Month: March 2015

Asian shares rise on China’s easing measures

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Asian equities kicked off Tuesday on a positive note, buoyed by a more than 1 percent jump on Wall Street overnight after Beijing unleashed new policy moves to rejuvenate a wobbly property market.

According to a statement on the People’s Bank of China’s website, the required down payment for second homes was lowered to 40 percent from 60 percent. In addition, select homeowners who have held a property for two years or more will be exempted from a sales tax, the finance ministry later announced.

The new moves are part of “Beijing’s broader package of policies to stabilize economic growth and dis-inflationary pressures,” according to HSBC’s note. As policymakers become increasingly concerned, analysts expect more easing measures in the coming weeks: “A 50-basis-point cut in the policy rate, a 200-basis-point cut to the reserve requirement ratio… in the coming months, if not weeks,” HSBC said.

On Monday, US stocks surged amid encouraging talk of stimulus in China and as investors eyed the week’s domestic economic data. The Dow Jones Industrial Average closed up 1.5 percent, while the S&P 500 and Nasdaq Composite gained 1.2 percent each.

Shanghai Comp up 0.9 percent

China’s benchmark Shanghai Composite index topped a new seven-year high at the open, with developers leading the charge.

China Merchants Property rocketed 8.4 percent, while China Vanke and Poly Real Estate -the mainland’s top two largest property developers by market value – bolstered 4.6 and 3.2 percent each.

Blue-chip banks were also higher, with Bank of China and Bank of Communications climbing more than 2 percent each.

ASX jumps 1.4 percent

Australia’s S&P ASX 200 index shot up in early trade, recouping all of Monday’s steep decline.

Oil and gas producers, along with miners, were among the biggest gainers after being heavily sold-off in the previous session. Liquefied Natural Gas jumped 4 percent, while Santos and Woodside Petroleum climbed 1.6 and 2.1 percent each. BHP Billiton and Rio Tinto rose 3.1 and 2.2 percent, respectively, despite iron ore prices slumping to a six-year low overnight.

“Although they’re bouncing today, investors should remain wary of the sector. Further falls in commodity prices are expected over the coming months, which could certainly inflict more pain,” Motley Fool’s analysts wrote in a report.

Financials were also buoyant, with Westpac Banking leading gains in the sector, up 1.4 percent.

Nikkei adds 0.3 percent

Japan’s Nikkei 225 index advanced as dollar-yen ticked up to 120.25 and buoyed most exporter stocks. Blue-chip Toyota Motor rose 1.1 percent, while Panasonic and Nissan also made gains of 1 percent each.

Fujifilm Holdings bounced up nearly 3 percent following news that it is acquiring U.S. biotechnology firm Cellular Dynamics International for $307 million.

Kospi gains 0.5 percent

South Korea’s Kospi index was bolstered by a robust performance among brokerage houses for the second day on hopes of stronger earnings. Daewoo Securities elevated 3.1 percent, while Samsung Securities and Hyundai Securities added 1.3 and 2.9 percent each.

Korea Aerospace Industries (KAI) leaped 3.9 percent after being named as the preferred bidder for a multibillion-dollar deal to develop a new fighter jet.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Iran’s nuclear deal and how it could affect oil

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

As a crucial deadline in talks between the West and Iran about its nuclear program looms, analysts warned that a successful deal could further compound the glut in global oil markets.

Representatives from the US, UK, France, Germany, Russia and China met once again Monday with Iranian officials at the luxury Beau-Rivage Palace hotel in Lausanne, Switzerland. Just the hint of a possible deal weighed on oil markets, with West Texas Intermediate (WTI) futures falling 1.6 percent to 48.08 a barrel by 9:00 a.m. London time, and Brent crude futures falling to USD 55.93 a barrel.

Here, CNBC highlights the key points surrounding a potential accord with Iran and how this could affect a commodity that has seen a dramatic fall since mid-June last year.

What deal?

