Thousands of Puerto Ricans took to the streets of Old San Juan to demand the ouster of Governor Ricardo Rosselló following corruption investigations and the leaking of 889 pages of text messages revealing him to be vindictive, sexist and profane – including against those who died following Hurricane Maria.
Demonstrations started with hundreds of people, then grew to the thousands. The growth was reflected on Twitter as the hashtag #RickyRenuncia (Resign Ricky), a shortened version of his name, Ricardo, and it was trending worldwide Monday.
Until Wednesday night, the rallies had been largely peaceful. On Monday night, about two dozen police officers were injured during a protest, and at least five protesters were arrested, authorities said. –NBC News
On Wednesday night protesters broke past a barricade at the governor’s mansion, resulting in the deployment of tear gas. “By early hours Thursday, the old city of San Juan resembled a war zone, with police chasing protesters through the streets while firing rubber bullets, gas canisters and what appeared to be flash bombs,” according to NPR.
Pictures from San Juan, Puerto Rico where marchers are moving to the Governors mansion pic.twitter.com/wiCtOACWI2
I’ve looked at this video from San Juan 20 times.
I now see something thrown from the protester side into the police side.
There’s a flash.
Then, you see an officer holding something that ignites in his hand.
Then police move in on protesters. pic.twitter.com/xEnN8dPRix
Some of the island’s biggest stars such as Ricky Martin and reggaeton artist Benito Martinez Ocasio (aka Bad Bunny) turned out to rally a crowd for this week’s second mass demonstration against the embattled government.
“Puerto Rico has suffered so much and we can’t deal with the cynicism of these leaders anymore,” said Martin in a video message posted online. “Fortunately the chat came out, because it unmasked everyone’s real face,” he added. “They made fun of our bodies, they mocked women, the LGBTT community, people with physical and mental disabilities, they made fun of obesity… Enough.”
Musician Residente released a song on Wednesday calling for protesters to take to the streets, rapping: “This is coming out early so you can eat it for breakfast … Sharpening the knives. Fury is the only political party that unites us.“
The protests have extended to cities in the US, including Miami, Orlando, Philadelphia and Nashville. 24-year-old Lillian Gonzalez took to Union Square in New York City to call for Rosselló’s resignation since she couldn’t be in Puerto Rico with family and friends.
Lillian Gonzalez attends a protest in Union Square, New York City calling for Puerto Rico Governor Ricardo Rossello’s resignation. Via Lillian Gonzalez
The creator of “Hamilton,” Lin-Manuel Miranda, joined the protesters in New York, telling the crowd “Rosselló has lost the people’s trust in him and we are here to support that.”
via ZeroHedge News https://ift.tt/2O2DGrU Tyler Durden
About 200 million Americans in the eastern two-thirds of the country will be trapped in a monsterous heat dome that will send tempatures over 100°F into the weekend, and with humidity factored in, the real feel could be a scorcher: 110°F, reported AccuWeather.
“Significant heat is expected across the eastern and central United States into the weekend as a ridge of high pressure anchors itself in place. This will promote very hot temperatures in the upper 90s and low 100s along with oppressive humidity. This combination will make it feel like 110-115°F into the weekend for millions. This will also impact energy and agriculture, leading to increased cooling load in the Northeast and Midwest as well as heat stress on Midwestern corn and soybeans. The heat will break into early next week,” reported meteorologist and owner of Empire Weather LLC., Ed Vallee.
From the Rockies through Central Plains and Midwest, to the Southeast and up across the Northeast, very hot and humid conditions will start on Thursday and last through the weekend.
A scorching #heat wave will consume about two-thirds of the country mid to late week into the weekend. About a total of 20 to 30 record highs are possible this #Friday and #Saturday, from the Front Range of the south-central Rockies to the East Coast. #heatwavepic.twitter.com/VtrTlIbWsb
Cooling degree days, which is a measurement intended to quantify the demand for energy needed to cool a building, is expected to spike across the Central, Midwest, Southeast, and Northeast regions through Monday.
Much of the Midwest, including Kansas City, St Louis, Omaha, and Wichita, are under heat watches, likely to see warnings posted in the next 24 to 48 hours as tempatures are expected to top 100 degrees.
Washington, D.C., could peak at 101°F on Friday, with New York’s Central Park reaching 97°F on Saturday.
“Excessive heat warnings cover a pretty considerable number of states today,” said Alex Lamers, a forecaster with the U.S. Weather Prediction Center in College Park, Maryland. “Then we are expecting the heatwave to ramp up on the East Coast in the next couple of days.”
Jim Rouiller, the chief meteorologist at the Energy Weather Group, said the intense heat could test regional electric grids from New York to Illinois, with extended power demand likely to “stress the grid-like it hasn’t been stressed in a long, long time.”
Excessive heat will impact tens of millions of people from the Midwest to the East Coast today through the weekend! The max heat index will reach well over 100 degrees in locations such as Dallas, St. Louis, Chicago, Detroit, Washington D.C., New York City, and Boston. pic.twitter.com/izj96w8ir0
Data compiled by Bloomberg shows wholesale electricity at a hub in New York jumped by almost 3,000% to as high as $286.95 a megawatt-hour on Wednseday.
