d been on March 2014. Three years of earnings stagnation. However, over the same three-plus years, the S&P 500 index has soared 33%. As earnings have stagnated while stock prices have jumped, the P/E ratio for the S&P 500 companies has soared from 14.8 at the beginning of 2012 to 24.8 now. And bonds have seen an enormous bull run too. It is at these precariously high levels of the markets that brokerages go into hyper-drive to push “shadow margin” on their clients, using inflated securities as collateral. If markets decline, brokerages start making margin calls, and investors will be forced to sell securities into a falling market at the worst possible time, or else the brokerage will liquidate their portfolios. Investors could lose every dime in their accounts and might be personally responsible for the remainder of the debt. After eight years of bull market, no one is thinking about risk anymore. Goldman Sachs will offer these SBLs to about six million accounts managed by 3,850 brokers and wealth managers that use Fidelity’s technology, though they will not be available to Fidelity’s own retail brokerage or wealth-management clients. The Journal: The centerpiece of the action is a new online platform, called GS Select, that will offer loans of between $75,000 and $25 million, with borrowers’ portfolios of stocks and bonds serving as collateral, the companies said Thursday. Goldman’s software can analyze the holdings and make a decision within a day about how much to lend and on what terms. Andrew Kaiser, head of Goldman Sachs Private Banking, told The Journal that this partnership with Fidelity is just the first of several: Small wealth advisers and independent broker-dealers are good fits because they aren’t already connected to a bank, he said. What’s in it for brokerages? SBLs are a source of revenue that replaces some of the revenue brokerages lost as they’re moving away from charging commission on trades to charging fees on assets under management. When clients need money, they’d normally sell some securities and withdraw the proceeds from the account. This would lower the asset balance of the account, and therefore the fees for the broker. So brokerages encourage clients to leave their assets intact and add a big loan to the account. This keeps the asset-based fee intact, and the brokerage also earns interest income on the loans. Everyone at the brokerage benefits from the deal. The Wall Street Journal: Several Merrill Lynch brokers said they have asked longstanding clients to open securities-backed lines of credit to help them hit bonus hurdles, assuring that clients wouldn’t need to use it or pay any fees for opening it. Merrill brokers receive ongoing payments for getting clients to tap credit lines, and those loan balances contribute to year-end bonus calculations, people familiar with matter said.   Brokerage executives have said the longer a client has one of these loans tied to their account, the more likely they are to use it.   “We were dramatically pushed to put these on all of our client accounts,” said Steven Dudash, a former Merrill Lynch broker who has been managing his own investment-advisory firm since 2014. “Whenever you’re product-pushing, it’s not in the client’s best interest.” What’s in it for their clients? Clients get to pile on low-interest-rate debt and huge risks, including the chance of losing more than all the assets in the account if push comes to shove in the markets and their collateral value gets crushed. They will have to sell into a crash at the worst possible time, and even after they sold all their assets, they might still owe the broker, and the broker will go after them for the remaining debt. The Journal explains: These arrangements are structured to benefit the brokerage, with the client shouldering virtually all the risk, critics say. And these loan products are often pushed without regard to whether clients even need them, they add. There is another side effect to this margin debt, whether it is out in the open, like NYSE margin debt, or the shadow margin of those SBLs: When markets decline and forced selling kicks in, it causes a further decline in the market, which causes even more forced selling. Leverage has been the great accelerator on the way up over the past eight years. And it’s also the great accelerator on the way down.

19 июля, 16:34

Квартальная прибыль US Bancorp превысила прогнозы аналитиков

Крупнейший по величине активов региональный банк США US Bancorp зафиксировал более высокую, нежели ожидали аналитики, прибыль во втором квартале благодаря увеличению процентных ставок. Согласно отчету компании, чистая прибыль, причитающаяся акционерам, практически не изменилась и составила $1,43 млрд, при этом прибыль на одну акцию возросла до 85 центов на одну акцию, превысив прогнозы рынка в 84 цента на бумагу. Заметим, что чистый процентный доход повысился в рассматриваемом периоде с $3,25 млрд годом ранее до $3,55 млрд.