The negotiations are the culmination of a 12-year standoff between the United Nations Security Council and the Middle Eastern nation. Sanctions were imposed on Iran in 2006 for its failure to halt is uranium enrichment following claims that it was trying to build a nuclear weapon. The country has repeatedly denied such claims, however, and is now seeking an end to the penalties, which have blocked the import and export of sensitive nuclear materials and frozen the assets of people involved with the program.

Meanwhile, global powers are trying to achieve a peaceful resolution which prevents Iran from building nuclear weapons and curbs it uranium enrichment, but also allows it back into the international community and relaxes the sanctions.

Will there be a deal?

With a deadline on Tuesday, March 31, negotiations are already at a key stage and are likely to continue into the eleventh hour. However, with so many potential stumbling blocks, many analysts are saying the chances of a successful accord are too close to call.

Michael Wittner, global head of oil research at Societe Generale, was a little more optimistic, however. In a research note Monday, he said there was a 70 percent chance of success. Seth Kleinman, global head of energy strategy at Citi, also said Monday that the likelihood of a comprehensive deal being done had “risen significantly.”

How much will oil fall?

Oil has already fallen in anticipation of an accord, but is expected to see a “knee-jerk” drop of around USD 5 if agreement is eventually reached, according to SocGen’s Wittner.

However, it is not clear how long a move lower would last. Citi’s Kleinman agreed that there could be a “short-term bearish jolt to the market.”

In terms of supply, nothing concrete would happen until a final agreement is signed at the end of June at the earliest. If sanctions were lifted on that date, 30 million barrels of crude from Iran could flood an already oversaturated market, according to Wittner.

Added to that, Iran – a member of the Organization of the Petroleum Exporting Countries (OPEC) – has previously stated that it could raise its exports by 1 million barrels a day if penalties were removed.

“The bottom line is that, aside from market psychology, we believe that Iranian crude will not become a major issue for the oil markets, from a fundamental perspective, until late 2015 or, more likely, 2016,” Wittner said in his note.

Stumbling blocks to a deal?
A range of potential pitfalls have emerged over the weekend that still need to be ironed out.

One is whether or not Iran will ship its atomic fuel out of the country, most likely to stockpile in Russia. Other concerns include how fast Iran’s sanctions will be lifted, how much uranium it will be allowed to produce, what nuclear research and development it will undertake in the latter stages of the accord and how transparent it will be with inspections.

There’s also differences of opinion on how long the deal should last, with reports of an agreement spanning 10 years to 15 years on the negotiating table.

Who doesn’t want it?

Israel. The country sees a nuclear-armed Iran as a key threat for its security, despite Iran denying that it wants to use the uranium in weapons.

Israeli Prime Minister, Benjamin Netanyahu, warned over the weekend that the potential deal looked worse than Jerusalem feared, and Defense Minister, Moshe Ya’alon, said it would be “nothing less than a tragedy for the moderate regimes in the Middle East and the entire Western world,” according to The Times of Israel.

US Republicans sympathetic to the Israeli view have also expressed concerns. Congress could weigh in on a possible agreement with a bill demanding its approval, but President Barack Obama has already warned that he could veto any such proposal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Modi’s popularity in rural India punctured by discontent

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Over a dozen debt-laden farmers have committed suicide in recent weeks in India, and discontent in many rural areas against government policies is turning into anger against Prime Minister Narendra Modi less than a year after he swept into office.

Unseasonal storms have badly damaged the winter crop in large parts of the fertile northern plains, most likely contributing to the suicides, and villagers have blamed Modi for not stepping in to help the distressed farmers or ensuring that crop prices remained stable.

The farmer suicides in India’s most politically sensitive region are the latest in several setbacks for Modi’s Hindu nationalist Bharatiya Janata Party (BJP), which is hoping to consolidate power by winning local elections in large, predominantly rural states over the next two years.