For farmers in the Midwest, record rainfall in the spring delayed a significant amount of planting that means plants have smaller root systems for this time of year and extended hot weather could lead to widespread crop losses for some parts.
Don Keeney, the senior agricultural meteorologist at Maxar, said it usually takes four or five days of temperatures in the 90s to stress crops. “When the root systems are as shallow as they are this year it only takes a day or two,” he said.
The heat dome is expected to dissipate next week as the jet stream drops southward across the eastern half of the country, allowing the heat to lift northward into next week.
via ZeroHedge News https://ift.tt/30BHuBK Tyler Durden
First, Mississippi gubernatorial candidate and state Rep. Robert Foster refused to have a female reporter accompany him on a campaign trip, an otherwise standard practice. Not to be outdone, his competitor Bill Waller Jr., the former chief justice of the Mississippi Supreme Court, stated that he would not spend any time alone with a woman (who is not his wife) in a personal or professional setting. According to CNN, here’s Waller’s murky statement:
“I just think it’s common sense. I just think in this day and time that appearances are important … transparency’s important. And I think that people need to have the comfort of what’s going on in government between employees and people. And there’s a lot of social issues out there about that,” Waller told the news outlet on Monday. He said his goal “is to not make it an issue so that everyone’s comfortable with the surroundings and we can go about our business.”
[…]
Waller told Mississippi Today that in his 22 years serving on the state Supreme Court, he never found himself alone with a female colleague.
This reasoning was similar to the one that Robert Foster had provided:
“I trust myself completely, but I don’t trust the perception that the world puts on people when they see things and they don’t ask the questions, they don’t look to find out the truth. Perception is reality in this world, and I don’t want to give anybody the opinion that I’m doing something that I should not be doing,” he said.
Given Waller’s statement that this has been his practice for many years, even the most creative minds won’t be able to blame this one on #MeToo (they might still try with Foster, though). So how are we to understand these men’s attitudes? Here are some possibilities:
While they would deny this as the reason, these men don’t trust themselves not to misbehave around women. This should make them look bad to voters.
Their wives don’t trust these guys around women. Voters may want to inquire why that is, and the reasons may well end up looking bad to voters.
These men don’t trust women not to behave inappropriately toward them. Any women. This should make said men look bad to voters.
These men don’t trust how journalists would present such interactions and/or they don’t trust the public in how it would view Important Men spending any time alone with women. In other words, these candidates don’t trust voters with something fairly basic. Why should voters trust them with much more important things?
If I was a voter in Mississippi, I would feel either 1) suspicious or 2) fairly insulted and stereotyped by now. I expect that individuals in that state are no less able to form judgments about human relationships than individuals anywhere else, even if their politicians apparently hold them in lower regard than I do. The exclusion of women from the same professional opportunities as men is a long-standing problem. Occasionally men express concerns about “what will people say” as a reason not to provide mentorship in a number of settings. This only becomes the reality if we let it become self-fulfilling–meaning, if interactions between one man and one woman are treated as inherently suspect.
Whenever I hear of stories like in Mississippi, or in fact ones where men did misbehave, I am reminded of how somehow none of this was a problem during my clerkship year. As it happened, I clerked for a Southern male judge (Judge Morris S. Arnold of the U.S. Court of Appeals for the Eighth Circuit) who had an all-female crew of three year-long clerks, one permanent clerk, and one administrative assistant. The fact that it was all women that year was coincidental, and most years it was a mix of genders, including with male majorities.
Never once did I think my judge acted inappropriately toward me. None of my co-clerks ever reported anything to me, either. Sometimes several of us spoke to him in chambers, and other times it was just one of us. Neither did that ever feel uncomfortable nor did anyone else think it was strange.
I have yet to meet anyone who speaks ill of Judge Arnold for any reason. He had (and I believe still has) a happy marriage with a lovely wife. If he could pull off healthy professional relationships with all his female employees in Arkansas over a decade ago, these Mississippi gentlemen could surely give it a shot in 2019.
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Every once in a while, especially at market extremes, it’s good to take a stake of the bigger picture. Now that the market, highly encouraged by the Fed, has baked in a rate cut for July (25bp or 50bp we shall see) a quick look at some yearly charts may provide some eye opening context as to where and when this rate cut is supposed to take place.
I’ve picked 6 well known stocks that may well now be considered stocks that never go down, that go up every single year without fail. Stocks that are heading toward the stars. Hyperbole on my part? You be the judge, but I think the charts speak for themselves. And yes, I’m posting linear charts to highlight how far we’ve gone…..just in 2019.
Don’t hate, appreciate 😉
Note I’m not just posting tech stocks, but some well known consumer stocks as well. All are a great companies that have delivered growth, but all are historically stretched, in many cases far above their yearly 5 EMAs, all represent technical reversion risk and all highlight how much this market has come to rely on a fantasy, a fantasy of perpetual rising asset prices in a world dogged by slow economic growth.
So the Fed wants to cut here, because the economy is in trouble? Oh kay.
$MSFT:
$AMZN:
$SBUX:
$MCD:
$KO:
$DIS:
Did I mention these stocks have been going up every year? A one way stairway to the stars? It’s almost like central planning. Go figure.