Выбор редакции
19 июля, 15:53

Квартальная прибыль US Bancorp выросла до 1.5 млрд долл

Москва, 19 июля. /МФД-ИнфоЦентр, MFD.RU/Один из крупнейших банков США U.S. Bancorp в среду сообщил о росте прибыли во II квартале до 0.85 долл на акцию против 0.83 долл на акцию годом ранее. Доходы банка выросли на 3.1% до 5.5 млрд долл. Аналитики прогнозировали прибыль U.S. Bancorp на уровне 0.84 д...

19 июля, 15:17

Квартальная прибыль US Bancorp превысила прогнозы аналитиков

Крупнейший по величине активов региональный банк США US Bancorp зафиксировал более высокую, нежели ожидали аналитики, прибыль во втором квартале благодаря увеличению процентных ставок. Согласно отчету компании, чистая прибыль, причитающаяся акционерам, практически не изменилась и составила $1,43 млрд, при этом прибыль на одну акцию возросла до 85 центов на одну акцию, превысив прогнозы рынка в 84 цента на бумагу. Заметим, что чистый процентный доход повысился в рассматриваемом периоде с $3,25 млрд годом ранее до $3,55 млрд.

19 июля, 13:39

Сегодня в США ожидается публикация нескольких важных показателей

В среду, 19 июля, в Соединенных Штатах Америки ожидается публикация нескольких важных показателей. В 15:30 МСК будет опубликовано число начатых строительств домов, которое согласно нашим ожиданиям, в июне составило 1,155 млн штук. В 17:30 МСК выйдут еженедельные данные по динамике запасов нефти, рассчитываемые EIA. Согласно нашим ожиданиям, показатель продемонстрировал снижение на 3,214 млн баррелей. Из второстепенной статистики стоит выделить ипотечные индексы, а также запасы бензина и дистиллятов за неделю. Сегодня до открытия рынка будут опубликованы финансовые результаты Morgan Stanley, Textron, US Bancorp, а после закрытия рынка – Alcoa, American Express, Kinder Morgan, Qualcomm. Важных выступлений сегодня также не ожидается. К 13:26 МСК фьючерсы на индекс S&P 500 торгуются с повышением на 0,07%.

19 июля, 10:42

Сегодня в США ожидается публикация нескольких важных показателей

В среду, 19 июля, в Соединенных Штатах Америки ожидается публикация нескольких важных показателей. В 15:30 МСК будет опубликовано число начатых строительств домов, которое согласно нашим ожиданиям, в июне составило 1,155 млн штук. В 17:30 МСК выйдут еженедельные данные по динамике запасов нефти, рассчитываемые EIA. Согласно нашим ожиданиям, показатель продемонстрировал снижение на 3,214 млн баррелей. Из второстепенной статистики стоит выделить ипотечные индексы, а также запасы бензина и дистиллятов за неделю. Сегодня до открытия рынка будут опубликованы финансовые результаты Morgan Stanley, Textron, US Bancorp, а после закрытия рынка – Alcoa, American Express, Kinder Morgan, Qualcomm. Важных выступлений сегодня также не ожидается. К 13:26 МСК фьючерсы на индекс S&P 500 торгуются с повышением на 0,07%.