The government has delayed a comprehensive health plan as it shifts focus from subsidies to investment, while religious tensions have made minorities uneasy. Nevertheless, Modi has made progress with economic reform in his first year – although not as rapidly as some investors would like – and has reined in inflation.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

The controversial theory that worries Janet Yellen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

In a speech on Friday, Federal Reserve chair Janet Yellen stayed her dovish course, maintaining that an increase in the federal funds rate “may well be warranted later this year.” She also emphasized the Fed’s data dependence, as well as her general tone of “cautious optimism” in the economy.

Yet it was in her discussion of what she termed “special risks and other considerations” where things got interesting. The first of her three special concerns around hiking rates run along the following lines:

“Some recent studies have raised the prospect that the economies of the United States and other countries will grow more slowly in the future as a result of both demographic factors and a slower pace of productivity gains from technological advances,” the Fed chief stated.

Read More: Yellen: Rate increase ‘may be warranted later this year’

“At an extreme, such developments could even amount to a type of ‘secular stagnation,’ in which monetary policy would need to keep real interest rates persistently quite low relative to historical norms to promote full employment and price stability, absent a highly expansive fiscal policy,” she added.

To take a step back, “secular stagnation” refers to the rather controversial theory that an economy may become stuck in a long-term period of slow growth and low interest rates, due to certain external factors.

A troubling theory makes a comeback

Originally developed in the late 1930s by Alvin Hansen (who earns a footnote in the official transcript of Yellen’s speech), it was reanimated by former White House economic adviser Larry Summers, who in 2013 asked whether the U.S. may be mired in secular stagnation.

Interestingly, Hansen’s theory was that a lack of technological innovations could be to blame for the stagnation; Summers, however, was more focused on an exogenous shock.

In April 2014, Brown University economists Gauti Eggertsson and Neil Mehrotra published a comprehensive model of secular stagnation, showing how income inequality and a drop in population growth could lead the economy’s ideal interest rate to fall.

Essentially, Eggertsson’s point is that a surplus of individuals looking to save their money, combined with a surfeit of individuals looking to borrow money, can lead the market-clearing interest rate to fall to unusually low levels.

Read More: Poll: Rates to rise, but by how much?

If the actual interest rate is too high (say, because it is at historically normal levels) then money will not flow from the would-be providers of income to the potential users of income. That would cause an economy to become mired in slow growth for longer than the economic cycle would predict—consequently making the stagnation secular rather than merely cyclical.

That would appear to have implications for Fed policy. For the central bank, the prescription is a familiar one: Keep rates lower for longer, as Yellen noted in her comments on Friday.

While the concept may sound obscure, the prospect is a scary one fraught with pitfalls. The most prominent modern example of a country suffering from secular stagnation is Japan, where a “lost decade” quickly morphed into 20 years of fallow growth.

For her part, Yellen was careful to frame secular stagnation as a risk rather than her base case. Indeed, the theory still remains far outside the mainstream.

Read More: Crazy short week with jobs, quarter eyed

Even uber-dove Narayana Kocherlakota, the non-voting Minneapeapolis Fed president (whose economic work was actually cited in the Eggertsson paper) told reporters in January that prolonged stagnation is a risk that “we should be thinking about as policymakers, but it is in no way my modal outlook.”

Still, the critical point Yellen is making is that the mere fact that America risks falling into the economic quicksand “has important monetary policy implications for the near-term.” On the margins, however, it may be enough to stay the Fed’s hand when it comes to raising rates.

It should be noted that like most economic concepts, secular stagnation is politically polarizing.

Last year, some members of Congress proposed legislation that the Fed should endeavor to follow the “Taylor rule,” which mandates the Fed base monetary policy on specific economic measures.

Yet the proposed legislation assumes (implicitly, given the inputs to John Taylor’s equation) that the equilibrium real interest rate is 2; Yellen said Friday that she believes it is lower.

If we are in a world marked by secular stagnation, the neutral rate is even lower than Yellen already thinks it is. In such a world, if the Fed begins to act as if the equilibrium interest rate is higher than it actually is, it could result in “appreciable economic costs.” That may create or elongate a secularly stagnant environment, she said.