But sure, let’s cut rates. How absurd and reckless.
* * *
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via ZeroHedge News https://ift.tt/2Y1mtyV Tyler Durden
Mere hours after WSJ reported that trade-deal negotiations had hit a snag over how to roll back restrictions on Huawei – something that President Trump reportedly promised President Xi as a precondition for restarting talks – Bloomberg is following up with its own story about how Trump and Xi are making slow progress, raising doubts about whether the differences between the two sides can ever be reconciled.
Last week, President Trump complained in a tweet that China wasn’t buying the agricultural goods it promised.
Mexico is doing great at the Border, but China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would. Hopefully they will start soon!
Sources close to Trump told Bloomberg that, with Trump already gearing up for his reelection campaign, the likelihood of a deal is looking increasingly remote. Earlier this week, Trump warned that he could still impose more tariffs on China if he wanted, even as Steven Mnuchin and Robert Lighthizer, the leaders of the US delegation, were preparing for talks with their Chinese counterparts.
In what sounds like a repeat of the confusion that followed the original trade truce in December, the two sides are reportedly still not on the same page about what exactly was agreed upon in Osaka. Beijing is apparently refusing to buy any American agricultural goods until restrictions on Huawei are lifted, and the US hasn’t taken Huawei off the entities list. Steven Mnuchin has reportedly been calling CEOs of US companies and asking them to seek exemptions to the entities list restrictions, but whatever the hangup is with Huawei, it’s not exactly clear.
And even if these two issues are resolved, there’s still the task of forging a mutually agreeable deal. The two sides remain at odds over Washington’s demands for structural reforms, China’s economy and Beijing’s call for the US to remove all existing punitive tariffs on imports from China.
Plus, now that the campaign is a factor, Beijing has every reason to stay cautious (after all, there’s a possibility that any progress could be erased should Trump lose), and Trump will soon become more preoccupied with optics – and walking away with anything short of the “great” deal he promised could create problems on that front.
If there’s any upside for markets, it’s that as long as there’s no end in sight for trade talks, the central bank has a solid excuse to deliver the 50 bp rate cut later this month that would likely send US stocks to fresh all-time highs.
via ZeroHedge News https://ift.tt/2LtMpRQ Tyler Durden
Iran’s Islamic Revolutionary Guard Corps (IRGC) says it has seized a foreign vessel with 12-crew members carrying one million barrels of oil. In an official Iranian media statement early on Thursday, the country’s military asserted the tanker was caught “smuggling” the fuel through the Strait of Hormuz.
While details to the breaking story remain confused, with some early reports speculating it could be reference to the Riah tanker which since the past weekend disappeared as it drifted toward Iranian waters in the Strait of Hormuz, what is clear is that Tehran is ramping up the pressure, perhaps now making good on its longtime threat to cut off global shipping through the vital oil passageway.
Illustrative image: tanker in the Persian Gulf.
“A foreign vessel smuggling one million liters of fuel in the Lark Island of the Persian Gulf has been seized,” state run ISNA said, adding that the ship was seized on Sunday.
This was the same day Iran had claimed to have “rescued” the UAE-owned, Panamanian-flagged Riah as it was in need of repairs due to technical problems, however, neither Iran’s military nor media identified the seized vessel or its country in initial statements.
The incident took place to the south of the Iranian Lark Island on Sunday.
IRGC naval forces, which were patrolling the waters on an anti-smuggling mission, acted against the vessel in a “surprise” operation upon ascertaining the nature of its cargo and securing the required legal approval from Iranian authorities.
The ship had loaded the fuel from Iranian dhows and was about to hand it over to other foreign vessels in farther waters. The vessel, which had 12 foreign crewmembers aboard at the time of the mission, is capable of carrying two million liters of fuel.
The statement hailed the naval forces’ “perceptiveness” in frustrating the smuggling effort. It added that the crime had invoked due legal proceedings.
In the past days Iran has vowed to “answer” the UK’s seizure and detention of the ‘Grace 1’ which had been transporting 2 million barrels of Iranian oil to Syria. The Royal Marines had boarded it in the Strait of Gibraltar and arrested its crew.
Tehran condemned it as an act of “piracy” and warned the UK it would respond in kind. Thursday’s so far mysterious vessel seizure announced by the IRGC could be the start of the promised coming retribution.
developing…
via ZeroHedge News https://ift.tt/30KzXkl Tyler Durden
The good news: Morgan Stanley does not have the balance sheet to engage in net interest income, unlike its big bank peers, so it could not report a decline in Net Interest Margin, which was enough to hit the stocks of Citi JPM and BofA.
The bad news: Morgan Stanley is very much reliant on institutional flow and trading, and it was here that the bank report sharp revenue declines, similar to Goldman, although unlike Goldman, Morgan Stanley did not have a hyperactive prop trading (investing and lending) group to offset the decline in flow.
So what did Morgan Stanley, the last of the big US banks to disclose Q2 earnings, report this morning? Like most other banks, MS also beat on the top and bottom line, reporting revenues of $10.244BN, below the $10.61BN from a year ago but above the $10.09BN expected and the 6th consecutive quarter of revenue rising above $10BN. EPS of $1.23 also beat expectations of $1.16, but declined from $1.30 in Q2 2018. As revenue dipped, so did expenses, with compensation expense dropping by $90 million to $4.531BN in Q2.