27 июня, 17:47

Stock Market News for June 27, 2017

Gain in utilities and telecom stocks led the Dow and the S&P 500 to finish in the green on Monday

23 июня, 18:26

Stock Market News for June 23, 2017

The Nasdaq finished in the green for consecutive sessions on Thursday, boosted primarily by gain in health care shares

23 июня, 17:00

4 Financial Mutual Funds to Buy as Fed Hike Rates

Higher interest rates and lighter regulations are expected to benefit financial companies, making investment in sound financial mutual funds judicious

21 апреля, 17:56

Market Absurdity Squared: There Is Now An ETF ETF

By now everyone is familiar with the charts showing the tremendous growth of passive investing in general, and ETFs in particular, shown most recently in our discussion of how ETFs make markets dumber.   To be sure, everyone is also quite familiar with the mutant permutations of the above assets, such as inverse and 2x or 3x levered ETFs, whose only function is to fleece retail investors with unprecedented theta, including ETFs on VIX, essentially making them the modern day equivalent of Synthetic CDOs so familiar from the peak of the last financial crisis. Yet while the exponential growth in ETF AUM continues, a landmark event took place yesterday, one which, at least according to Bank of America, may signal that we have hit a top. The bank points out that after $2.9 trillion of inflows to passive funds, and $1.3 trillion redemptions from active funds past 10 years, an ETF ETF has launched.  That's right: the ETF Industry Exposure & Financial Services ETF (NYSE Arca: TETF) began trading overnight, composed of stocks of the companies driving the growth of the Exchange Traded Funds industry. And since ETFs are effectively derivative products, something which will become abundantly clear when the liquidity mismatch chasm is exposed following the next violent market selloff, any similarity between ETF ETFs and CDO-squareds - whether synthetic or otherwise - which marked the top of the last credit bubble, is surely purely accidental. So what is the ETF ETF, or TETF? Here is the explanation from the press release: ETF Industry Exposure & Financial Services ETF (TETF) Launches April 20th, Providing Access to Full Range of Companies Driving ETF Industry Growth The ETF Industry Exposure & Financial Services ETF (NYSE Arca: TETF), will begin trading today, April 20, 2017, providing investors with a single point of access to the companies driving and participating in the growth of the Exchange Traded Funds industry. ETF will seek to track, before fees and expenses, the price and yield performance of the Toroso ETF Industry Index (the Index), which is designed to provide exposure to the publicly traded companies that derive revenue from the ETF industry. This includes ETF sponsors, index and data companies, trading and custody providers, liquidity providers, and exchanges. ETFs and the industry have experienced significant growth over the past five years, as their assets have grown in the U.S. from $1.2 trillion to $2.7 trillion; the number of U.S. ETF sponsors has increased from 45 to 78; and the average ownership of U.S. equities by ETFs has more than tripled. 1 The Index is overseen by an Index Committee made up of industry veterans, including Mike Venuto, CIO of Toroso Investments; Guillermo Trias, CEO of Toroso Investments; Linda Zhang, Founder of Purview Investments; Kris Monaco, Founder of Level ETF Ventures; and Kevin Carter, Founder of Big Tree Capital. This group has decades of ETF industry experience covering a range of functions including index creation, ETF portfolio construction, investment management, distribution, research, trading and more. “Not only are we seeking to capture the performance of the industry, but we’re also looking to bring together many of its leaders to leverage their authority as we monitor, research, and benchmark the category’s potential future growth,” said Trias, who created the concept and the idea behind the ETF. “We have deep roots in the ETF ecosystem and have created an Index that captures the dynamism of ETFs and the disruptive innovation they have brought to the financial services industry,” said Venuto. “Clearly, investors and advisors now understand the benefits of the ETF structure, including improved liquidity, tax efficiency, and increased transparency. But while they’ve been able to incorporate those benefits into their portfolios, they have not had opportunities to participate in the growth of the ETF industry itself. That is an issue we’ve solved with the launch of the Toroso ETF Industry Index and TETF,” Venuto said. The Index, maintained by Solactive AG, is designed with four tiers of constituents: Tier 1, 50% of the Index’s exposure, is made up of companies with substantial participation in the ETF industry, providing direct financial impact to shareholders, including BlackRock, Charles Schwab, Invesco, State Street, WisdomTree, and more. Tier 2, 25% of the index’s exposure, is made up of companies with substantial participation in the ETF industry, providing indirect financial impact to shareholders, including KCG Holdings, NASDAQ, Intercontinental Exchange, Inc., and more. Tier 3, 15% of the Index’s exposure, is made up of those companies with moderate levels of participation in industry, including Bank of New York Mellon, US Bancorp, FactSet, Ameriprise Financial, and more. Tier 4, approximately 10% of the Index’s exposure, includes companies that are new or participating in a smaller way in the ETF industry relative to their overall focus, and includes such names as Morningstar, Eaton Vance, Goldman Sachs, Legg Mason, Citigroup, and more. “The ETF industry is more than just a list of fund sponsors, and this Index is designed to include the full range of participants,” continued Venuto. “It is also aimed toward capturing not only the established leaders in each area, but also those firms that might be new to the space but which are bringing exciting approaches that could resonate with investors and drive further growth of the industry itself.” The Toroso ETF Industry Index has been licensed to Exchange Traded Concepts, the advisor to TETF. The fund begins trading on April 20th on the NYSE and will be the first ETF to provide this type of targeted exposure to the universe of companies participating in the growth of the Exchange Traded Fund category. * * * So is this all becoming just a little too self-reflexive? And how long until liquidity problems force the creation of an ETF ETF ETF, and so on ad absudrium?  For the answer keep an eye on the assets contained in TETF: if it took sees a surge in assets under management, the current generation's CDO2 will be officially born.