In other words, the economy is a delicate and temperamental beast. That creature—in the view of Yellen and other Fed officials—is best handled by the professionals.

—By CNBC’s Alex Rosenberg.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

‘Oil wealth transfer’ to benefit – airlines?: Pro

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Oil’s recent plunge could result in a transfer of wealth from the pockets of big oil companies to those of big airliners. According to one top analyst, investors looking to cash in on that phenomenon should keep a keen eye on the airlines, and their capital return plans, for the rest of the year.

Crude oil prices fell on Friday but still finished the week higher by 9 percent on the back of fear over unrest in Yemen and the Middle East. Even with this week’s pop though, oil is still down more than 50 percent from highs reached in June of 2014.

In a research note earlier this month, Wolfe Research senior airline analyst Hunter Keay outlined the impact of falling crude prices on big oil companies and airlines, calling the phenomenon “the oil wealth cash transfer.”

“We expect US airlines to return USD 9.9 billion to shareholders this year, up from USD 4.6 billion in 2014, facilitated by good fundamentals and the likely cash windfall from lower oil prices,” he wrote.

Read More: Oil prices will remain ‘choppy’: Chevron CEO

Airlines to Big Oil: Thanks a bunch!

Lower fuel costs have led to an influx of cash for the airlines. That windfall, according to Keay, is coming directly from the pockets of big oil companies like Exxon Mobil and Chevron, which have suffered as oil revenues dwindle.

In an interview on CNBC’s “Fast Money” this week, Keay tracked the cuts in Exxon Mobil’s buyback plan and compared them to moves made by American Airlines in the latest quarter.

“We noticed that Exxon Mobil cut its buyback to about USD 1 billion a quarter, which is almost the exact same amount that American bought back in the fourth quarter,” he said.

In its fourth quarter earnings release, Exxon said it was cutting its dividend by more than USD 2 billion for the first quarter. Vice President of Investor Relations Jeff Woodbury said on the earnings call that despite the change, the company remains “committed to our investment program and of course paying our growing dividend.”

Exxon Mobil isn’t alone in revising its share repurchase plan. Chevron said in its latest earnings release that it’s suspending its buybacks for all of 2015. The company’s CFO said on the earnings call that the decision was based on the “change in market conditions.”

Keay told “Fast Money” that the market hasn’t yet priced in the potential upside from increased airline buybacks. “The market is not valuing these airline stocks properly at all given the fall in oil prices,” he said. “These airlines are just taking that money and turning around and buying back stocks with it.”

In addition to American Airlines, Keay said he also expects Delta to increase its share repurchase plan. He named Spirit Airlines, United Continental, and American as his top picks in the space.

Tim Seymour of Triogem Asset Management says he liked American Airlines as an investment. “I think this is a case of a company that’s underperformed a little bit. There’s probably more capacity, there’s probably more leverage in the multiple as the cycle expands a little bit,” he said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sydney shares lead declines as rest of Asia turn positive

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Asian markets, with the exception of Australia, turned positive by mid-morning trade on Monday, as a modestly positive lead from Wall Street offset the impact of sliding oil prices.

US stocks snapped a four-day losing streak to settle mildly higher on Friday. The Dow Jones Industrial Average and the S&P 500 closed up 0.2 percent, while the Nasdaq Composite finished 0.6 percent higher.

ASX falls 1.4 percent

Australia’s S&P ASX 200 index hit a one-and-a-half-week low, with Caltex Australia leading declines after US energy giant Chevron sold its entire stake in the refiner for $3.7 billion. Shares of Caltex Australia plunged 10 percent.

The resources sector was heavily-hit by sliding commodity prices. Among miners, Fortescue Metals lost 3.5 percent, while BHP Billiton and Rio Tinto dropped 2 and 1.7 percent each. The oil and gas industry also saw steep declines, with Santos down 6 percent.

Copper and gold miner PanAust soared 40 percent on the back of news that China’s Guangdong Rising Assets Management approached it with a takeover bid for the third time.