The company also increased its quarterly dividend to $0.35 per share;and announced share repurchase of up to $6.0 billion through the second quarter of 2020, an increase of approximately $1.3 billion.
That was the good news. The bad news emerges when looking at the bank’s all important trading desk, the biggest on Wall Street. The overall “Institutional Securities” group reported net revenues for Q2 of $5.1 billion compared with $5.7 billion a year ago, as every single trading division saw revenue decline in Q2.
Of note, the bank posted a sharp 15% drop in equities-trading revenue, the biggest decline among major U.S. banks, which was driven by “lower revenues in the financing business reflecting lower client balances and realized spreads.”
Here is a summary of the key segment revenues:
Equity Sales and Trading: $2.13BN, down -15% from $2.470BN, Exp. $2.27BN
FICC Sales and Trading: $1.13BN, down -19% from $1.389BN, Exp. $1.29BN
Investment Banking: $1.472BN, down -13% from $1.699, Exp. $1.44BN
The bank’s fixed-income trading also dropped more than rivals in the second quarter, slipping 18%, compared with analysts’ estimates of a 7% drop, and was blamed “on a decline in interest rates and lower volatility, as well as a subdued level of structured transactions. The net revenues decline was partially offset by increases in credit products on strong client activity.”
Investment banking had a drop across deals and underwriting for debt that was worse than expected, while equity underwriting surpassed estimates. Specifically, fees from underwriting bond and loan deals, meanwhile, tumbled 22% to $420 million, below analysts’ estimates for $452 million.
Other, less market reliant, results from MS were generally better than expected, to wit:
2Q net interest income $1.03 billion, +14% y/y, estimate $991.6 million
Commenting on the results, CEO Jim Gorman said “We reported solid quarterly results across all our businesses. Firmwide revenues were over $10 billion and we produced an ROE within our target range, demonstrating the stability of our franchise. We remain focused on serving our clients and pursuing growth opportunities while diligently managing expenses.”
Others were less sanguine, with Bloomberg analysts stating that “the outlook for trading revenue is relatively soft, in our view, based on global peer reports so far. Morgan Stanley’s equities trading result faces a higher hurdle after a beat and gain at Goldman Sachs amid misses and declines for other peers, with the market-share opportunity critical. A 36% jump in BofA equity fees is a highlight among broadly better results.”
Overall, this was a poor quarter for Morgan Stanley on the banking and trading front, because as Bloomberg notes, “analysts had been pricing in some weakness here but not as much as this.”
The stock, however, took it all well, and has barely moved since the report.
via ZeroHedge News https://ift.tt/32y36Rc Tyler Durden
Global stocks stumbled early in the session in the aftermath of the dismal Netflix earnings which saw the first drop in US subs following the company’s price hike (suggesting US consumers are far less price inelastic than many had suspected), and following a bevy of European earnings misses, but then staged a sharp rebound after a Bloomberg report that the ECB was seeking to imitate the Fed and was potential revamp of their inflation goal.
The news, which suggested that the ECB was set to ease even more than the market had priced in, slammed the EUR, sending the EURUSD to session lows just above 1.12…
… while Europe’s Stoxx 600 erased a drop of as much as 0.7%, trading little changed, with defensive sectors including health-care and utility shares among the best performers and tech shares remain biggest losers. The rebound was strongest in the export-heavy DAX, which sharply pared losses, narrowing its loss to 0.5% from as much as 1.4%.
According to Bloomberg, similar to the Fed’s own “symmetric” approach to inflation, the ECB was studying a potential revamp of its inflation goal, in a move that could “embolden policy makers to pursue monetary stimulus for longer. ” As the report noted, the staff are informally analyzing the institution’s policy approach, including the question of whether the current target of consumer-price growth “below, but close to, 2%” is still appropriate for the post-crisis era, which is ironic: after all, the ECB has been unable to hit 2% for years, and now the implication hopes to hit 3%
President Mario Draghi favors a “symmetrical” approach, meaning flexibility to be either above or below a specific 2% goal, the officials said, asking not to be identified as the work so far is confidential and preliminary. That would allow the ECB to keep inflation elevated for a while after a period of weakness to ensure price growth is entrenched.
Governing Council members were given a presentation last week on symmetrical approaches to the current target. Changing the goal itself would probably require a formal review, the officials said. An ECB spokesman declined to comment.
The ECB “trial balloon” promptly papered over several big earnings misses in Europe, most notably after SAP, Europe’s most valuable tech stock by market cap, reported poor results, with U.K. fashion retailer Asos and Nordea Bank also reporting poor earnings.
“We’re in a trade war, you’re seeing the impact on corporate earnings, you’re seeing the central banks forced to scramble to react to that,” Bob Michele, CIO of JPMorgan Asset Management told Bloomberg TV.
The weak start to the Q2 earnings season may spill over into the outlook for the remainder of the year, threatening equity markets’ stellar rally this year. “We are probably in the middle of analysts downgrading Q3 company earnings expectations,” said Sunil Krishnan, head of multi-asset funds at Aviva Investors.