Выбор редакции
19 апреля, 15:21

Квартальная прибыль US Bancorp увеличилась на 6,3% г/г

Крупнейший по величине активов региональный банк США US Bancorp зафиксировал рост прибыли в первом квартале благодаря увеличению объема выданных займов. Так, чистая прибыль возросла на 6,3% г/г и составила $1,47 млрд по сравнению с $1,39 млрд годом ранее. При этом прибыль на одну акцию увеличилась с 76 центов, зафиксированных годом ранее, до 82 центов, тогда как аналитики ожидали 80 центов. Выручка, тем временем, повысилась на 5,7% г/г до $5,32 млрд, в то время как аналитики прогнозировали $5,29 млрд.

19 апреля, 13:36

Сегодня в США ожидается публикация недельных данных по запасам нефти

В среду, 19 апреля, в Соединенных Штатах Америки ожидается публикация лишь одного важного макроэкономического показателя, а именно недельное изменение запасов нефти за неделю по данным EIA (в 17:30 МСК). Согласно нашим прогнозам, показатель продемонстрировал снижение на 1,47 млн баррелей. Среди второстепенной статистики можно выделить ипотечные индексы, запасы дистиллятов и бензина, а также объем потребительского кредитования за май. Между тем, в 21:00 МСК будет обнародована "Бежевая Книга" ФРС. Кроме того, сегодня состоится выступление президента ФРБ Бостона Эрика Розенгрена. Сегодня до открытия рынка будут опубликованы финансовые результаты Abbott Laboratories, Morgan Stanley, Textron, TD Ameritrade, US Bancorp, а после закрытия – American Express, CSX, Ebay, Qualcomm. К 13:30 МСК фьючерсы на индекс S&P 500 торгуются с повышением на 0,18%.

14 апреля, 01:43

Q1 Earnings Season Ramps Up

Q1 Earnings Season Ramps Up

06 апреля, 12:29

Fidelity Select Banking Fund (FSRBX) in Focus

Fidelity Select Banking (FSRBX) a Zacks Rank #2 (Buy) invests at least 80% of assets in common stocks of companies principally engaged in accepting deposits and making commercial and principally non-mortgage consumer loans

27 марта, 16:26

Brief Study of Mairs & Power Balanced Fund Investor Class (MAPOX)

Mairs & Power Balanced Fund Investor Class (MAPOX) seeks to provide shareholders with regular current income

18 января, 18:23

Bank Earnings Continued to Be Strong

Bank Earnings Continued to Be Strong

18 января, 18:02

Banks Continue Q4 Earnings Strength, Netflix After the Bell

Closely monitoring banking stocks' earnings is an essential way to track how any particular earnings season transpires in the early going.