Nikkei gains 0.5 percent

Japan’s Nikkei 225 widened gains by mid-morning trade, with index heavyweights providing upward momentum to shrug off disappointing data released before the market open. Industrial production dropped 3.4 percent in February from the previous month, marking the biggest drop since June last year. The result compared with expectations for a 1.8 percent decline and a 3.7 percent gain in January.

Fast Retailing, owner of clothes brand Uniqlo, piled on 2.8 percent, while Softbank and Fanuc elevated 0.5 and 0.7 percent each.

Among top losers, petroleum and metals conglomerate JX Holdings and Inpex lost more than 3 percent each as US crude fell below $48.50 a barrel in early Asian trading.

Mobile game developer Gumi dived 10.3 percent after announcing plans to sell its assets and a 10 percent reduction of its workforce last Friday.

Mainland indices up

China’s benchmark Shanghai Composite index opened to a fresh seven-year high as comments from authorities over the weekend fueled expectations of further stimulus.

“[Beijing] said that growth is on the lower side so maybe there’s a need to do something. It’s very consistent with what they’ve been highlighting over the last couple of weeks in terms of what they want to do in terms of stimulus,” Herald Van Der Linde, head of Equity Strategy, Asia-Pacific at HSBC, told CNBC. “So we think there’s more to come from China.”

Airlines and shipping plays led gains. China Southern Airlines rallied 4.2 percent, while Air China and China Eastern Airlines bounced up nearly 3 percent, respectively, on the back of lower crude oil prices. In the shipping industry, China Ocean Shipping Company (COSCO) jumped 6.6 percent.

Oil majors appeared unaffected in early trade; PetroChina and Sinopec held near the flatline, while China Oilfield Services ticked up 0.3 percent.

Kospi adds 0.3 percent

South Korea’s benchmark Kospi index headed north in early trade, buoyed by blue-ship stocks such as Samsung Electronics and Hyundai Motor, which advanced 0.4 and 0.3 percent each.

However, losses among energy-related counters capped gains. SK Innovation and S-Oil eased 2.3 and 0.8 percent, respectively. Dongkuk Steel tanked 6.4 percent as prosecutors launched an investigation into one of the country’s top steelmakers over allegations of large-scale embezzlement and tax evasion.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How oil is preparing for a new world order

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

A new oil order has arrived and it will be marked by greater uncertainty and generally lower oil prices as the oil industry frantically re-prices as costs decline and gains in efficiency are made, strategists say.

As investors continue to weigh up the fallout of a rout in oil prices since June last year, Goldman Sachs has warned that the “level of uncertainty cannot be underestimated as these dynamics spill over into the price of commodities, currencies and consumption baskets around the world, with far-reaching market and economic implications.”

Read More: Buckle Up! Oil ‘could fall to USD 30’ say trading pros

And amid heightened uncertainty, oil prices can swing sharply in either direction as developments this week have shown with a crisis in Yemen triggering a spike in crude.

“Oil has been sideways for about four months, in a USD 15 range; it hits a bottom, bounces up, hits the top comes back down,” Sean Corrigan, founder of True Sinews Consultancy told CNBC Europe’s “Squawk Box” Friday.

“We’re all waiting for the next break and trying to find the signal that will push us from this range,” he added.

The Goldman Sachs note, published late last week, adds that while it believes “the new equilibrium price for oil is USD 65 a barrel for WTI [West Texas Intermediate] and USD 70 a barrel for Brent, the risks are skewed to the downside.”

Those forecasts would imply gains of at least 21 percent for Brent crude from current levels around USD 58 and a rise of about 30 percent for WTI, which is trading at around USD 50.

Still, and more significantly, prices would remain more than 30 percent below peak levels of above USD 100 a barrel on both oil contracts seen last year before concerns about a supply glut helped drive prices down.

The International Energy Agency said late last year that a slowing Chinese economy and a boom in US shale production had brought about a new era for oil.