Europe’s latest monetary boost – which is certain to infuriate Trump as it is another indication of just how the ECB manipulate the common currency by jawboning also helped push US futures off session lows and back to unchanged, despite yesterday’s shock report from Netflix which slammed the Nasdaq and pushed tech stocks sharply lower at least until Draghi’s verbal intervention.
Earlier in the session, Asian stocks dropped for a third day, led by industrial and energy firms, as investors assessed trade tensions and the increasingly gloomy Q2 earnings season. Most markets in the region were down, with Japan and China leading declines. The Topix closed 2.1% lower, dragged by electronics makers and chemical firms, as Japanese exports fell for a seventh month, slumping 6.7% in June, while manufacturers’ confidence fell to a three-year low in July on the back of the trade tensions and slowing China growth.
Japan Export Value, Import Value, and Trade Balance
Canon dropped 4% following a Nikkei report that the company may cut its profit outlook. The Shanghai Composite Index fell 1%, with Kweichow Moutai and PetroChina among the biggest drags. The liquor giant declined 1.7% after reporting its slowest first-half revenue growth since 2016. India’s Sensex retreated 0.4%, driven by Reliance Industries and Tata Consultancy Services. Yes Bank tumbled as much as 20% after the lender’s profit missed estimates amid rising bad loans.
In global macro, with less than two weeks before the Fed’s policy meeting at which investors expect an interest-rate cut, the central bank’s anecdotal Beige Book report yesterday suggested the outlook was far better than it was in April and the labor market remains tight, even as companies are still struggling to pass on higher wages and tariff-related costs to customers, keeping inflation subdued, and the start of earnings season hasn’t improved sentiment.
… investors betting on rate cuts by the BOK were proven right on Thursday, as central banks in South Korea and Indonesia lowered benchmarks. Ironically, both countries’ currencies strengthened modestly and the Kospi slumped, suggesting the move was seen as a “policy error” by the market. That’s after similar moves by central banks in Malaysia, India and the Philippines.
Meanwhile, trade war sentiment worsened overnight after a WSJ report that progress toward a U.S.-China trade deal has stalled as the Trump administration works out how to address Beijing’s demands that it ease restrictions on Huawei Technologies.
“It’s still about the U.S. and China dispute,” Christophe Barraud, chief economist and strategist at Market Securities. “The trade war is creating uncertainty, weighed on capex, and clearly on trade flows. There are also problems with guidance, especially in the transportation sector. The fact is that one of the key stories of this year is global trade flows contraction,” he said.
In rates, Eurozone government bond yields slipped back toward record lows on Thursday as economic indicators and corporate earnings deepened gloom on the global economy and increased bets on interest-rate cuts by major central banks. 10Y Treasury yields moved within 1bp of 2.045%.
In FX, the euro was the big mover, sliding sharply lower just after 6am when the ECB inflation revamp report hit; the yen initially strengthened amid reports of fresh trade tensions between Japan and South Korea however it later gave up all gains thanks to the plunge in the Euro; Sterling was a shade higher at $1.244, off its lowest since April 2017 touched on Wednesday amid growing risks of Britain leaving the European Union in a no-deal Brexit. After trading lower, the dollar also spiked thanks to the plunge in the euro.
Oil prices were mixed, with WTI modestly lower after data showed U.S. stockpiles of gasoline and other products rising sharply last week, suggesting weak demand. Brent futures were up 6 cents, or 0.1%, at $63.71 a barrel.
Expected data include jobless claims and the Leading Index. Blackstone, Danaher, Honeywell, Morgan Stanley, Philip Morris, and Microsoft are among companies reporting earnings.
Market Snapshot
S&P 500 futures down 0.1% to 2,981.75
STOXX Europe 600 down 0.5% to 385.64
MXAP down 0.8% to 159.11
MXAPJ down 0.3% to 526.13
Nikkei down 2% to 21,046.24
Topix down 2.1% to 1,534.27
Hang Seng Index down 0.5% to 28,461.66
Shanghai Composite down 1% to 2,901.18
Sensex down 0.4% to 39,042.90
Australia S&P/ASX 200 down 0.4% to 6,649.12
Kospi down 0.3% to 2,066.55
German 10Y yield fell 1.2 bps to -0.302%
Euro up 0.1% to $1.1238
Italian 10Y yield fell 1.7 bps to 1.242%
Spanish 10Y yield fell 1.8 bps to 0.429%
Brent futures up 0.4% to $63.91/bbl
Gold spot down 0.4% to $1,420.66
U.S. Dollar Index down 0.2% to 97.08
Top Headline News
Slow progress on key initial demands from Presidents Donald Trump and Xi Jinping is raising doubts about whether the U.S. and China will actually return to the negotiating table to overcome their much deeper differences. Reaching a comprehensive trade deal as Trump gears up for re-election next year increasingly seems like a remote possibility, according to people familiar with the matter, who spoke on the condition of anonymity
Group of Seven finance officials meeting near Paris confronted an outlook of slowing growth that has already prompted monetary authorities to shift stance and prepare for stimulus
Iran is capable of shutting the Strait of Hormuz — a crucial choke-point for oil flows — but doesn’t want to do it, the country’s foreign minister said
U.K. lawmakers are gearing up for a knife-edge vote on a measure to prevent the next prime minister suspending Parliament to pursue a no-deal Brexit. As pro-EU ministers weigh up how they will vote, the government’s fiscal watchdog published new forecasts of the economic damage a chaotic exit would bring
Boris Johnson, the favorite to succeed Theresa May as British prime minister, said a trade deal won’t be reached with the U.S. soon after Brexit, predicting discussions will be “tough” and “robust”
Asian equity markets traded negatively as the risk-averse tone rolled over from Wall St where all major indices declined for a 2nd consecutive day amid mixed earnings, in which the S&P 500 gave back the 3k level and with futures pressured after-market following disappointing Netflix results which missed on revenue, as well as global subscriber growth and posted its first ever decline in net US subscribers. ASX 200 (-0.4%) and Nikkei 225 (-2.0%) were lower in which the energy sector led the declines in Australia after further pressure in oil prices and reduced quarterly revenue from Santos and Woodside Petroleum, while the Japanese benchmark underperformed from a double whammy of a stronger currency and wider than expected decline in Exports. Hang Seng (-0.5%) and Shanghai Comp. (-1.0%) were dragged lower by weakness in the blue-chip oil names and amid ongoing trade uncertainty with US-China talks said to have stalled as the Trump administration determines how to respond to Beijing’s demands of easing restrictions on Huawei. Finally, 10yr JGBs were higher as they tracked the upside in T-notes with prices underpinned by safe-haven demand and following a continued decline in exports.
Top Asian News
Japan LNG Imports Hit Post-Fukushima Low as Reactors Restart
China Investor Beating 98% of Peers Bets on Hong Kong Stocks
SoftBank’s Son Shines a Spotlight on His Vision Fund Proteges
Indonesia Pledges More Rate Cuts as It Moves to Spur Growth
Major European bourses are now mixed after the region pared opening losses [Eurostoxx 50 -0.2%] amid reports ECB staff are looking at a revision to the inflation target.. Sectors are mixed with heavy underperformance in the IT sector (-1.4%) as EU’s largest tech stock SAP (-6.0%) posted disappointing earnings in which all major metrics, including cloud revenue, fell short of estimates. Furthermore, the IT sector could also be feeling some pressure amid comments from TSMC post-earnings as the chip-giant expects a global semiconductor contraction this year. On the flip side, healthcare names (+1.5%) outperform as pharma heavyweight Novartis (+5.0%) rose to the top of the Stoxx 600 amid guidance upgrades in which FY 19 operating guidance was raised to “double digits to mid-teens” from “high single digits” and net sales guidance is now expected to be in the “mid to high single digits” compared to a prior view of “mid-single digits”. Subsequently, shares in Roche (+1.3%) moved higher in tandem and thus Switzerland’s SMI (+0.9%) outperforms vs. its EU peers. In terms of individual movers, Germany’s Hochtief (-9.8%) fell to the foot of the pan-European index as its Asia-Pac division reported a decline in revenues, whilst easyJet (+4.8%) and Ubisoft shares are supported on the back of earnings. Looking ahead, British American Tobacco (+3.9%) and Imperial Brands (+1.2%) are awaiting numbers from US competitor Philip Morris.
Top European News
U.K. Retail Sales Unexpectedly Jump, Reversing Two-Month Drop
Nordea Sinks After Signaling It Will Cut Shareholder Rewards
Vodafone Wins Conditional EU Approval for Liberty Global Deal
Deutsche Bank Considers Subletting Zig Zag Offices in London
In FX, the Pound had already extended its rebound from midweek lows (and a fresh sub-1.2400 ytd trough vs the Usd) on a combination of positive sounding EU remarks about the Irish backstop, technical buying and short covering, but got an additional boost via UK retail sales data that confounded expectations for a 3rd consecutive monthly decline in consumption. For the record, the ONS reported a 1% rise in sales vs consensus for a 0.3% fall on the back of non-food items and 2nd hand goods, and Cable climbed towards 1.2500 in response, while Eur/Gbp retreated further from circa 0.9050 at one stage on Wednesday to 0.9000 before Sterling momentum waned somewhat ahead of a vote in Parliament on a bill to prevent its suspension and force through no Brexit deal.
AUD/NZD – The Aussie is the current G10 outperformer, and also partly due to bullish macro news, albeit not quite so apparent from the headline Aussie payrolls tally released overnight. However, internals were encouraging as permanent placements rose 21.1k (vs +10k forecast for full and part-time jobs combined) and underemployment eased. Aud/Usd subsequently reclaimed the 0.7000 handle and is back above the 100 DMA (0.7018) eyeing this week’s prior high just shy of 0.7050, but still below 1.0450 against the Kiwi that is benefiting from ongoing Greenback weakness. Indeed, Nzd/Usd is holding firm within a 0.6730-46 range as the DXY only just keeps its head above 97.000 following yesterday’s US housing data misses.