Watch out

And oil strategists say there are a number of factors that suggest oil markets will be characterised by uncertainty and volatility in the months ahead.

These include geopolitical risk as seen this week, the prospect of increased supply from Iran if it reaches a nuclear agreement with the West that leads to a lifting of sanctions, and the prospects for alternative fuels as well the rise of shale oil

“We still have quite a lot of variables that could affect the spot price for a long period,” Barclays Oil Analyst Miswin Mahesh told CNBC.

“If you look at Iranian oil production if sanctions are removed, what would they bring into the market, what could Iraq bring into the market?,” he added.

Other analysts point out that speculators betting on where oil prices are headed only fuel that uncertainty.

“If you look at oil ETFs [exchange traded products], there is huge buying interest despite oil prices falling,” Ashok Shah, director of asset management firm London & Capital,” told CNBC.

Read More: Are bottom-fishing oil investors complacent?

“There are a lot of non-consumption players out there playing it [oil] for financial gain and that will create more volatility with moves down and corrections up,” Shah said, adding that he thought oil prices could go back down to around USD 40 and stabilise there.

Complicating matters

Analysts at Goldman Sachs add that the move lower in oil prices since last June has happened at a time when rise in the US dollar’s value, and corresponding fall in commodity currencies such as the Australian dollar and Chilean peso, reduces the cost of producing energy.

“This puts downward pressure on commodity prices and in turn reinforces US growth, a stronger dollar and lower oil prices, suggesting the risks to costs are distinctively skewed to the downside,” the Goldman note said.

Miswin at Barclays said that two developments he was watching closely for the outlook was the solar industry and energy storage.

“There are reports that we will get to grid parity in the next 12-18 months in the solar industry, which has very important implications because that means even without subsides electricity generated by solar power will be one-to-one with conventional energy, he said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Don’t start your weekend yet: Yellen speaks Friday

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Fed Chair Janet Yellen speaks just before the closing bell Friday, and you can bet Wall Street will delay the start of its weekend to listen.

While Yellen’s comments are always important, the markets have been fine-tuning positions for more than a week now after the Fed’s shift in policy. With the laundry list of catalysts that traders have attributed to volatile moves in bonds, stocks and currencies this week, one undercurrent they all come back to is the central bank.

Conflict in Yemen, fears of a weak economy and declining earnings were all factors at play in the stock market Thursday. Shares were weak on the open after Wednesday’s steep selloff. They then recovered in the afternoon, before falling into the close.

The Dow dropped 40 to 17,678, erasing a triple-digit loss, and the S&P 500 was off nearly 5 at 2,056. “I think it’s kind of normal profit-taking. I think eventually the economic data is going to rebound and the corporate profits will come in OK, and that will take the market higher,” said Andrew Burkly, head of institutional portfolio strategy at Oppenheimer Asset Management.

The market has been worried in the past several sessions about forecasts for a decline in S&P 500 earnings this quarter—the first in six years. The strong dollar and falling oil prices are blamed for the dip in corporate profits.

Burkly said there is a lack of catalysts for the market to consider in the next week, and that could create a vacuum for more selling. “The market’s felt a little heavy,” he said.
Treasury yields, however, were higher as bonds also sold off Thursday, and the 10-year crossed above the key 2 percent level for the first time since March 18, the day of the Fed’s meeting.

“We’re talking Fed, but I don’t think we’re trading Fed,” said David Ader, chief Treasury strategist at CRT Capital. “I think we’re dealing with a positioning story and repatriation story. … We’ve got the Fed priced in and we’re going to see volatility around month-end, quarter-end.”

Read More: Reversal today? If so, it could be temporary

Ader said the market also was responding somewhat to hedging around the USD 5 billion offering from German development bank KfW. He also said technical factors were behind the move up in yields, and a lack of liquidity in the bond market exaggerated moves.
“Let’s get use to this.

The dealer community is not about to expand. You’re not getting more balance sheet traders. As we get to these moments, whether it’s from quarter-end or positioning extremes, you’re going to find, like during the taper tantrum, a lot more of these moves that defy fundamental logic and then have a life of their own,” he said.

But traders will watch Yellen regardless, as the market struggles to figure out the timing of that first rate hike. “She’s not going to tell us more than we got last week. She got her opportunity and not a lot has changed, unless she tells me it’s June, July or September,” said Ader.

The Fed did spur a weeklong selloff in the dollar that abated somewhat Thursday, as the dollar index turned higher.

Read More: Fed policies have cost savers USD 470 billion: Report

“Markets have still been digesting last week’s Fed announcement and realize they’re not in a rush to hike and if they’re going to do it, they’re going to be gradual about it because they don’t want to risk the recovery with premature hiking,” said George Goncalves, head of rate strategy at Nomura.

Another Fed luminary, Vice Chairman Stanley Fischer, speaks on regulatory issues in Frankfurt at 6:30 a.m. Friday. Earlier this week, Fischer spoke before economists in New York and said he expected the US central bank to raise rates before the end of the year. He also emphasized that the path of future rate rises will not be smooth but offered no new insights.

Yellen definitely gets top billing Friday. “The conference is on the new normal, so it’s a relevant topic. I suspect (Yellen’s) discussion will be broader and a bit more academic than what the market wants to hear,” said Amherst Pierpont Securities’ chief economist, Stephen Stanley. “I don’t know that she has anything new to add after a week”.

“The Fed says they’re data dependent. Now the market has to pay attention to the data,” Stanley said. “Starting in June, anything’s on the table and it depends on how the data plays out.”

Friday’s data include a final reading of fourth-quarter GDP, expected to rise to 2.4 percent from 2.2 percent. The 8:30 a.m. ET number will be followed by consumer sentiment at 10 a.m.

Read More: ‘Three black crows’ could spell doom for the market

“It might help to focus people on the first-quarter numbers and the first-quarter numbers are starting to feel like a replay of last year,” said Stanley. “We’re going to see a very slow first quarter, and I don’t think that’s been internalized. The median forecast for Q1 is still around 2 percent.”

Data this week included a disappointing durable goods report which resulted in economists slicing forecasts for the first quarter. According to a CNBC/Moody’s Analytics survey, economists now expect growth of 1.8 percent. “I’m down at a half percent,” Stanley said. “Based on what we know today, I wouldn’t rule that out.”

While markets struggle with concerns about the weak economy, the debate on Wall Street has been when and how much will growth will pick up. That debate goes directly to the heart of the discussion on when the Fed will raise interest rates.

Read More: War in Yemen: What it means—and doesn’t mean

“I think we’ll get a pretty big snapback,” Stanley said of the second quarter. The market is already focusing on next week’s jobs report, expected to be released on the Good Friday holiday when the stock market is closed.

The jobs number should be fairly strong, and it is the one data series the Fed relies on that has shown consistent strength. “I’m at 275,000. I think we’ve turned the corner. I think the underlying trend is very strong,” Stanley said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian stocks mixed as Yemen fears, Japan data weigh

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Asian equities were mixed on Friday as fears over Yemen and weak data from the world’s third largest economy weighed on sentiment.

Yemen’s President left the city of Aden for Saudi Arabia on Thursday after Riyadh and its allies began air strikes targeting the Houthi rebels in Yemen. The military operation saw oil prices surge 5 percent overnight, but those gains were reversed on Friday with U.S. crude and Brent both 1 percent lower. While Yemen isn’t a major oil producer, fears are high that the Bab-el-Mandeb strait, a key shipping route for oil tankers located between Yemen and Djibouti, may be closed.

Those concerns saw US stocks fall for a fourth straight session on Thursday and offset data showing that jobless claims fell to a five-week low, pointing to a healthy and expanding labor market. Attention now turns to Federal Reserve chair Janet Yellen’s speech on Friday.