JPY/CHF/EUR – The Yen and Franc are back in demand on safe-haven grounds as US-China trade angst intensifies after the latest stall in negotiations on Huawei concessions, with Usd/Jpy down through 108.00 and seemingly capped ahead of more decent option expiries at or above the big figure (1.5 bn up to 108.15 and 1 bn from 108.30 to 108.50). Similarly, Usd/Chf has pulled back from around 0.9900 and Eur/Chf is under 1.1100 even though the single currency remains heavy on attempts to clear 1.1250 vs the Dollar and embroiled in tightly stacked expiries. Indeed, some 7 bn roll off between 1.1190 and 1.1275, as Eur/Usd breaks below a tight range to retest 1.1200 amidst reports that the ECB staff are looking at a revision to the inflation target.
EM – The Rand is also in a bind vs the Buck, with Usd/Zar straddling 14.0000 ahead of the SARB policy verdict that is expected to deliver a 25 bp cut in line with BoK and BI moves in the run up.
In commodities, WTI and Brent futures are marginally firmer following yesterday’s decline in the complex with prices currently above 57/bbl and 64/bbl respectively. Comments from Iranian Revolutionary Guard aided the benchmarks climb over the round figures, which stated they have stopped a foreign oil tanker in Lark Island in the Gulf. On the OPEC+ front, Russia’s Energy Minister acknowledged that Russian production will be increased to levels agreed in the accord. Meanwhile, gold prices are marginally softer and little influenced by the declining Buck as investors lock in profits following the yellow metal’s recent surge. Elsewhere, copper prices are little changed above the 2.7/lb whilst Dalian iron ore continued to decline as market participants reassess the base metal’s outlook given the rising shipments to China from Australia coupled with the Dalian Commodity Exchange’s higher transaction fees in all iron ore futures contracts.
US Event Calendar
8:30am: Philadelphia Fed Business Outlook, est. 5, prior 0.3
8:30am: Initial Jobless Claims, est. 215,500, prior 209,000; Continuing Claims, est. 1.7m, prior 1.72m
9:30am: Fed’s Bostic Speaks to Clarksville Chamber in Tennessee
9:45am: Bloomberg Consumer Comfort, prior 63.8;
10am: Leading Index, est. 0.1%, prior 0.0%
2:15pm: Fed’s Williams Speaks on Monetary Policy
DB’s Jim Reid concludes the overnight wrap
Whether it’s investors waiting on the sidelines for the FOMC meeting in under two weeks, a reluctance to break past recent record highs, or just a general lack of newsflow to get excited about, risk assets are certainly lacking a bit of inspiration at the moment. The S&P 500 closed down -0.65% last night and below the 3k level again while there were similar declines for the DOW (-0.42%) and NASDAQ (-0.46%).
Earnings were the main focus with a big slide for freight transport operator CSX (-10.27%) front and centre. That was the biggest decline since 2008 after the company forecast weaker sales for 2019 with the company CEO calling the present economic backdrop “one of the most puzzling I have experienced in my career”. On aggregate yesterday though earnings were still better than expected and the same can be said for Bank of America which gained +0.93% on the back of gains in the retail division. That offset declines in trading revenue – a similar trend to the other US banks that have reported so far.
Late last night we also got results from some of the high profile tech names, with IBM and eBay both beating estimates. However the big move came for Netflix which dropped as much as -13% in late trading after its report revealed that the company had lost 130k US-based subscribers, most likely as a result of recent price hikes. Competition in the streaming sector is heating up, with Disney and Apple set to launch their own services later this year, followed by Comcast and AT&T next year. S&P 500 and NASDAQ futures are down -0.23% and -0.46%, respectively, this morning.
On a related note, yesterday we published a US credit strategy note looking ahead to earnings season and highlighting the USD BBB- potential fallen angels names to look out for. A couple of stats that stood out include there being $768bn of BBB- bonds which are 1-3 downgrade notches away from HY and of that, $144bn of bonds where the number of notches of downgrade required is less than or equal to the number of rating agencies that have a negative watch or outlook. That’s 19% of the BBB- universe. See the link here for the full report .
Back to markets, where the risk off moves led to a decent bid for bond markets with 10y Treasuries finishing -5.7bps lower in yield and the 2s10s curve flattening -2.1bps. The Fed released its beige book of anecdotal economic commentary, which showed broadly steady growth over the last several weeks. The labour market continued to improve, albeit at a slower pace, and price inflation moderated. Separately, Kansas City Fed President George, considered the most hawkish member of the committee, gave a somewhat surprisingly dovish speech. She emphasized demographic trends and noted that the natural rate of unemployment may be lower than thought, which would make rate cuts less risky from an inflation standpoint. Treasuries continued their rally throughout the Fedspeak. Speaking of safe havens doing well, Gold (+1.45%) tested the recent highs again yesterday while Silver jumped +2.63% for the biggest daily gain since January.
This morning in Asia equity markets are trading lower, with the Nikkei (-1.60%) leading the declines as data overnight showed Japanese exports fell -6.7% yoy (vs. -5.4% expected), the seventh consecutive monthly fall. A report in the Nikkei suggesting that Canon is expected to profit warn next week is also doing some damage. In Korea the equity moves are smaller however, with the Kospi down -0.33% after the central bank unexpectedly cut interest rates by 25bps overnight to 1.5%, the first rate cut since 2016. The Bank of Korea also cut their growth forecast for the country to +2.2% this year, down from +2.5% previously. Following the decision, the Korean won has actually strengthened against other major currencies this morning, and is currently +0.31% against the US dollar. Elsewhere, the Hang Seng (-0.46%) and the Shanghai Comp (-0.65%) are also lower.
Also worth flagging are a couple of trade stories out overnight in the WSJ and SCMP which are perhaps adding to the slightly damper mood in markets. The suggestion from both are that US-China trade talks have stalled or are stalling and that China appears less willing to compromise. The WSJ story in particular suggests that China is waiting to see what the US does on Huawei before making any commitments.
Moving on. In Europe yesterday it was also a decent for bond markets where 10y Bunds rallied -4.5bps to close at -0.294% despite euro area core inflation getting revised 7bps higher to 1.12% yoy and the headline index revised up 0.1pp to 1.3%. Elsewhere, the STOXX 600 faded to close -0.37% after the US session kicked into gear, with the auto sector (-1.45%) lagging. Euro area new car registrations fell -7.8% yoy, for the worst June since 2015. Other cyclical sectors fared poorly as well, including a -1.74% drop for European Banks and -2.07% fall by the oil and gas sector. The latter was catching up to Tuesday evening’s descent in oil prices. That was compounded by a further -1.07% decline in crude yesterday, after US data showed a smaller-than-expected drawdown in stockpiles.
Before turning to the remainder of yesterday’s economic data, it’s worth highlighting updated forecasts from our US econ team. They still expect the Fed to cut rates three times this year, by 25bps each, and the see core PCE inflation staying below-target at 1.8% by the end of the year. The only major change to the forecast is slightly higher growth due to the recent firming in consumer spending, as our team now sees Q2 growth 0.3pp higher at 1.8%, taking the full year forecast up 0.1pp to 2.0% Q4/Q4.
Finally, yesterday’s economic data in the US including the latest housing numbers and which were fairly underwhelming. Housing starts fell -0.9% mom in June (vs. -0.7% expected) while permits plummeted -6.1% mom (vs. +0.1% expected), although the latter does tend to be quite volatile. In the UK there were no surprises in the June inflation numbers. Core CPI rose one-tenth to +1.8% yoy as expected while headline CPI was unchanged at +2.0% yoy, also as expected.
To the day ahead now, which this morning includes the June retail sales report in the UK, before US data releases include jobless claims, July Philly Fed business outlook and June leading index. Away from that it’s the turn of the Fed’s Bostic and Williams to speak this afternoon and this evening, respectively, while the last of the big US banks in Morgan Stanley is due to report earnings. Microsoft is the other notable company reporting.
via ZeroHedge News https://ift.tt/30CxcBj Tyler Durden
A few months back, we warned that one of the most-followed belwethers for global growth has just flashed a warning sign that was impossible to ignore: South Korea’s GDP contracted 0.3% QoQ in Q1, a sign that declining investment and exports were beginning to take a toll on Asia’s fourth-largest economy, and the broader region.
One quarter later, and exports across the region have continued to weaken as global trade contracts, which is perhaps why the Bank of Korea on Thursday decided to try and get ahead of the curve and surprise the market by cutting its base rate for the first time since 2016, joining a wave of central banks that have been cutting rates as the global economy slows (Indonesia’s central bank also cut rates for the first time in nearly two years on Thursday).
The quarter-point cut to 1.5 per cent came after pressure mounted on the BoK to act quickly to prop up the country’s slowing economy following its worst quarterly contraction since the global financial crisis in the first three months of this year, and deteriorating conditions since then.
Seoul is locked in a trade row with Tokyo, which has seen Japan tighten curbs on chemical shipments needed for production of semiconductors, South Korea’s biggest export item.
“Economic circumstances have deteriorated since April…With the rate cut, we took into account the effects from Japan’s trade restrictions,”BoK governor Lee Ju-yeol told a news conference on Thursday.
Unfortunately, a cut that the policy makers at the BOK probably viewed as a prescient decision is already beginning to look more like a mistake, as local markets appear to be far more concerned with whatever inspired the rate cut.
After all, the BOK also slashed its growth target for this year to 2.2% from its previous forecast of 2.5%, and lower than the government’s forecast of 2.4%. By comparison, South Korea’s economy grew by 2.7% last year.
In response, the Kospi slid, Korean bonds rallied, and the won strengthened 0.4% against the dollar. The move reverberated across the region, and global markets, as the MSCI Asia Pacific dropped 0.7% and Japan’s TOPIX dropped 2%. In the US, S&P futures were off 0.7%.
Exports, a major driver of South Korea’s economy (particularly the all-important semi-conductors) have fallen for the past seven months, and continued trade friction between the US and China (and South Korea and Japan) will likely continue to take a toll, seeing as the trade spat between the two largest economies is unlikely to end any time soon.
Economists expect more rate cuts to follow later in the year. Will the market take to monetary easing? Or is there more unrest ahead. We’ll have to wait and see.
via ZeroHedge News https://ift.tt/2JGTc8N Tyler Durden