Meanwhile, Japanese data for the month of February was also in focus. Core consumer price inflation (CPI) and retail sales came in worse than expected, but household spending posted a smaller-than-expected annual fall.

Nikkei 0.5 percent higher

Japan’s benchmark index reversed losses, moving off a one-week low to enter positive territory, as investors engaged in bargain hunting following Thursday’s losses.

Panasonic jumped 4 percent after announcing it was prepared to spend 1 trillion yen on mergers and acquisitions over the next four years.

Some exporter stocks declined on the back of a slightly stronger yen; Nissan Motor and Toshiba eased over 1 percent while Japan Display lost 2 percent.

Shanghai dips 0.2 percent

China’s benchmark stock index resumed its declines after data showed industrial profits for the first two months of the year fell 4.2 percent on year.

PetroChina tanked nearly 2 percent and Sinopec fell 0.7 percent on the back of lower oil prices.

Banks also weighed on the benchmark Shanghai Composite index, with Agricultural Bank of China and Bank of China down 0.5 percent each.

ASX gains 0.7 percent

Australian shares rebounded from a one-week low hit on Thursday, with the benchmark S&P ASX 200 breaching 5,900 points.

Oil producers rallied on the back of higher crude prices; Beach Energy and Santos jumped over 1 percent each.

Banks that were heavily sold off on Thursday rose on bargain hunting, with Westpac, Australia New Zealand Banking and Commonwealth Bank of Australia all 1 percent higher.

Kospi flat

South Korea’s benchmark Kospi index rebounded from a ten-day closing low thanks to gains in blue-ship stocks; Hyundai Motor and Kia Motors gained 1 percent each.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian shares drop on US selloff; Yemen in focus

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Asian equity markets declined on Thursday following a sharp selloff on Wall Street overnight and as investors monitored political turmoil in Yemen.

Wall Street shares were sold off on Wednesday, with the Nasdaq Composite tumbling more than 2 percent due to losses in technology and biotech shares. The Dow Jones Industrial Average and S&P 500 both ended over 1 percent lower after February durable goods orders fell, missing expectations for an increase.

Oil prices rallied over 1 percent on Thursday, extended gains following a near 4 percent rally overnight, on the back of political conflict in Yemen. Saudi Arabia announced it began military operations in Yemen at 7pm Eastern time on Wednesday after Yemeni President Abed Rabbo Mansour Hadi reportedly fled Aden as Houthi militants moved closer to the city.

Nikkei falls 1 percent

Japan’s benchmark index retreated further from a 15-year high hit on Monday, with technology shares leading the declines.

Sony and Japan Display fell 3 and 4 percent respectively, following a selloff in the US technology space.

Toyota Motor eased nearly 1 percent after the Nikkei newspaper reported the firm will release more hybrid vehicles in Japan.

Shanghai down 0.8 percent

China’s benchmark Shanghai Composite index extended losses into a second session as investors digested the latest earnings. The index snapped a 10-day winning streak on Wednesday.

Bank of China lost over 1 percent after fourth-quarter net profit rose at the slowest pace in six years. ICBC and Bank of Communications traded down 1 percent each ahead of reporting 2014 earnings later in the day.

Aluminum Corporation of China (Chalco) dropped 1 percent after reporting its biggest ever loss in 2014.

ASX 1.3 percent lower

Australia’s benchmark S&P ASX 200 moved further away from the key 6,000 mark, weighed by steep losses in banks.

Australia New Zealand Banking, National Australia Bank and Commonwealth Bank of Australia all lost 1 percent each. Bank of Queensland fell 2 percent despite posting record first-half earnings of A$167 million.

Department store operator Myer slumped over 5 percent on news it is being sued by shareholders over its weak profit results.

Kospi down 0.6 percent

South Korean shares declined on fears of deflation. Data out before the market open showed March consumer sentiment hitting a three-month low, while inflation expectations for the next year dropped to a record low.

Index heavyweight Samsung Electronics was the biggest loser on the benchmark index, down 2.5 percent.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow